It is a Japanese production control system invented and developed by Toyota that allows no surplus production and gives the workers the right to stop the line if they cannot keep up. It runs contrary to well settled principle of the continuity of production. Kanban literally means a card.
The only paper work issued by production control department consists of the final assembly schedule and two cards — traveling production authorizations. These cards stay with the container (or pallet) containing components throughout the production process. Each consuming department consumes the components in the container. The empty container and cards are returned to its preceding supplying department. There is immediate replenishment of the container, which is again sent to the consuming department (under strict lead time and delivery schedules).
Kanban aims to achieve just in time production. It relies on the physical evidence of an empty container. It is not a time-phased approach. It is a â€˜pullâ€™ system of production authorization. The secret of just in time production lies in the number of cards which are allowed to circulate on the factory floor at any one time. Kanban treats inventory as a liability rather than an asset. It believes in set ups where there are fast changeovers, extra machines, off-line calibration. Kanban gives a significant competitive advantage to the Japanese industry. It moves towards stockless production by cutting EOQ and safety stocks.
Japanese believe in building relationships with a hard core of suppliers. For effective working of Kanban, continuity of relationship with suppliers is essential, as these suppliers are expected to supply in smaller lots at less frequent intervals. In Kanban, a flexible organization with an educated work force who concentrates upon the key problems such as the reduction of set-up times is really very helpful.
Design rationalization, rationalization of parts and attendance to logistics are also equally important for the success of the Kanban. In Kanban, a â€˜bankâ€™ system is established between one process and another to adjust automatically the quality of in-process products and to reduce the down-time of the whole line. It is however to be noted that Kanban system cannot be applied to all manufacturing operation. Where there are large variations in day-to-day production levels, and frequent design changes, MRP (Materials Requirement Planning) is the best system. Sometimes best results are obtained by combining Kanban and MRP.
Kanban is a cost reduction method of inventory management Toyota maintains because of Kanban 0 – 3 dayâ€™s inventory of spares. It also improves productivity (2,700 cars a day at Toyotaâ€™s Takaoka plant each completed in 1.6 man hours average. Compare with 3.8 hours in the USA, 4.7 hours in Sweden and 2.7 in Germany. Kanban is only a contributory factor. Productivity in actually results from the Japanese style of management with emphasis on â€˜work together conceptâ€™ and a belief in â€˜peopleâ€™ not system, produce the desired results.