If you are new to the world of Lean, Six Sigma or continuous improvement in general, you may be scratching your head over some of the terms flying around you. It can certainly be confusing, especially with so many of the words having originated in Japan. We’re here to help. Today we are going to take a look at the concept known as Kanban.
The word Kanban means signboard or billboard in Japanese. The business practice arose from an observation that Toyota executives made about visiting American grocery stores in the 1950s. Who knew "Piggly Wiggly" was so important to Lean history?
A grocery store loses business if they run out of a particular item that a customer wants to buy, but they also stand to lose if they stock a large inventory of something that doesn’t sell (especially perishable items). They address this by keeping a small inventory on hand and reordering from suppliers only when onsite inventory is low. Also, an empty store shelf (or low inventory) gives the shopkeeper a visual cue that backroom inventory needs to be moved to the shelf.
Toyota realized that this approach could be used effectively in manufacturing. Employees on the line would pull required items from bins. The bins would be replenished from on-site inventory only when needed. On-site inventory would be replenished with new parts from the supplier when it ran low in a systematic manner. In this way, Toyota created a demand based, just-in-time method of managing inventory. They use what is called Kanban cards to signal depletion of product, parts, or inventory. When received, the Kanban triggers replenishment. in some cases, that replenishment authorizes the production of an item, not just its movement.
Today, the principle behind Kanban is used by all sorts of organizations well beyond manufacturing. It can be useful for any process that moves items or work from one stage to another. For example, software development teams use Kanban (often with a physical Kanban board or softwware) to move work along different stages from requirements, to design, to development, to testing, to production. The process that Chipotle uses to make burritos is also a good example of Kanban.
Principles of Kanban
Keep in mind that Kanban is all about the flow of items or work. The idea is to maximize that flow. This is achieved with the following guiding ideas that apply either in manufacturing, hospitals, or software companies.
- Work is visualized
- Work-in-progress (WIP) is limited
- Interruptions in flow represent potential improvement
- Improvement is continuous
Visualization Speeds Understanding – The human brain processes visual information more than 60,000 times faster than text. A quick glance at a Kanban board or card tells you everything you need to know about the state of work and whether something needs to be replenished or not.
Projects Get Finished – As long as you can push work from one status into the next, regardless of the capability for the next team to process the work, you risk unfinished projects and large backlogs. Kanban forces the discipline of limiting work in progress so that what gets started gets done.
Impediments are Obvious – Kanban makes it exceedingly clear when there are interruptions to flow in any setting. Because work behind the interruption is impacted, there is a large incentive for improvement.
Results are Predictable – An important benefit of this visualization is that it becomes very easy to predict when work will be delivered because flow has been improved.
Like the related concepts of Kaizen and Gemba, Kanban is simple, but powerful. It’s also very flexible. There’s software to manage it, or you can use post-it notes on a whiteboard. It’s worth thinking about how it might help improve the flow of value in your organization.