Warehouses and manufacturing facilites often utilize kanban systems.
Companies rely on just-in-time manufacturing processes such as 5S, Six Sigma and Kanban to help improve manufacturing processes and reduce operational downtime, however, consultant David McBride warns that a stable production process needs to be in place before implementing those systems. Kanban systems work by introducing a “pull” signal when a certain level of inventory is reached. The pull signal indicates the business should order more inventory or begin manufacturing replacement products. Measuring and mastering the intricacies of your ordering, purchasing and manufacturing processes provides the base to successful Kanban implementation.
1. Examine your processes and decide what areas would benefit best from Kanban. While people often think of raw goods and component inventories when Kanban is mentioned, the system also works for establishing and maintaining base levels of any type of supply, including final inventory and office supplies.
2. Examine your inventory usage over the past year and determine appropriate minimum and maximum stock levels for each item. Identify and document how often you use the items — inventory must be kept higher for frequently used parts, and pull triggers set accordingly.
3. Study the lead times for each individual item. Lead times are how long the product takes to arrive at your plant after your place an order for it with the supplier, or how long it takes your plant to manufacture a product. Eliminate long supply lead times if possible, either by negotiating better terms with suppliers or switching to new, faster suppliers.
4. Compare the minimum stock quantities you’ve established for each item against both usage rates and the lead time for the part to determine when you should issue a pull command for the item. Err on the side of caution — give yourself a little bit of leeway to work out any kinks in the new system or in case manufacturing, quality or supplier issues arise.
5. Order a full, maximum stock level for each item. Begin the Kanban process for each item as it’s stocks are filled.
6. Observe the efficiency of the Kanban system. Reduce the Kanban level for items that end up sitting in inventory for extended periods — if widgets aren’t being used as quickly as you anticipated, slowly reduce the quantity you order at each pull, and lower the inventory level that triggers the pull command.
7. Continue tweaking the order quantities and pull trigger amounts until item usage rates and inventory levels reach near-perfect balance, with replacement stock arriving just before existing inventory runs out. Keep a small amount of “safety stock” on hand in case your tweaking results in inventory shortages. Increase the inventory level that triggers a pull command when a shortage occurs.