KANBAN in manufacturing industry Part 3 /ENG version

Kanban is an information system designed to successively transmit information from the customer, through the internal organization to the supplier about what and at what time to produce in order to achieve Just In Time delivery. According to the same information, each process step installs added value into the final product to the end customer. In the article "What is KANBAN" Part 1, I wrote that if everyone in the chain would produce as written on KANBAN cards in the ordering process, then everything will be fine-tuned in the production process. Just In Time. In theory, the practice is a little different.

The difference between Manufacturing Resource Planning (MRP) and the KANBAN system

Manufacturing Resource Planning (MRP) is conceptually different from the original KANBAN system and care should be taken in combining the two systems. The MRP concept is based on the planned production of the same product over a longer period. KANBAN is designed to support the production of various products in a short period of so-called. small batches, according to customer orders. Simplified KANBAN is a user-focused system, and MRP is a product-focused system even though they use the same processes (see Figure 1). MRP has less change over losses, but therefore higher final product inventories, and KANBAN has slightly higher change-over losses, but significantly less inventories. The MRP turnover of finished products is about 120 days, and the KANBAN system has about 45 days. Therefore, before introducing the KANBAN system, the manufacturing company should consider whether it wants to work according to the MRP principle or the KANBAN principle. KANBAN can be used in conjunction with the MRP system, but the method of implementation is different from this as stated in this article. Regardless of the model, MRP or KANBAN, it is necessary to implement standardization.

Standardization in manufacturing

For a better understanding of the content, in this article I use the word “process” for multiple “procedures” and the word “value chain” for all processes involved in delivery to the end customer. The word "process" is so used, and is used for anything and everything, that two people who talk about processes no longer understand each other.

Product standardization means to define and specify every component of the product (product part specification or title blocks). Each part of the final product has its own specification. The specification is done before the start of production. We can say that there are three types of specification: (1) Part specification for serial production, (2) Part specification for custom production and (3) Successive production of the part specification, where the specification for the next part is done after the installation of the previous one. The part specification is a prerequisite for any production.

Each part of a product goes through processing operations where each process adds a new value to it, so that finally all the parts are assembled into the final product. Thus, some metal part undergoes processing "Cutting", "Drilling", "Welding", "Grinding" and the like. Each processing procedure consists of activities that do not have to be standardized and are subject to continuous improvement. For each procedure, the duration should be defined, which is obtained by summing the duration of the activity. At the beginning of the introduction of the KANBAN system, do not spend too much energy on accurately measuring the duration of the procedure (or each activity), but estimate the duration. Try to cover as many different products as possible for the same duration of the same procedure. For example, if you drill 3 holes for one product and 5 holes for another in the “drilling” process, in the first phase of the KANBAN system implementation, the expected duration should be the same in both cases. A few minutes of difference in duration due to two holes does not mean much in the overall process of making the final product. I will explain why later **.

We are standardizing the products, procedures, and duration of procedures to establish the KANBAN system.

Establishment of the KANBAN system

I said that the KANBAN system works based on customer orders, unlike the MRP system which defines a production plan a month or more in advance. The KANBAN system pushes the customer's order one by one as information from the last production process (most often assembly or packaging), as last production process in the value chain in the form of a KANBAN card (order).

PUSH process in KANBAN system

As the component of each product is known, the last process (assembly) in the chain gets as many KANBAN cards as there are different products and associated parts that need to be assembled. Orders come one by one and fill up KANBAN POST. This process further sends KANBAN cards to predecessor processes (organizations) about parts to be produced and fill their KANBAN POSTS. As processes are linked in a value chain, everyone in the chain (including suppliers and external partners) consistently receives information on how much parts is required to be produced and when they should be delivered. If the product is made in own production facilities, then the KANBAN card is called "PRODUCTION KANBAN", if it is delivered by the external partner, then is called "TRIANGULAR KANBAN", and if the material is ordered from the supplier, then it is "SUPPLIER KANBAN".

Each KANBAN card says which part is ordered for which final product, in what quantity, when and where it should be delivered. Thus, the last to the user in the chain pushes the information (order) to the first predecessor in the chain in the order in which he wants to be delivered.

The pushed KANBAN card sits on the predecessor in the KANBAN POST as they arrived from subsequent process. KANBAN card which arrives may generate another KANBAN cards towards to its predecessors, suppliers and external partners who manufacture sub-parts or deliver material for it. These cards also contain information about the part order, time and quantity as they should be delivered. It is possible to send KANBAN cards to everyone in the chain at once, then it is done according to the daily plan and it is not possible to change priorities daily.

This pushing of information (orders) from the subsequent process / procedure to the predecessor processes / procedures occurs in real time. For this to happen, you must have pre-arranged contracts with suppliers and external partners and agreed delivery times that must be met. You must have the same conditions agreed with internal predecessor processes (departments) and internal suppliers (warehouse, logistics…).

PULL process in KANBAN system

In an ideal world where you have everything arranged and prepared, everyone in the value chain will deliver their piece on time as stated in the KANBAN card they received at KANBAN POST. This means that each successive process will PULL the piece to be processed as ordered from the previous process, exactly as ordered - FIFO model (First In - First Out). As you know all the durations of the procedures, you also know the durations of the processes, and then of the entire production value chain, so you know the capacities of your production and you can tell the customer the exact delivery date. There will be no stock either in the warehouse, or between processes, or between processes, or stocks of finished products.

KANBAN was "invented" to reduce stock!

As no business environment is ideal (including Toyota’s), there are downtimes, manufacturing errors, delays in delivery to suppliers or external partners, complaints, machine and tool failures, lack of contracts with suppliers… that generate inventory – excessive stock. The place where excessive stock accumulates, indicates which procedure or process is in trouble. ** Losses incurred due to the above reasons far exceed the losses of a few minutes in the production itself. That is why I said under the heading "Standardization in production" that those few minutes of difference in the duration of a procedure for different products (3 or 5 holes), does not mean much in relation to the entire value chain. Thus, it is much more important to maintain the continuity of production in a slightly "slower batch", but optimal for all resources, suppliers, and external partners, than to have interruptions when production stops. For this purpose, we use value chain supervision and orchestration of the process.

Orchestration and process control using the KANBAN system

Orchestration means synchronizing the number of deliveries of all processes in the value chain to the customer. To achieve this, it is necessary to have a defined optimal duration of all procedures and processes. Any downtime in any of the processes should be compensated by safety stock. The safety stock is not calculated based on previous consumption but based on the risk of downtime of previous processes and the time of elimination of the defect. That is why the KANBAN system works based on optimal time that considers variations. Variations may be larger at first, later with improvement they can be reduced to +/- 10%. Reducing variations below 10% creates system overload and complexity, with no significant effects on profitability (investment outweighs benefits). Likewise, if you digitize some process and bring it to perfection!?, and others stay at the same level, you have not achieved any effect on the result, because that process will generate a stock for subsequent processes that they will not be able to process. Even Toyota does not want to robotize some process and replace people if the entire value chain does not benefit. Balancing value chain while improving every process independently is a key success factor.

That is why the KANBAN system also serves to monitor the entire value chain. Value chain control is achieved by measuring the state of stock level between two adjacent procedures as well as between two adjacent processes. Excess stock level is an identifier of the problem. The monitoring status of the value chain and each process is visible on the control panel - Cockpit. The dashboard is a large screen visible to all employees, with visible statuses that are in progress, whether there is a problem and in case a downtime occurs it has a downtime indicator. That board is called ANDON. For a mark to appear on the ANDON board, the system itself must recognize the problem (for example, excessive stocks), and in the case of a machine failure or a manufacturing error, the employee presses a button that stops the production process. Pressing the button as an alarm appears on the ANDON board, and at the same time special KANBAN cards are generated, for example EMERGENCY KANBAN.

IT support for KANBAN system

There is no room in the article to describe all the details and ways of introducing the KANBAN system. The introduction of KANBAN requires good preparation and should be adapted to the method of production that the company has (high serial production, order based, etc.). In this article, only the basic principles of the system are given, which can be very well digitized if the prerequisites are met, especially standardization. Toyota calls such a system e-KANBAN. Currently, the market in Europe is dominated by IT systems for the MRP type of production which is not quite suitable for running small batches of the same products and successive product specification. KANBAN system has ability to support large series production of the same product, small batches and successive production as well as transformation from one to another production type. The benefits of the KANBAN system are extraordinary, as it forces the company to standardize and regulate relationships with partners and suppliers. Like the entire Just In Time model, the purpose of the KANBAN system is to reduce costs, and the effects on reduction are best seen at the company that invented it – Toyota: # 1 in the world in terms of number of cars sold and produced, # 1 in the world in terms of revenue, # 1 in the world by profitability in the automotive industry. If you think this is because the Japanese are robots or work like slaves, read What is KANBAN Part2. They only work by KANBAN.