Sunday, September 29, 2013

The Kanban credence!

During the 1940’s primarily after the second world war Toyota was experiencing the trouble of keeping their car prices low and keeping their process efficient. They had to come up with a mechanism to reduce the inventory which would further help in JIT (just in time) productions. Toyota started to study the supermarket shelves where the customers obtain the required quantity at the required time, no more and no less. Furthermore, the supermarket stocks only what it expects to sell within a given time frame, and customers take only what they need, since future supply is assured. Toyota saw the value in this system and came up with a system to reduce inventory by applying store and shelf-stocking techniques to their production centers.

A part of the complete evolution of the Toyota’s production system (TPS), which was later adopted by all its competitors, they produced the system of ‘Kanban’. Kanban-literally means a signboard or a billboard but was more used as a signal for the next person the production chain. It is a powerful method for linking customers and suppliers in the value chain. One of the major troubles in a manufacturing stream is synchronizing and connecting disconnected portions of value stream. With the introduction of Kanban systems the Japanese car manufacturer saw a significant improvement in their process efficiencies.

 In TPS every person in the production chain treated the next person as a customer and would provide them with the best quality work possible. This would make processes more efficient. During every step in line a Kanban was passed over to the next person in line. A kanban was an automatic directional device which provided information about, what to provide, when to provide, in what quantity to provide, by what means and the way to transport. With this information being handy every worker exactly knew what they were expected to do and what process that they needed to follow.

Different from the conventional production systems that followed a ‘push’ system the Kanban systems followed the pull system. It’s the customer’s demand that drives the production. With every person being treated as a customer to the previous one, the demand could be easily forecasted and thus efficient production levels could be maintained.  In contexts where supply time is lengthy and demand is difficult to forecast, often, the best one can do is to respond quickly to observed demand. This situation is exactly what a kanban system accomplishes, it is used as a demand signal that immediately travels through the supply chain. This ensures that intermediate stocks held in the supply chain are better managed, and are usually smaller.

Where the supply response is not quick enough to meet actual demand fluctuations, thereby causing significant lost sales, stock building may be deemed more appropriate, and is achieved by placing more kanban in the system. With the proven success of the Kanban systems there has been a widespread implementation of this system. It is not only restricted to manufacturing but the modern software development technologies like agile and scrum use the kanbans as well.

The major ERP systems present today use the Kanban systems for maintaining the right inventory levels ensuring JIT delivery of the supplies. In modern day ERP systems like Oracle's JD Edwards and eBusiness Suite, IFS AB, Infor ERP LN, SAP ERP, Deltek Costpoint or Microsoft Dynamics AX, kanban is used for signaling demand to vendors through email notifications. When stock of a particular component is depleted by the quantity assigned on kanban card, a "kanban trigger" is created (which may be manual or automatic), a purchase order is released with predefined quantity for the vendor defined on the card, and the vendor is expected to dispatch material within a specified lead time.

Kanban systems have been widely adopted by the software development practitioners as well. The kanban development cycle follow six main practices:
1.     Visualise
2.     Limit work in progress
3.     Manage flows
4.     Manage policies explicit
5.     Implement feedback loops
6.     Improve collaboratively, evolve experimentally 


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