2.3 Kanban
The background to kanban is well explained in your text. This system works best in the following conditions:
- There are few variations in the final product.
- The suppliers are located within easy servicing distance from the buyers.
JIT was originally thought of, and practised by, Henry Ford. He wrote in 1926: 'waste is that stock in materials that turns up in high prices and low wages'. This concept was developed and made famous by Taichii Ohno as the Toyota Production System. However, Ohno describes his system as 'exactly-in-time' rather than 'just-in-time'. The latter definition implies barely being able to meet the deadline, while the former implies availability when required.
Today, kanban and JIT are used almost interchangeably in logistics, although kanban is essentially a specific type of JIT system.
Reading 2.4
Anon (March 2001), 'Kanban methodology accelerates flow, reduces inventory', Inventory Reduction Report , pp4, 5, 10.
The benefits are that the direct costs of holding the inventory are reduced through having less money tied up in maintaining a suitable size of stock for production. This also means less space is required for storage. Another important aspect of JIT is 'inventory turn'. This is the amount of inventory that is waiting in stock to be used in the production. Increasing inventory turns has been shown to impact seriously on the cost of the final product. Harley-Davidson, the motorcycle manufacturer, started to use JIT when they were seeing very stiff market competition form Japanese manufacturers. They increased their inventory turn by more than five times. This reduced costs, which were passed on to customers and contributed to increasing the market share.
Reference is sometimes found to another system - quick response logistics (QRL). The aim of QRL is again to reduce the order cycle. This is the system that is, for example, seen in supermarkets. When a product is purchased, the bar code is scanned. This is related to the inventory levels. When a certain level of inventory is reached, purchase orders are generated for suppliers to refill the stock. The supplier does this in the agreed time period - overnight, next day, next six hours, etc. The main communication between the purchaser and supplier is actually between the computers, thereby reducing entry errors, paperwork, lead times, costs and so on.
Kanban has also resulted in increasing quality of output. Purchasing firms are more easily able to control quality of small shipments from suppliers than of one large shipment. Suppliers, in turn, have had to adopt JIT to their processes and control quality of output. The outcome has been the formation of long term relationships between suppliers and purchasers, not based on cost alone. Supplier contracts are increasingly seen to have no sunset dates, indicating partnerships based on mutual benefit that lasts the life of the organisations.
In the next reading, you will read about the variations that have been developed on the kanban system. In addition, you will also read about another system called constant work in progress (CONWIP). The reading is a report on the comparison of these various systems.
Reading 2.5
Yang, K (2000), 'Managing a flow line with single-kanban, dual-kanban or conwip', Production and Operations Management , vol 9, no 4, pp349 - 366.
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