Kanban

A Lean Manufacturing Tool

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contents

Introduction..................................................................................... pg 1
Brief History
Kanban Basics
Small Inventories

Benefits............................................................................................... pg 3
Improving Production
pg 3 Benefits of Kanban Reducing Inventory
Meeting Customer Demand

Basic Methods................................................................................. pg 5
Kanban Cards
Explanation of the System
Examples
Kanban Queues

Implementation.............................................................................. pg 7
pg 12 Sustaining Kanban Kanban Basics
Universal Customer
Kanban Preparation
Kanban Design

Data Collection............................................................................. pg 9
Getting Started
Process Measurement
Data Interpretation & Application
Toro Kanban kit available

Sustaining..........................................................................................pg 12
Kanban Evolves

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Introduction
Most facilities share two common business goals—decrease costs and increase production. How managers go about
accomplishing these goals may vary, but most can be achieved with the aid of Kanban.

Brief History
Kanban is one of the most popular efficiency improvement
systems used in any size of facility. It was developed
as an integral part of the Just In Time (JIT) production
system, developed at Toyota, by Taiichi Ohno, and
influenced by American economist W. Edward Deming.
When implemented properly, Kanban uses a system
through visual communication and inventory management
to eliminate waste and reduce cost of over production.
Kanban eliminates stock piling wasteful inventory, instead,
supplying only what is needed based on demand.

Modern American business methods such as Training

within Industry (TWI) and Total Quality Management
(TQM), developed in the 1930s and 1940s, provided the
foundation for Kanban. Japanese facility managers and
leaders like Taiichi Ohno learned of these methods during
the U.S.-backed reconstruction effort just after the war.
Elements of TWI and TQM were shared with industrial
managers, which led to many innovative Japanese
methods and philosophies. The Japanese refer to this
early industrial period as The Quality Movement. Several
of these innovations are now popularly used in industrial
facilities throughout the world.

Taiichi Ohno was specifically tasked with catching up

the Toyota production process to American standards of
production. After visiting the U.S. he publicly expressed
how impressed he was by what he saw in American
supermarkets. Consumers picked items off the
shelves dictating demand, and inventory was replaced
only when the items were removed. He realized that
Toyota’s productivity could eliminate inefficiencies and
wastefulness by implementing the same ideology. Let
customers dictate demand by producing things on an as With Kanban implemented, station operators find ways to be
needed basis. more efficient with the inventory on hand.

Kanban was happening in American stores and

restaurants naturally based on consumerism, before it
had a defined name. The Japanese recognized it as an
efficient system translating it to manufacturing to improve
assembly lines, warehouses and other similar industrial
facility processes. Anywhere inventories are relied on for
production, Kanban has a place. Where implemented
properly, the system is proven to help facilities become
more time and cost efficient. Worker safety, morale, and
even sales are known to improve with Kanban.
Translated to English Kanban has several similar
meanings. Translations include: instruction card, visible
record and signboard. All refer to a system where the
status of production and inventory are clearly displayed
using very simple methods of visual communication. As a
result, processes are streamlined and problems identified
and improved.
In this guide, several fundamental Kanban concepts are
addressed to assist a facility in implementation. Keep in
mind, not all ideas or methods described in this guide are
suitable for all facilities. You must decide which elements
are right for the processes you hope to improve.

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Kanban Basics
In industrial-method terms, Kanban is known as a pull
system based on demand. This means facilities stock
inventory determined by orders placed. The inventory is
then pulled through each production segment purely by
customer demand.
Kanban, offers greater efficiency than a traditional pull
system due to its visual cues. Kanban relies on limited
inventories and visual markers to help workers improve
efficiency. Orders become easily tracked from start to
finish.
Small Inventories
Before Kanban was developed in Japan, many facilities
were starved for space. Inventory-storage was difficult to
find and very expensive. Facilities soon realized storing
large inventories was not cost-effective.
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Introduction
To overcome this obstacle, Japanese managers began
applying new methods to reduce inventories. Instead of
stocking inventory based on projected demands, inventory
was only stocked when customers demanded products.
Many additional benefits were soon realized by these
early implementations. As an example, facilities rarely
overproduced because limited supplies naturally stop
production when orders are met.
For many traditional Western facilities, maintaining
small inventories may appear somewhat problematic.
After all, large inventories are thought to keep a facility
from running out of materials. With Kanban properly
implemented, materials are always available to meet a
facility’s production demands.
In addition to improving process flow, Kanban helps
managers and workers control inventory size with
strategically placed visual communication. These are
generally colored markers placed near or under inventory
stocks to help workers easily monitor levels and rapidly
adjust to changes in customer demand.
 2
Benefits
By combining simple controls and methods, Kanban naturally creates a “check-and-balance” system. Workers will
no longer be guided by facility-wide production goals. Instead, their goal is to ensure inventory stocks and individual
production duties move along with customer order demands and don’t exceed them.

Improving Production or obsolete items never take valuable storage space.

Once Kanban is properly implemented, workers operating
assembly stations will naturally gauge their own work
performance and adjust accordingly. As a result, workers
become more focused on meeting upstream demands and
less on individual achievements.
Common benefits include:
• Lowered overhead costs
• Standardized production goals
• Increased efficiency
• Reduced obsolete inventory
• More control for workers
• Improved flow
• Prevention of overproduction
• Progress reports for managers
• Improved responsiveness to changes in demand
To achieve a truly self-managed process, visual
communication is used to help workers easily identify
inventory levels at each step in a process. Strategically
placed labels and signs give workers minute-by-minute
production goals. In turn, processes have greater
transparency—promoting efficiency.
Reducing Inventory
One of Kanban’s most celebrated benefits is its inherent
ability to help processes function with very limited
inventories. In fact, Kanban is known to reduce inventories
by as much as 75%. Inventory reductions decrease
overhead costs, increase efficiency and save money.
These limits help workers focus on filling orders with
greater efficiency.
Meeting Customer Demand
Since station operators continually pull the supplies they
need from proceeding stations, production goals are
naturally established by customer demand. In Kanban,
the production goal for each station operator is to always
keep pace with a system’s continual pull. This eliminates
wasted time and energy by focusing production on actual
needs and not desired goals.
Kanban is designed to help implementation teams make
precise adjustments to a process. Processes must be
programmed to operate with tight buffers for adjustments
to function properly. Use visual communication to help
workers see when their station is behind or ahead of
production. These visual cues provide immediate feedback
to help workers rapidly adjust to ongoing changes in pull.
Visual cue adjustments can be made at any step in a
process to improve inventory flow.
Kanban promotes minimizing actions within a process.
Actions involved in each step of a process should be
boiled down to the least number of steps possible. This
way, materials are never moved or stored twice in a single
process. Goods immediately enter a process the moment
they land on the loading dock.

Since nothing in Kanban is ever produced until a

customer’s order is placed, large stockpiles of inventory
are unnecessary. Kanban helps facilities program
processes so they are always supplied with what they
actually need and shortages are eliminated. Station
operators learn to work with smaller buffers and find ways
to be more efficient with the inventory on hand.

Working with small buffers provides many benefits.

One benefit is the system’s natural ability to expose
inefficiencies in production. Inventory stocks are easy to Kanban is designed to help implementation teams make
monitor and issues are quickly identified, almost as they precise adjustments to a process.
happen. Solutions can then be found, well before an entire
process is affected. In Kanban, unnecessary overstocking

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BASIC METHODS
Kanban Cards and Kanban Queues are two common methods that make Kanban successful.

Kanban Cards
One of the earliest forms of Kanban is a simple card-based
system known as Kanban Cards.

Production and warehouse facilities use this system

to track inventory and control production. Even today,
Kanban cards are popularly used to track the status of
unfinished units and provide production with special
instructions.
Fig 1

Explanation of the System

A simple way to think of how Kanban works is a three-step
visual process.

1. To do column: Order cards are placed in the “to do”

column to indicate inventory supply needed.
2. Doing column: Order cards are pulled from the “to
do column” and inventory is moved to the “doing” Fig 2
process for workers to assemble what is needed.
3. Done column: Order cards are pulled from the “doing” Modern facilities may use more complex, multi-layered
column to the “done” column and product is shipped forms of the Kanban Card system. Cards may include
out. carbon copies so each station or drop point within a
process keeps a physical record of each unit they produce.
Once the “done” order cards are removed, this is a
Other facilities have moved to a software based Kanban
visual indication to workers to pull the order cards from
card. This system relies on barcoded labels and electronic
the “doing” column to ship out more products. Workers
databases to track production and inventory. Managers
responsible for the “doing” column then need to pull
can track production from any network or WiFi location ─
order cards from the “to do” column to get more inventory
providing greater control over a process.
assembled. Workers in charge of inventory and the “to do”
column will order more inventory based on orders coming
Kanban cards are normally printed on a durable,
in. This system continues to cycle and workers visually
industrial-grade material so they survive rough handling
understand exactly what is required of them in the process
common to production processes. DuraLabel’s DuraTag™
of manufacturing.
and magnetic supplies are both made of industrial-grade
materials ideal for use as Kanban cards. DuraLabel
Examples printers make it easy to design cards in-house so they look
professional. With an in-house industrial printer, cards can
Follow the visual example in Fig 1. The first station be printed on-demand and custom designed with barcodes
operator attaches an issued Kanban card to the and special fields for improved tracking.
production unit’s storage container. The card remains
attached to the container throughout production.

Once the production unit and its associated Kanban card

arrive at the end of a process, the card is removed and
returned to the hanging file (Fig 2). Empty slots in the
hanging file visually communicate how many orders have
been issued and how many more must be produced to fill
all orders. Place the hanging file in a central location to
give all workers access to the current production status.

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 basic methods

Kanban Queues Replenishing Downstream Demands

Warehouse floors are easily and economically marked
to indicate proper locations for palletized or other large
Station 1
container storage. Kanban queues visually communicate
dedicated storage locations to all workers. Floor markings
can be used to help facilities organize inventory or finished
products. This visual communication makes inventory easy
to locate and identify so stocks are tightly controlled.

In Fig 3, additional inventory in the upstream queue at

Station 1 alerts the operator at Station 2 to replenish their
queue. Queues are restocked immediately so customer
orders are filled on time.

When customer orders increase, production naturally

adjusts to meet these new demands. To avoid shortages,
program queues with a small, but necessary buffer.
Extra inventory within a process provides flexibility so Station 2
adjustments are seamless throughout a shift. Just
remember not to overstock buffers. The system depends
on limited inventories to function properly.

For rolling, or other moving inventories, colors can be

designed into queues. Workers use these colors to help
maintain accurate stocks and improve process flow. In
Fig 4, queues are marked with stop-light coloring to help
station operators react to pulls in demand as it happens.

With a properly programmed queue, time is never wasted

calculating upstream or downstream demands. Needs
Fig 3
are visually communicated as stocks are removed.
Colors reveal downstream and upstream demands at a
glance─eliminating guesswork and overproduction.

Station 1 Station 2 Station 3

Fig 4

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Implementation
Teach the basics of Kanban to all employees during facility-wide meetings. How it will be implemented in your facility
should be understood by all to be truly successful.

Kanban Basics
Kanban implementations can be as simple or complex
as you make them. All require discipline and facility-wide
support to be successful. This is why it’s critical for all
employees to understand the benefits of Kanban prior to
implementation.

Once management is prepared to implement Kanban,

form an implementation team to develop and manage
the system. Invite personnel from all facility levels to
participate as members of this team. Having teams with
varied perspectives invites more feedback for planning.
For a truly successful implementation, teams should meet
regularly so issues and concerns can be discussed and
resolved.

Universal Customer
In a Kanban facility, workers are expected to treat
coworkers and managers as customers. Each employee
is asked to take it upon themselves to produce the best
possible products and services for their many customers.
Less time is spent sifting through inventory when color-
coding is used for labeling products, components, and raw
material.

The philosophy benefits a process in many ways. For

example, station operators in an assembly line consider a
downstream station operator as a customer instead of just
a coworker. They are motivated to provide quality goods
and services downstream, which results in a higher quality
product.
Satisfying the needs of coworkers and managers should
be the goal of all employees. When a worker’s customers
are happy, it reflects positively on them. Satisfying the
needs of others helps workers take a personal interest in
the job they do.
Treating coworkers and managers as customers has
always been much more than just a business philosophy
in Japan. It’s traditional cultural. Some claim Japan’s
dedication to satisfying the customer is the main reason
for their success.
Japanese employees are credited as the first to formally
apply universal customer to industrial manufacturing
and did so as early as the 1960s. Since then, employees
at facilities around the world have applied similar
philosophies to improve other Lean methods and systems.
Benefits of “Universal Customer”:
• Better communication
• Higher quality product
• Lower production costs
• Less wasted-time formulating ideas
• Reduced production lead times
Since Kanban helps workers focus on inventory and
production efficiency, the system easily integrates with
a number of popular Lean Manufacturing systems,
processes and philosophies.
If your facility has not already implemented Lean, Kanban
is an excellent first step. An implementation shows how
basic efficiency improvements are made in Lean and the
role visual communication plays. The system is often used
to pave the way for more complex implementations like
Lean.

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Kanban Preparation
Kanban team leaders should begin researching and
documenting facility process elements. Diagrams are one
of the best ways to document a process and describe
how unfinished products travel through a process. Good
diagrams will continue to offer Kanban team leaders
excellent reference.
Since diagrams help describe processes in simple and
very visual terms, they expose inefficiencies more clearly.
Once identified, team members can use process diagrams
to develop and implement more effective Kanban
techniques and examine individual process stages more
closely.
The first stage in a Kanban process is a customer order
and the last stage is delivery of a finished product. The
assembly of each product type makes up an individual
process.
For the life of a facility, processes should be viewed as
imperfect. Team leaders should continuously look for new
ways to reduce inefficiencies and work to combine related
actions into single events. Streamlining a process into an
uninterrupted flow of production is the ultimate goal.
Implementation team members research each action or
step involved in a process and then consider alternative
techniques and tools to see if steps can be streamlined
into fewer actions. Whenever an unnecessary action is
eliminated, costs are reduced and efficiency is improved.
Keep in mind, the path materials take should never
represent a single process. As an example, manufacturing
facilities often retool assembly equipment to produce
different products. Different tools or equipment are
generally required at some point when a different product
must pass through the same assembly line. Identifying
each process by a finished good ensures data accuracy.
Displaying a process diagram helps improve Kanban
techniques.
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implementation
Kanban Design
For Kanban to provide the greatest return on investment,
facility managers must be willing to make considerable
changes to their operations. In some cases, this may
actually require relocating a process or facility. Keep in
mind, the goal of Kanban is to continuously strive for
the most efficient processes possible. Finished products
should provide the customer with the greatest possible
quality and value.
Access to materials, utilities and other critical process
resources should be continuously monitored by Kanban
team members. Where costs exceed benefits, relocation
may be required. Relocating a plant may dramatically
improve facility efficiency and, in some cases, save
facilities from becoming obsolete.
Just like an internal facility process, diagrams can be
used to describe each stage in an external process. This
is called value stream mapping. Diagrams are used to
help expose external inefficiencies so team members
can modify processes where necessary. As an example,
delivery of a specific material would be described as an
individual process and stages would be identified and
indicate man-hours, time, and cost. This diagram would
offer excellent reference when researching relocation
sites.
Facility layout is another critical element to consider in
Kanban. Process diagrams will likely expose bottlenecks
and other process delays due to poor layout. Ensure
materials flow uninterrupted through a process by
modifying layout where possible. As an example, it
may be beneficial to reorganize assembly stations so
interruptions in flow are eliminated. Other considerations
include workspace. Workers are often more efficient when
provided with adequate space. Eliminate obstacles so
routine tasks are performed efficiently and safely.
Well researched diagrams of all facility processes will be
beneficial in helping your team streamline production
and improve efficiency. Update your diagrams whenever
facility layout changes are considered. The goal is to
continually strive for maximum efficiency using the best
data available.
 8
Data Collection
Sample data from all stages within a process will maximize process efficiency. Complete and reliable data results in more
accurate changes to processes.

Getting Started The following list describes several examples of common

facility data collection guidelines:
Implementation teams should develop a disciplined
schedule for data collection. Longer periods will provide • Processes should be divided by individual finished
more accuracy, but may be unrealistic for many processes. products. Changeovers create separate processes.
• Data collectors should have access to computers to
In large facilities, with multiple processes, team members store data electronically. Fig 5 shows process data
should collect data from processes they are most familiar stored in a Microsoft® Excel spreadsheet.
with. Refer to previously diagramed process steps to help
• Videotaping the production of a single unit through
with data collection research.
a complete production process offers valuable
information.
In Kanban, data is collected regularly from each individual
stage in a process. This generally provides data collectors • To increase data collection efficiency, all production
with measurable events occurring at each step. units and related components or materials should be
assigned a reference number.
Data collections should sample production times,
maintenance times, downtimes, and retooling times. In
manufacturing, and some warehouse processes, units
produced and rejects are generally sampled for the
BLEACHED FLOUR PROCESS
collection period. STATION 3 (Avg. per week)
Collections must be regularly scheduled and occur over an
Product Number 75Q-211
established sampling period. Depending on the accuracy
required, a collection period could be a week, several
months or longer. Since Kanban works to streamline Product Name Bleached
processes, data collectors will find it much easier to take
accurate samplings once Kanban is fully implemented.
E
Production Rate 1498
PL
To ensure the data is as accurate as possible, a calendar
Production Order
of collection days should be created and provided to 1500
Kanban team leaders. Collections must always fall within
Demand
established sampling periods, but occur randomly. For
example, one collection may occur at the start of a shift Time Per Drum 35 sec.
M

and another may start at the end of a shift. Mix these

times up so data contains a good cross section of all Batch Size 1
shifts. Extenuating factors, such as power outages or
SA

equipment failures, are known to skew data. Document

these occurrences so their effects are factored in. Retooling Time 15 min.

From this point forward, data collections should be a Preventative

10 min.
regularly occurring activity for Kanban team leaders and Maintenance
continue for the life of a process. Create data collection
guidelines to ensure accuracy. Downtime 15 min.

Reject Rate 5

Fig 5

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 data collection

Process Measurement
Kanban data collection should focus on measuring
the routine elements of a process. These are generally
measurements of time and production. As an example,
the assembly of a single component by a station might
be one measurement.

Once team members define what data will be collected,

build a collection checklist for Kanban team leaders to
reference. Having a checklist ensures the same process
elements are always sampled. The goal should always
be to collect reliable data so process modifications or
adjustments are always accurate and improve efficiency.

The following measurement examples are commonly

used in manufacturing processes. Implementation
teams will need to research whether these
measurements apply, or develop a more applicable set
of measurements.

• Batch Size – The smallest number of units a station

produces in one production run. As an example,
the batch size for canned beverage packaging is
commonly six. Automated tools generally determine
batch sizes in modern production facilities.
Handmade items normally have a batch size of one.
• Station Production Rate – The average number of
batches a station produces during the established
sampling period.
• Production Order Demand – The average number
of orders demanded. This will help you calculate
production requirements. As an example, a
production order demand of 100 finished units might
require 100 man hours to produce.
• Retooling Times – This is the average time it takes
for process tools to be changed over to produce a
different product. Lost time for shut-downs, clean-ups
and start-ups are factored in.
• Downtime – Any unscheduled stop in production.
This includes any unscheduled repair, employee
emergency, etc. Lunches, breaks and scheduled
maintenance periods are not factored in.
• Reject Rate – All finished products and materials
removed from a process.

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data collection

Data Interpretation & Application

As your implementation team compiles data, better
comparisons will be possible and trends more apparent.
Comparisons may occasionally show unusual data. Never
hesitate to retake a collection when this occurs. Incorrect
data diminishes Kanban’s effectiveness and can even
harm a process. This is why it is always better for data
collection to be accurate, than fast.

Setting guidelines can help Kanban team leaders

avoid common shortcuts and focus on consistency and
accuracy. As part of the guidelines, encourage team
leaders to research what’s really happening in a process.
Document any unusual activities or discoveries as a
routine part of their collections. Data collectors will be the
ears and eyes of the process.
Once complete, data should be transferred into an
electronic spreadsheet. Format the spreadsheet to
display each process individually. Breaking data up by
process helps organize data into useful and accessible
groups. Convert the spreadsheet into graphs and charts
to provide a more complete picture of a process. Highlight
improvements and issues.
To make the most of your team’s data, develop a set of
simple formulas to help gauge efficiency for all facility
processes. This figure will be your Kanban Score and can
be calculated by averaging all process scores within a
facility. Track Kanban Scores on a chart and share them
with facility employees by displaying them on posters (Fig
6).
Depending on process type, many popular efficiency
formulas can be used to calculate the efficiency of process
elements.
In manufacturing, popular supply chain management
formulas are used to calculate the Reject Rate, Production
Unit, Production Time, Scheduled Production Time,
Scheduled Retooling Time and Buffer Quantity. Once
Kanban team leaders select a formula for each, facility
improvements can be tracked and displayed as a single
facility Kanban Score.
As your team begins to record Kanban Scores, use
the results of these calculations as your team’s basis
for process redesigns. As an example, converting raw
material and component storage to Kanban queues will
likely decrease lengthy production times. Support team
members’ creativity and ingenuity. They will be important
assets as you and your team tackle a redesign.
Display facility Kanban achievement scores on posters at
strategic locations. Visible scores provide workers with the
feedback they need to improve. In this example, a facility has
chosen to display the status of a "Kanban Score". A score
is often calculated using a set of custom formulas based
on production time, supply efficiency and several other key
process measurements.
Fig 6
Over time, buffers used to ensure sufficient station
inventory should be fine-tuned. Research shipping terms,
production lead times, vendor lead times and a facility’s
own level of comfort to set buffers. As adjustments are
made, Kanban Scores should always improve. Help this to
occur by keeping workers focused on meeting customer
orders and eliminating over production.
Process stations generally find their optimum buffer
quantity through trial and error. For example, a very small
inventory buffer may result in stock shortages at one
station seven-days-a-year. By raising this level slightly, a
station may completely eliminate shortages and, in turn,
improve their Kanban Score.
Consultants and books are often valuable resources. Both
can provide detailed directions on how to apply specific
Kanban methods. One of the more popular Kanban books
is Kanban Made Simple by John M. Gross and Kennith R.
McInnis. The book contains many useful process formulas
to help your team tailor the right system for your specific
process type.

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Sustaining
Ensure Kanban continues to benefit the processes it’s applied to. Use the following tips to help sustain Kanban for the
long run.

Kanban Evolves encouraged from all employees. Their unique perspectives

Since processes are so different, there are many
Kanban methods and techniques not discussed in this
guide. Only general applications are covered for basic
implementations. Over time, Kanban teams should
consider developing custom methods and techniques to
improve data collection and efficiency. Kanban should
continually change to improve efficiency. This is especially
true as new technology becomes available and facility
needs change. Keep Kanban flexible so methods and
techniques are adaptable to changes. Processes must
always be operating at their optimum efficiency.
Program the processes in your facility to rely on the most
efficient level of inventory. Do this by limiting inventory
stocks so they never exceed customer demands.
Keep in mind, Kanban relies on facility-wide participation
to improve existing implementations. Feedback should be
will help guide your implementation team to more accurate
solutions and foster continued support for Kanban’s
sustained use.
Kanban is best implemented alongside other popularly
used “Lean Manufacturing” systems and philosophies.
Two of these are 5S and Kaizen. The two go hand-in-hand
with most Kanban implementations. Having both in place
paves the way for a more successful Lean Manufacturing
implementation.
Make sure to share your Kanban success stories. Show
reductions in cost and resulting profits by displaying these
successes on highly visible banners. This helps employees
see the fruit of their labor and encourages improvement.
In time, using these techniques will help Kanban become
an accepted practice and integral element of a facility’s
overall operations.

The cooperation of all employees to continually improve facility-wide process will help to ensure the success of Kanban.

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04/16