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Kanban as Plan-Do-Check-Act

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Kanban is one of the primary Lean tools. It is a pull-based inventory management system that relies on real-world inventory usage to trigger replenishment signals.

Plan-Do-Check-Act (PDCA)

One of the most effective ways to analyze kanban is to compare it to the Plan-Do-Check-Act cycle.

Plan = Size, or calculating kanban solutions

In PDCA, the Plan phase is when targets, action plans, key metrics, and owners are defined. This step shouldn’t be shortchanged since it is the foundation for everything that comes after it. Within the context of kanban, this is when kanban data is gathered, solutions are calculated,and cards and boards are deployed. This is also when standard work should be written for all the associated kanban processes or tasks.

For kanban, the sizing process is a repetitive loop that calculates and deploys kanban solutions.

Do = Execute, or performing processes that manage kanban signals, cards, orders, & boards

The “Do” or execution portion of PDCA is when defined action plans and processes are accomplished. Since most manufacturing and operational processes are repetitive, this phase of PDCA is performed over and over, which is one of the primary reasons why PDCA is considered a loop. Every time a process is repeated it should be viewed in the larger context of the overall plan along with any follow-up activity.

In kanban, execution revolves around the care and feeding of kanban cards and boards; cards trigger replenishment orders and boards manage open orders. Click here to read more about kanban cards, and click here to read about kanban boards.

 

Check = Audit, reviewing the health of the kanban system

The Check phase is the oversight portion, which is often overlooked or under-resourced, and the intent is to find shortcomings and areas for improvement. A discovery in this phase doesn’t necessarily indicate failure, though that could be the case, but instead it is meant to maintain that desired focus of continuous and intentional improvement.

Kanban audits are key to maintaining a healthy system. By its very nature, kanban gets out of sync over time if any of the underlying data changes, such as daily demands or lead times. Kanban gaps can also occur if new employees aren’t fully trained or if standard work doesn’t keep up with current process and material handling conditions. These are just a short sampling of the many reasons why kanban audits must be regular occurrences with broad coverage. It is helpful to think of audits in a few broad categories, as in this graphic.

Act = Respond, addressing anything that was discovered during the prior 3 steps

The Act phase closes the loop on all the prior steps because it drives any action that came out of the prior steps. Whether something was missed in the plan, or the execution phase didn’t quite meet the expectations, or the audit process discovered potential improvements, this is when those gaps are closed. It can also be appropriate to view this phase as the time to celebrate identified successes from any of the prior phases. Yes, continuous improvement focused much more attention on the next improvement than it does on the latest success, but associates deserve the chance to celebrate their wins.

Kanban actions are essentially limitless, but it commonly includes responding to data changes or errors (e.g., new daily demand, updated minimum order quantity), process errors (e.g., missing cards, boards not updated), unexpected events (e.g., stock outs, late deliveries), and general performance misses (e.g., inventory reduction not occurring as planned.) One of the most powerful actions that can be taken within kanban is to negotiate with internal and external suppliers to get better order quantity limits (lower minimum order and standard package quantities) and short lead times. These factors are often the biggest contributors to excess inventory.

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.