The key benefit of implementing a Kanban Pull process?...The widely quoted reasons for implementing Kanban pull processes within an organization are often given as benefits associated with reduced inventory levels, operational efficiency gains, operating cost reductions, product quality benefits, more responsive delivery, enhanced supplier responsiveness, reduction and possible elimination of incoming, in-process and final inspections points, …. to list a few of the widely perceived benefits. When we talk about Kanban in process control, we’re looking at a system of inventory control and a system for managing the flow of product or services through a process. While there are many quality, cost and delivery benefits associated with effective kanban implementation,… to focus solely on business performance indicator advantages, runs the risk of MISSING the critical advantage to an organization.
It is important to understand kanban, in order to appreciate the key benefit associated with effective implementation.
What is kanban?
Kanban is quite a simple concept. Those charged with implementing and managing kanban systems need to define clear levels of inventory which are to be allowed at each stage throughout a process and set in place procedures and practices for adhering to these pre-defined levels of inventory. Where inventory levels reach an allowed maximum at a processing point within a process, lets call this point X, then the prior process stops feeding new inventory forward until the inventory levels drop at point X. This has the effect of strictly controlling production levels.
As the kanban system matures, the allowed inventory levels throughout the organization will continually be driven lower. The effect will be a continually increasing need for improved process and product quality, higher reliability levels will be demanded from equipment and utilities, consistently high material quality and delivery will be expected, process planning across the organization and back through the supply chain will be continually forced to improve.
The reduction in the inventory buffers throughout a process will magnify the impact of equipment breakdown, poor quality materials, poor workmanship levels, etc.. The net result will a better more consistent product or service delivered to the customer and lower operating costs to the organization.
Types of Kanban
There are two main types of kanban, namely “withdrawal (conveyance) kanban” and “production kanban”. The key objective of a withdrawal kanban is to pass the authorization for the movement of parts from one stage to another, the key objective of the production kanban is to release an order to the preceding stage to build the lot size indicated on the card.
When considering Kanban, reference is often made to Little’s Law. Per Little’s Law
the basic long-term relationship between process cycle time, work-in-progress and throughput of a production system in steady state is given by:
Inventory = Cycle Time x Throughput
Taking the formula previous and applying to a welding machine within a process. The machine welds say 100 units per hour. The inventory awaiting welding is 1000 parts. Therefore, there are 10 hours of WIP in place. (WIP = work in progress).
By applying Little’s Law and reducing the inventory awaiting welding to say 500 parts, then we would only have 5 hours of WIP in place.
Therefore by reducing inventory levels across a process, then even with the throughout time unchanged, the cycle time for the entire process will fall. Shorter cycle times allow faster customer response times, resulting in a more flexible process operation.
Implementing the Kanban process
When implementing a kanban process the normal approach is to first perform a analysis of the process, gather data re: volumes, product mix variety, inventory levels, etc.. Then calculate the kanban size and the number of kanbans required. Design the proposed process and commence training of staff involved, so they understand the concept, the potential benefits and the importance of staff buy-in. This is critical, as initially there will be major opportunities for improvement, and it is best that line staff are actively engaged, identifying problems and suggesting opportunities for improvement. Then commence the kanban process and audit to check effectiveness. Initially, the permitted inventory levels will be set high, just so as to allow the kanban process to get established, however, once in place, then a continuous program of inventory level reduction can be commenced. This is where the real benefits will be seen to the organization. The permitted inventory level reductions, will force response improvements, equipment reliability improvements, cycle time reductions, ….. i.e. you will see all the benefits of the kanban pull process appear.
Benefits of Kanban Pull Process implementation.
The benefits of Kanban can be identified in terms of impact on employee safety, impact on inventory, impact on operational efficiency, and the potential impact on the customer.
A key benefit of a Kanban process is the rigour it places for an orderly tidy working environment. This minimizes situations where local excess inventory stocks appear in un-approved storage locations. In turn, this reduces possibilities for accidents, falls, etc..
i) As there are clearly defined levels of inventory throughout a process, excess inventory levels and the potential for inventory obsolescence can be miminized.
iii) Working capital levels are controlled as cash is not tied up buying and holding onto expensive inventory.
i) High quality levels are demanded throughout a process.
ii) Equipment uptime and operational reliability is continually driven to higher levels.
iii) Process cycle times are driven down.
iv) Process change-over times are reduced.
The customer benefits from a range of factors. The need for improved quality and process reliability drives enhanced product and service quality for the customer. Shorter lead times, allow more rapid customer response. Operational efficiencies resulting from kanban, may allow cost savings to be passed onto the end customer, however, any such decisions would be at the discretion of the product or service provider.
While Kanban can provide quality, delivery and costs benefits to customers, if implemented correctly, drives a requirement for a deep understanding of the needs, wants and expectations of the customer. The need to accurately forecast future customer demand requires an insight into the mind of the customer and an alignment of customer and supplier market perceptions. Forecasting future customer demand, entails an understanding of future short term demands plus an understanding of the longer term expectations of the customer, taking into account potential technology, environment, competitor, regulatory, etc.., change impacts on the customer. Such an in-depth customer understanding can provide significant competitive advantage to an organization and provide focussed direction to a business in terms of product and process development, marketing orientation, development of costs delivery points, …. i.e. the knowledge of the customer developed as a result of the need to achieve operational efficiency through kanban pull processes, becomes a critical advantage to the business in terms of strategy development and implementation.
Therefore, the key advantage in implementing Kanban Pull processes, will be the effective alignment of business strategy and orientation of the business, with the future needs, wants and expectations of the customer.
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