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Kanban Types & Triggers

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Kanban, one of the primary Lean tools, is an inventory management system that relies on real-world inventory consumption (demand) to trigger replenishment signals (supply). Click here to read about kanban.

Components of a kanban solution: signals, quantity, & lead time

Kanban solutions consist of a specified number of signals, a standard order quantity, and a defined lead time. The number of signals determines the type of kanban solution being utilized, e.g., 2 cards, multiple cards, or 1 card. The timing of when a replenishment signal is issued determines the trigger timing for the solution, which can be break a bin, empty a bin, or in the middle of a bin.

A typical kanban solution might be 2 cards @ 100 pieces each, 4 cards @ 500 pieces each, or 1 spot on the floor for a 55-gallon drum.

The term lead-time demand refers to the expected consumption during one lead-time period. If an item has a lead time of 10 days and daily demand is 5, the lead-time demand is 50 pieces. Every kanban item’s solution must order enough inventory to cover the expected demand during the actual lead time, including any required safety stock for delivery or supply variation.

Regardless of the total number of signals or the timing of the triggers, when a kanban signal is sent there must be enough inventory on hand to cover the expected demand that will occur from that moment until the next replenishment order arrives. Figuring out these details is part of the complex process of calculating kanban solutions.

3 Types of kanban solutions

Once items are sorted into “on kanban” or “not on kanban,” the kanban items must be assigned a type of kanban solution.

Two card solutions are the standard or ideal kanban solution, which allows one card to be with on-hand inventory while the other is linked to a replenishment order that’s coming from the supplier. Conceptually, one card is linked to on-hand inventory while the other hangs on the kanban board.

A single card or 1-card solution is used when an item’s minimum order quantity (MOQ) exceeds the number of pieces that need to be ordered for a 2-card solution. For example, if an item has a lead-time of 10 days and daily demand is 10, we need to order 100 pieces to cover lead-time demand with zero safety stock. If the item has a minimum order quantity of 1,000 there’s no way to use 2 cards for this item because there would be piles of excess inventory. Instead, use 1 card and place a replenishment order when the on-hand balance gets down to no less than 100, which is the amount needed on the shelf when a new order is placed. One-card solutions are considered mid-point triggers because the card is not triggered at the beginning or end of the kanban bin.

Multi-card solutions have any number of kanban signals or cards, going to as low as one card and up to any number. (I’ve seen solutions with as many as 89 cards. Yes, it worked, but it’s a long story.) There are three specific circumstances that justify a multi-card kanban solution.

  • If an item has seasonal or day-to-day demand variation that necessitates frequent resizing, a multi-card solution is deployed to make it easy to resize by adding or subtracting cards from the floor.
  • If an item has a long lead time, a multi-card solution reduces on-hand inventory by breaking the order quantity into smaller batches than a 2-card solution would allow.
  • An item with a maximum order quantity (MaxQ) that is less than the 2-card order quantity requires more than 2 cards. If an item’s 2-card solution requires an order quantity of 5,000 per card, but the maximum allowed order quantity is 2,500, we need more than 2 cards.

Trigger timing

Kanban signals are triggered at the beginning, end, or middle of a kanban bin. In this context, the word “bin” means the kanban order quantity, not the physical container. If we order 100 pieces in 2 boxes of 50, the bin is 100 pieces, not a box of 50.

Break a bin (BaB) means the card is triggered when the first piece is taken out of the kanban bin. The advantage to this method is that it can reduce inventory for 2-card solutions, but break a bin is very difficult to audit because kanban items only expect to have a card with on-hand inventory when the bin is full, and it’s difficult to tell the difference between a full bin and a bin that has consumed one piece.

Empty a bin (EaB) means the card is triggered he last piece is removed from the bin. It is the opposite of break a bin, so average inventory for a 2-card solution is higher that BaB, but EaB is easier to audit because every kanban item has a card associated with on-hand inventory, from 1 piece up to a full kanban bin.

Mid-point triggers only occur with 1-card solutions, as described above.

Need more info? Keep browsing this blog. Want specific expertise implementing kanban solutions in your organization? Contact Josette Russell today.

kanban calculator

What Exactly Is Kanban?

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Kanban, one of the primary Lean tools, is an inventory management system that relies on real-world inventory consumption (demand) to trigger replenishment signals (supply). Since kanban signals are based on actual consumption, it is considered a visual “pull” system. The opposite of pull is push, in which material is delivered to the recipient based on the supplier’s scheduling preference and not on the customer’s need.

At its most fundamental level, kanban performs two functions

Kanban calculates replenishment solutions based on the characteristics of each item, specifically lead time, demand, and supply and/or demand volatility. Kanban solutions balance the need for meeting customer delivery requirements, specifically high on-time delivery plus short lead times, with the need for low on-hand inventory levels to boost cash flow and minimize required space. Be very clear: kanban’s primary goal is to protect delivery performance, and inventory performance is a secondary goal that is only pursued after delivery performance is successful.

Kanban initiates replenishment orders in response to material consumption, using the calculated kanban solution to trigger an order for a standard order quantity at a standard lead time, such as 100 pieces due in 2 weeks.

Unlike kanban, MRP (materials requirements planning) exists in a Big Computer System, which relies on system values for on-hand balance, expected incoming material, and upcoming demand.

Kanban utilizes visible signals such as kanban cards or empty inventory spots to manage replenishment signals. Associates can quickly and easily check kanban cards or boards to determine what is ordered, when it is due, how many will arrive, etc. This puts a significant amount of inventory management intelligence in the minds of the people who do the work, versus in the hands of a few people with access to MRP.

Kanban is a repetitive loop

Kanban can be compared to the Plan-Do-Check-Act cycle.

Plan = Size, or calculating kanban solutions

Do = Execute, the processes that manage kanban signals, cards, orders, and boards. Click here to read about kanban cards, or click here to read about kanban boards.

Check = Audit, the regular review cadence that verifies the health of the kanban system

Act = Respond, addressing anything discovered during the prior 3 steps that can be repaired or improved

Once kanban solutions are calculated and deployed, kanban is a repetitive loop that triggers replenishment orders based on consumption.

  1. As inventory is consumed, kanban replenishment signals are triggered. In many kanban systems, the physical or observable kanban signal is a kanban card, like the cards in front of the plastic inventory bins in this picture.

  1. Kanban signals are transmitted to the item’s supplier, which can be an internal manufacturing cell or an external supplier. For internal suppliers, sometimes the card actually travels to the supplying work cell, but the signal can also be electronic, such as an open purchase order or an email request.
  2. While waiting for material from the supplier, the kanban card hangs on a kanban board, seen in picture below. Each card hangs on the numbered peg that stands for the due date for that order.

  1. When replenishment material arrives, the associated card is taken from the board and placed with the material in the correct storage location.

This trigger-and-receipt process is repeated over and over for every kanban item.

Basic elements define a kanban system

First, we need a kanban calculator, or a spreadsheet to generate kanban systems. This work is essentially invisible to associates who manage kanban cards and boards, but it is the most critical element of a kanban system. The calculator is usually a spreadsheet with formulas that assign kanban solutions to accommodate demand, lead time, safety stock, and order-quantity requirements. Click here to read about safety stock. Since replenishment signals are issued based on consumption, the calculation process has to accurately trigger replenishment orders at the right time and for the right quantity. Therefore, a kanban solution that is “under-sized” results in too little inventory, which puts delivery at risk. On the other hand, a solution that is “over-sized” results in too much inventory, which eats up cash and space.

Lead-time demand equals [daily demand * actual lead time], or how much consumption occurs in one lead-time period. This is an important number to know when designing kanban solutions because every kanban solution has to order a quantity greater than or equal to the lead-time demand.

As simple as this sounds, calculating kanban solutions is by far the most difficult part of designing a kanban system. For an in-depth review of kanban, get a copy of my book Banking on Kanban: Mastering Kanban to Boost Cash Flow, Minimize Inventory, and Maximize Delivery Performance. Click here to see Banking on Kanban on Amazon.

Next, we need signaling methods, something to trigger replenishment orders wherever inventory is consumed. As stated before, this is usually kanban cards but it can be empty spots on the floor, empty containers, or anything that can serve as a visual indicator. For any type of signal, its form and function must be easy to interpret on the floor. For example, a kanban card should include part number, description, lead time, supplier, order quantity, storage location, and other information that tells associates how to manage the card and the associated inventory. Similarly, an empty spot on a shelf might be labeled with part number, type of container (e.g., box, tote, bucket), supplier, and the quantity per container.

Finally, we need processes to manage kanban orders with accuracy and urgency. Kanban boards store cards that are waiting for orders. Deploy kanban boards where triggers are generated or where they are fulfilled, depending on the defined path of the card from signal to fulfillment. In conjunction with kanban boards is the task of receiving material and putting it away. As material arrives at point of use, the correct card must be taken from the kanban board and put with the material in the correct storage location.

Need more info? Keep browsing this blog. Want specific expertise implementing kanban solutions in your organization? Contact Josette Russell today.