12/8/2010

E-Kanban: The Next Step towards Continuous Improvements

By Piyush Dewangan

Kanban is one of the key elements of lean manufacturing and pull production systems used to trigger an action

through visual signalling. The kanban system is useful for managing inventory on real-time basis in accordance

with actual customer demand instead of theoretical, management forecasts and implementing “Just in Time”

manufacturing. Kanban signal starts from customers' orders and follows further processes.

Manufacturers following lean practices use Kanban to drive the process to make, move, or buy the appropriate

parts. In manual kanban system, a piece of card is used, which is attached to the front of the containers or other

storage medium, to manage raw material and WIP inventory. The operator picks up the card and deliver to the next

process operator for signaling about the replacement in certain quantity of parts or components is required.

Typically, spreadsheet, faxes, and emails are used to perform ordering and other transactions. This transactional

information is limited to the concerned personnel. Limited visibility of key process information can lower the

effectiveness of any improvements activities such as process improvements, waste reduction, and others. In the lean

environment, operators do not produce any components or parts if there is no card available for that operation. Poor

implementation of kanban system and missing or lost cards can have adverse impact on the entire production

system.

The challenges of manual kanban system can be overcome by implementing electronic kanban system. The e-

kanban system ensures all the basic components of manual kanban system and also facilitates additional

functionalities and features. This not only improves the efficiency and effectiveness of kanban function, but also

facilitates easy implementation of the system.

An e-kanban system helps companies to achieve process improvements by providing real time information. It

captures all transactions and builds a repository of information that can be used in the implementation of process

improvements tools, such as six-sigma, poka-yoke, and such others. The information can also be used to carry out

root cause analysis faster and in a more reliable manner. Deployment of automatic e-kanban system greatly

removes the elements of human errors prevalent in manual kanban system. The e-kanban system can be integrated

with existing ERP systems. Integration with ERP will result in improved visibility across the supply chain with real

time demand information.

Lean manufacturing practice requires trusted relationships with suppliers and pre-negotiated terms of engagement.

Internal and external e-kanban enables manufacturers to effectively decide on the optimum level of inventory

needed to satisfy demand requirements with reduced lead time. It ensures better supplier relationship management

with its alarm notification functions. It ensures meeting all service level agreements defined by suppliers, such as

lead time, packaged quantities, order receipt confirmation, advance shipment notices and such others. As a lean

element, it focuses on improving flexibility and helps manufacturers to minimize or eliminate some of the non-value

added activities. It is very useful in identifying the true potential of the system by qualifying the level of flexibility,

leanness, and such others.

All the transaction and communications in e-kanban system regarding supply chain requirements are done with a

secured web portal. It supports all transaction related to external purchase items, internal distribution items, finished

goods items, and such others in effectively managing firm’s supply chain. The system provides manufacturers and

suppliers to monitor and track the status of replenishment orders.

ARC recommends manufacturing companies to deploy advanced e-kanban system to overcome the limitations of

manual kanban system, such as scalability, data availability, and others. Numerous companies, such as Ford motors,

Bajaj Auto, Lucas-TVS, L&T, Videocon Industries, and others have deployed e-kanban to improve the processes. It

is the time for companies to take the next initiative towards continuous improvements by using e-kanban systems in

place of traditional card-based systems. According to ARC research Oracle and SAP are the leading suppliers of e-

Kanban.