Kanban - Supply Chain in 3 minutes


The Kanban method was initially implemented to improve manufacturing efficiency and reduce waste by providing a simple and visual material replenishment process so that every step of the production process would get just enough to operate smoothly without stockpiling raw materials or components. The principle is that the second a certain quantity of material is consumed,it becomes immediately visible as an empty box or an empty shelf, and a visual signal is sent to trigger replenishment for the same quantity.

Traditionally, the production of goods is based on the anticipation of the demand. Goods are produced in advance and then pushed to the market. With pull, the system is demand-driven and goods are made to order. On the contrary, Kanban operates in a push system, meaning that production and replenishment only come when needed and not in anticipation of the demand. Beautiful in its simplicity and design, the Kanban has many advantages that can explain why the method became so widespread. It is up to each company to define its buckets and the logical steps that make sense within the organization.

However, the size of the bins, boxes, buckets, or any space to be filled in a Kanban system is the product of a forecast in itself. It is directly related to the amount an organization chooses to use as a buffer or safety and therefore also supplier’s lead time. In situations where suppliers are not reliable, with fluctuating lead times and quality of materials, Kanban becomes tricky to put in place. The same holds true when demand varies over the year, as bin sizing should not remain constant. Applying Kanban usually reduces inventory, partly at the cost of flexibility and by introducing a stronger dependency to suppliers and their lead times. It makes it trickier to benefit from network effects or leverage supplier MOQs and price breaks.