By: Rashid Javed | Updated on: July 9th, 2023

Definition and explanation

Kanban is a Japanese manufacturing regulation system which makes use of an instruction manual to control the flow of work, usually the production line in a business. It is also sometimes called as lean manufacturing system.

Kanban is a Japanese term which translates to ‘billboard’ or ‘signboard’.  It is a management tool which is used by companies to regulate the smooth running of activities. Kanban runs alongside with a just in time (JIT) system. Where JIT is the work approach under which producing right amount of goods at the right time is the key aim, kanban is a tracking system which keeps a trail of work to be started, work still in process (WIP) and the completed tasks.

In a kanban system, kanban cards are a vital part. These cards are the main tool which indicate the progress of work for a company, movement of inventory for a manufacturing line and personals assigned to a task or service etc. It maintains the tasks which form part of a specific operation of the company. All the related resources and employees are continuously informed about the progress that can trigger or delay the activities based upon the levels of completion. A basic kanban card consists of following heads:

As shown above, the “Backlog” of a kanban card highlights all the tasks that are yet to be started. These are either tasks that are not scheduled or the task force has not done necessary arrangements to commence these tasks in the first place. “To Do Task” head of the card shows the tasks that are being started. “In Progress” shows the tasks which the task force is currently working upon. “Completed” as the heading reads highlights the tasks that have been completed. A company can add or remove headings and invent its own kanban cards based upon the own unique nature of business and work requirements.These headings enable the team to prioritize the tasks and plan their work accordingly. Work in progress limits are set which enable the work to be consistent and smooth because as soon as a blockage is highlighted the whole team gets to know the bottleneck or constraint and so can actively collaborate to release it.

Application and use of kanban system

Kanban system was first formulated in 1950’s by a Japanese Automobile Multinational company ‘Toyota’. Toyota Company started its research on the methodology of supermarket businesses and observed the trends of expected customer turnover and stocks maintained by large super markets. This ultimately led Toyota to formulate a working kanban bin system, which acted as a signaling mechanism to align the stock levels of Toyota directly with the consumption levels of the stocks. So, the goods were only ordered when the current raw material was consumed.

Toyota applied this theory into their main production systems. It devised six rules to ensure the efficacious implementation of kanban with monitoring at every level. The main points included were the inventory requests were sent to suppliers when company ran out of its existing supplies, the maintenance of quality of systems and goods produced, the reconciliation of kanban request with items produced and minimizing the amount of pending requests.

Dell, an American IT company that manufactures computer systems applied kanban lean manufacturing successfully in their systems. Previously, Dell was using an outdated website which was structured to match its existing requirements at that time. Under kanban theory Dell made a new website that used a system of real time assessment of orders of its costumers based upon their requirements including the prices they are willing to pay. It took almost six to eight months for DELL to become one of the most successful computer selling vendor in the world. The share price hike that DELL experienced was 650%, from $20 to $148.75 in a span of one year.

Since its introduction, kanban is being applied not only in production processes but also in industries like construction, architecture and software development. Siemens healthcare, SAP – a German based multinational software corporation, Apple, an American multinational tech and computer manufacturer etc. are some other companies that applied kanban to gain required results in their systems. This was possible due to the ‘flexibility’ that kanban system carries.

Advantages and disadvantages of kanban

Advantages kanban:

  1. Kanban is a very simple and easy to understand system that makes it practical for the management of a company to apply this system effectively.
  2. The main advantage of applying the kanban system is a direct reduction in the costs and wastage of the company. Kanban system improves the flow and management of inventory by directly assisting the company to pursue the company’s existing systems i.e. just in time (JIT) and make to order etc. which reduces carrying or holding costs and makes sure smoother running of inventories.
  3. Kanban system advocates continuous and sustainable improvements in the production systems of the company. Kanban not only consist of manual guidelines or cards but also visualizations of the process outputs which makes the review of work easier. This could also highlight other potential problematic areas where additional attention is needed.
  4. Kanban system is a very responsive system and does not promote any lags or delays. As the tasks are continuously shifted between the columns of the kanban cards, it automatically highlights the areas where any limiting factors are raised that could hold up the overall output which can be responded to as soon as possible by shifting and switching the resources from the other tasks.
  5. Kanban enhances the effectiveness of human resource of a company. As the system requires an on-going training, learning and improvement in the competency levels of the employees. The employees are likely to retain their experiences in long run. Additionally, kanban system is usually applied in team situations which harbor a sense of shared responsibility and harmony among the employees. This enhances their decision making capabilities and raise prospects of innovation.

Disadvantages of kanban:

  1. Kanban cannot be used as an independent tool. It is not a methodology that could be applied solely rather it can be merged with other processes and systems of a company like JIT, make to order and scrum etc. making these systems more visible.
  2. As the tasks are continuously shifted between the columns of kanban board, the prediction of specific timelines for completion of tasks or activities becomes difficult. This is because kanban acts only as a signaling port in a pull production system.
  3. Kanban is not suitable for the environments that are dynamic in nature. Because a kanban system assumes the plans that are stable and consistent to a certain extent, it may become ineffective in industries where the activities are not static.
  4. Kanban will become very difficult to apply if too much activities or tasks are interrelated in a system. This is because such systems enhance the possibility of transfers of goods and expertise amongst different tasks too often and increases difficulty to keep the pace of all these activities.
  5. The implementation of the system may result in poor quality outputs. Kanban acts like a monitoring structure that makes the flow of tasks smoother. If any work done is unsatisfactory for the costumer or the company, it would require a rework that could worsen the situation as it will require more time and resources to get completed.
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