The Effects of Implementation

of Kanban System on Productivity:

A Case Study of Auto Parts Company

Sachin Kumar Sharma* and Vikas Singla**

This paper presents a case study of Kanban system implementation in an auto

parts manufacturing company. The control system was implemented on three
largest selling parts, namely, Emblem Maruti Suzuki, Emblem S Mark and
Emblem VXI. These products go through the process of injection molding,
plating, painting, assembly and final inspection. Data suggested specifically
high in-process inventory during injection molding stage. To reduce such
Work-in-Process (WIP) inventory, Kanban was implemented firstly by deducing
the number of Kanban required at every stage of process and then examining
its effect on reducing stock levels and lead times. The findings suggest
significant reduction in daily production quantity, WIP level and process lead
time of all three emblems.

Introduction
Relentless market competition and rapid technology development force managements
of manufacturing industries to improve productivity and cost-effectiveness of their
products. This leads manufacturing industries to adopt the philosophy of time-based
management of inventory using Kanban technique—an integrated Just in Time (JIT)
philosophy. Kanban is one of the primary techniques of JIT philosophy which signals
a cycle of replenishment for production and materials. It is a card-based control system
to transfer instruction based on logic that nothing will be produced until needed.
In case of the existing factory scheduling method, Material Requirement Planning
(MRP) based on the monthly forecast creates schedules on every 25th of the month for
the material required in the next month. Once schedules are communicated and

* Research Scholar, School of Management Studies, Punjabi University, Patiala, Punjab, India.
E-mail: sachin.1595@rediffmail.com
** Assistant Professor, School of Management Studies, Punjabi University, Patiala, Punjab, India;
and is the corresponding author. E-mail: vikassingla@yahoo.com

© 2019 IUP. All Rights Reserved.

56 The IUP Journal of Operations Management, Vol. XVIII, No. 1, 2019
allocated, processes are allowed to supply components on daily basis and can dump
the material in between processes. Every process owner decides the daily production
quantity of the part based on the customer demand, lot size of the process and rejection
rate of the process. In between, if the customer plan gets revised, the new schedules
are again communicated to the process owners, and again components are produced
which pile up the inventories in the plant.
Thus, the push system has no explicit limit on amount of daily production and WIP
inventories in between the processes (Rahman et al., 2013). The problems identified
are large lot sizes, over production, high delivery lead time, infrequent supply, excess
supply, transit time variation and material rejection at plant. No discipline has been
observed in the activities of receiving, storing and issuing of products. Even sometimes
the actual inventory levels do not match with the inventory records in the computer
system creating a chaos.
These drawbacks can be overcome by establishing an effective visual control system
through Kanban. Kanban establishes a pull control policy, which is based on the
consumption-based replenishment system (Balram, 2003). Kanban is one such system
along with techniques like Kaizen, Single Minute Exchange Die (SMED), six sigma,
etc., which are aimed at improving productivity by reducing or eliminating waste
(Singh et al., 2010; and Antony, 2011). Kanban particularly does so by regulating
inventories during production. It does not allow machines in the system to produce
more than required, if the subsequent machine in the system does not require it.
Starting from a predetermined production quantity, the upstream machine is told to
either start or stop production rather than allowing it to keep on producing even when
there is no demand. This strategy reduces WIP significantly and makes production
line receptive to frequent changes in demand and type of product. Such a manufacturing
process focusing on reduction of wasteful activities at every stage of production is
categorized as lean manufacturing (Wilson, 2010). Kanban is only one of the techniques
in lean manufacturing approach.
This paper focuses on studying the effects of implementation of Kanban on
improvement of productivity in terms of reduction of lead time and lower WIP inventory
in an auto parts company. The determination of the size of Kanban is an important aim
of this study. Under Kanban approach, the number of Kanbans varies with each process
and with each product. This study calculates the number of Kanbans for three different
products using same sequence of production process.

Literature Review
Kanban system was developed and implemented by Toyota Motor Corporation in their
car factories. Literally, the word Kanban means visible record which can be implied as
a card or a sign required to communicate the level of inventory between workstations.
The system is designed to minimize inventory and deliver the raw material or semi-
finished goods to next machine only when asked by it (Ravichandaran and Kumar,

The Effects of Implementation of Kanban System on Productivity: 57

A Case Study of Auto Parts Company
2015). Thus, under this system, only right quantity of product is made available at the
right time. The system has been modified in different settings to achieve similar
objectives (Kumar and Panneerselvam, 2007). For instance, electronic version of Kanban
system was found to improve the speed of information being shared among suppliers
(Mayilsamy and Pawan, 2014).
Kanban system helps in achieving manufacturing superiority by eliminating over
production, reducing lead times and thus saving costs (Adnan et al., 2013).
Organizations which are supplying multiple products require flexible workstations so
that different products could be manufactured on same workstations. However, frequent
production of different products should be done in a manner that it minimizes the
waiting or idle time. Kanban has been seen to fulfil these objectives quite effectively
as it does not allow production until there is demand from customer (Schaefers et al.,
2000). The control mechanism improves productivity levels by streamlining sequencing
of mixed product lines (Olaitan et al., 2017). Results in terms of low WIP were found
to be more prominent in pull production environment than only in push system. This
finding was further emphasized in an attempt to highlight the importance of
determining sizes of Kanban for different assembly lines in pull production system
(Arasanipalai et al., 2014).
Kanban system as a production control technique when combined with other
production control techniques was found to provide better productivity results than
when it was applied in isolation. It was highlighted by Colledani (2011) where Kanban
was combined with SQC and significant reduction in defective items was observed.
Combination of lean manufacturing approaches such as Value Stream Mapping (VSM),
root cause analysis and Kanban to enhance productivity was found to reduce non-
value added activities and eliminate waste (Ramnath et al., 2010). Furthermore, Garza
et al. (2018) investigated the combined effect of five lean manufacturing principles,
namely, Kanban, Kaizen, automation, periodic maintenance and VSM on measures of
environmental performance in polluting industries. The study explained the significance
of relationships between most commonly used lean principles in understanding the
performance of an entity. The application of Kanban approach when combined with
other control techniques such as constant Work-in-Process (WIP) technique in a high
volume low variety production environment was found to reduce cycle time and increase
inventory turnover significantly (Leonardo et al., 2017). Similarly, application of Kanban
was further examined in a semi-automated assembly line with a closed loop layout of
automotive components firm implying improved working condition of workers (Savino
and Mazza, 2015).
Kanban system controls the inventory by imposing strict limit on inventory level
at every machine in production line (Al-Tahat and Mukattash, 2006). This limit starts
off with accurate forecasting of customer demand. Predetermining finished good
requirement controls the upstream production. Kanban system is better understood
by an illustration involving a production line consisting of four workstations: M1, M2,

58 The IUP Journal of Operations Management, Vol. XVIII, No. 1, 2019

M3 and M4 in the sequence. Every withdrawal generates a signal to upstream machine
for initiation of production. For instance, a part after being processed at M1 goes to a
bin B1 along with Kanban card placed between M1 and M2 for processing on M2.
Machine M2 procures the part from B1 and places the attached Kanban card in an
adjacent bin B1. So when the card is placed in B1, it signals M1 to start production
again. This procedure keeps on repeating itself till predetermined stock level is reached.
Also production level of a machine depends on requirement of next machine. So the
amount of produced items is equivalent to the number of Kanbans generated.
However, if a machine produces in batches and that batch is passed on to next machine,
then a Kanban will be generated only after the entire batch is consumed. So a Kanban can
signify one item or a batch of items. Thus, generation of Kanban depends on size of the
batch. Several studies (Yavuz and Satir, 1995; Huang and Kusiak, 1996; and Co and
Sharafali, 1997) have adopted Toyota’s method for determining size and number of Kanbans.
These studies have shown this aspect to be a critical factor in regulating inventories.

Data and Methodology

Overview of the Company
A well-established automobile parts company was selected for implementation of Kanban
and investigating its effect on productivity. The company has a diversified product range
to serve multiple industries, with automotive industry being the main industry served. It
manufactures Emblems (electroplated, painted, gold plated and hot stamped), automotive
plastic molded components, wheel trims and wheel rim covers, electroplated bigger
parts (radiator grills, license plate garnish and hood strips), decorative body side molding,
assemblies, control brackets, dash board components, auto electrical assemblies, door
handle, ash trays, fuse box assemblies, diesel water separator, etc. Emblems for various
car companies were the largest produced auto part by the company. Considering the
sales data of past one year, it was decided to study three largest selling emblems by
volume, which were Emblem Maruti Suzuki, Emblem S Mark and Emblem VXI. Another
reason for selection of these parts was that they went through identical process of
manufacturing, which included injection molding, chrome plating, painting, assembly,
final inspection and packing processes (Figure 1). VSM applied by researchers of this
study in earlier part of the project identified that all these three parts were produced
based on push system and no process is producing the parts based on customer demand.
Thus, these parts were appropriate for application of Kanban.

Data Collection
Data was collected regarding customer requirement per day, daily production quantity
by each process, cycle time of the process, process flow of the part, standard quantity
of parts kept in bin in each process, process-wise safety stock, and replenishment
stock (quantity which is needed between time interval of one order and the next order).
Table 1 shows the process-wise data collected in initial stage.

The Effects of Implementation of Kanban System on Productivity: 59

A Case Study of Auto Parts Company
 Figure 1: Process Flow

Sampling Injection Chrome

Raw
Inspection Molding Plating
Material
Suppliers Raw
Material
Stores

Final
Inspection Assembly Painting
Customers Finished
Goods
Store

Table 1: Process-Wise Data Collection in Initial Stage

Process Daily Process

S. Part Customer Cycle Lead Lot Safety
Flow of Production
No. Name Requirement/Day Time (s) Time Size Stock
Part Quantity
(Days)

1. Emblem 2,640 Injection 3,500 40 1.65 972 10,560

Maruti Molding
Suzuki
Plating 3,200 38 1.41 324 7,920
Painting 3,000 8 0.30 480 1,500
Assembly 2,700 80 2.50 240 0
Inspection 2,640 10 0.31 240 0
2. Emblem 1,800 Injection 2,200 45 1.17 975 7,200
S Mark Molding
Plating 2,100 38 0.93 325 5,400
Assembly 1,800 5 0.10 300 0
Inspection 1,800 10 0.21 300 1,800
3. Emblem 1,440 Injection 1,700 45 0.91 960 5,760
VXI molding
Plating 1,600 13 0.24 960 4,320
Assembly 1,440 5 0.08 480 0
Inspection 1,440 10 0.17 480 1,440

The data clearly shows the WIP inventory between every process to be very
high. For instance, for Emblem Maruti Suzuki, 10,560 units were produced after
injection molding, and they were kept as in process material to be asked for
processing by next step of plating. Similarly, for other parts, WIP was found to be
highest after Step 1, though it varied from one to four days of requirement. Data

60 The IUP Journal of Operations Management, Vol. XVIII, No. 1, 2019

collection discussion with process owners resulted in indicating that such huge
WIP is kept in stock to mitigate the effects of variation in customer demand and
sudden breakdown of machinery. No logical reasoning was developed for
maintaining such huge inventory.
It was decided to rectify this problem by applying a logical reasoning based on
methodology adopted by Toyota to decide levels of WIP stock. Thus, WIP stock was
decided based on maximum time of machine breakdown, mold breakdown and power
failure. So previous six months data was collected, and based on longest time
abnormality in the last six months, it was decided to keep the WIP stock to fulfil the
requirement of longest time abnormality or breakdown. Table 2 shows process-wise
data which was collected to decide the WIP stock of Emblem Maruti Suzuki, Emblem
S Mark and Emblem VXI, which would be kept as safety stock in future and the same
would be considered for Kanban implementation.

Table 2: Process-Wise Data Collection for Safety Stock Calculation

Data to Decide WIP Stock

Max. Max. Max. Max.

S. Part Customer Process Machine Mold Power Stock
No. Name Requirement/Day Breakdown Break- Failure Needed
Time (Days) down (Days) (Days)
Time
(Days)

1. Emblem 2,640 Injection 0.5 0.25 0 0.50

Maruti Molding
Suzuki
Plating 0.5 0 0 0.50
Painting 0.25 0 0 0.25
Assembly 0 0 0 0.00
Inspection 0 0 0 0.00
2. Emblem 1,800 Injection 0.5 0.25 0 0.50
S Mark Molding
Plating 0.5 0 0 0.50
Assembly 0 0 0 0.00
Inspection 0 0 0 0.00
3. Emblem 1,440 Injection 0.5 0 0 0.50
VXI Molding
Plating 0.5 0 0 0.50
Assembly 0 0 0 0.00
Inspection 0 0 0 0.00

The Effects of Implementation of Kanban System on Productivity: 61

A Case Study of Auto Parts Company
 Based on data collection and calculation shown in Table 2, WIP stock/safety stock
for each process is revised, which is shown in Table 3.

Table 3: Process-Wise Revised Safety Stock for Each Process for

the Three Selected Products

Data to Decide WIP Stock

S. Part Name Customer

Process WIP/Safety Stock
No. Requirement/Day

Injection Molding 2640*0.5=1320

Plating 2640*0.5=1320

1. Emblem Maruti Suzuki 2,640 Painting 2640*0.25=660

Assembly 0

Inspection 0

Injection Molding 1800*0.5=900

Plating 1800*0.5=900
2. Emblem S Mark 1,800
Assembly 0

Inspection 0

Injection Molding 1440*0.5=720

Plating 1440*0.5=720
3. Emblem VXI 1,440
Assembly 0

Inspection 0

Results and Discussion

After data collection, the next step was to calculate the number of Kanban required
in order to implement and run the Kanban system successfully in each process.
Identifying the number of Kanban for each process was considered as critical so
that regular customer supply could be maintained and optimum inventory or WIP
stock/safety stock could be kept. The number of Kanban required for each process
was decided by the following formula derived from production processes of Toyota
Kirloskar Motor Pvt. Ltd.
Number of Kanban = (Customer Requirement per Day + Safety Stock +
Replenishment Stock)/Quantity per Bin
The formula is explained by illustrating the number of Kanban required for
Emblem Maruti Suzuki at injection molding process. Customer demand for Emblem

62 The IUP Journal of Operations Management, Vol. XVIII, No. 1, 2019

Maruti Suzuki per day is 2,640 units (Table 3). A lot of 972 units (Table 4) is produced in
injection molding (M1) process as first batch after receiving raw material from store
(M0), and finally, the finished product moves to next process of plating (M2). It was
decided that a safety stock of 1,320 (Table 3) molded units has to be kept, so M1 has to
produce these parts as well. After manufacturing 2,640 + 1,320 = 3,960 units, the process
will stop as demand is fulfilled. However, M1 has to produce 2,640 units for the next
day. So an order for 2,640 units or 2,640 Kanban is sent back to raw material section. It
is important to remember that Kanban control system is a system of communication
between workstations, so total stock for which the number of Kanban has to be generated
is a combination of actual products produced which goes for processing on next machine
(2,640 units) plus safety stock (1,320 units) and signal of replenishment stock of next
day’s demand (2,640 units) which goes to previous workstation.
Thus,
The number of Kanban for Emblem Maruti Suzuki after injection molding would be:
= {Customer Requirement per Day (2,640) + Safety Stock (1,320)
+Replenishment Stock (2,640)}/Quantity per Bin (972)
= 6,600/972 = 6.79
= 7 (Rounded off to the next digit)
Based on the above formula, the number of Kanban required for each process and
for three selected products is shown in Table 4.
The results presented in Table 4 clearly show that the number of Kanban required
in each process varies because as per the above formula, data regarding four variables
is required, and all of them are dependent on different factors and variables of the
process which vary from process to process.
Next, evaluation of Kanban system’s performance was carried out using lean metric.
Three metrics were used for evaluation: daily production, WIP stock/safety stock and
process lead time in days (Daily production Qty.*Cycle time + Change over time). The
identification of metrics was done jointly by process owners and researchers. Some authors
have demonstrated their lean metric to verify and justify the effectiveness of pull system
in manufacturing area. A comparison of manufacturing performance before and after
implementation of Kanban system was carried out to validate if the manufacturing
performance had improved or deteriorated. The outcomes are presented in Table 5.
The before-after data presented in Table 5 clearly shows that daily production
quantity is reduced in each process. In before Kanban condition, no process was
producing the part based on daily customer demand. After implementation of Kanban,
every process was producing only customer demand on daily basis and rejection or
breakdowns could be managed through safety stock /WIP stock available at each process.
Safety stock is also reduced after consideration of major abnormalities related to variation
in customer demand and internal breakdowns that have occurred in last six months.

The Effects of Implementation of Kanban System on Productivity: 63

A Case Study of Auto Parts Company
64
Table 4: Number of Kanban Required for Each Process for the Three Selected Products

Bins to
S. Customer Process Flow of Lot Size Safety Replenishment Qty./Bin Total Number
Keep
Part Name of Kanban
No. Requirement/Day Part Stock Stock Stock Total
Required
Stock
(Nos.)
1. Emblem Maruti Suzuki 2,640 Injection Molding 972 1,320 2,640 972 6,600 6.8 7

Plating 324 1,320 2,640 324 6,600 20.4 21

Painting 480 660 2,640 480 5,940 12.4 13

Assembly 240 0 2,640 240 5,280 22.0 22

Inspection 240 0 2,640 240 5,280 22.0 22

2. Emblem S Mark 1,800 Injection Molding 975 900 1,800 975 4,500 4.6 5

Plating 325 900 1,800 325 4,500 13.8 14

Assembly 300 0 1,800 300 3,600 12.0 12

Inspection 300 0 1,800 300 3,600 12.0 12

3. Emblem VXI 1,440 Injection Molding 960 720 1,440 960 3,600 3.8 4

Plating 960 720 1,440 960 3,600 3.8 4

Assembly 480 0 1,440 480 2,880 6.0 6

Inspection 480 0 1,440 480 2,880 6.0 6

The IUP Journal of Operations Management, Vol. XVIII, No. 1, 2019

 Table 5: Process-Wise Data Before/After Kanban

Daily WIP Stock/ Process

S. Part Name Process Production Safety Stock Lead Time
No. (Qty.) (Qty.) (Days)

Before After Before After Before After

1. Emblem Maruti Suzuki Injection Molding 3,500 2,640 10,560 1,320 1.65 1.25

Plating 3,200 2,640 5,280 1,320 1.41 1.16

Painting 3,000 2,640 1,500 660 0.30 0.27

Assembly 2,700 2,640 0 0 2.50 2.45

Inspection 2,640 2,640 0 0 0.31 0.31

2. Emblem S Mark Injection Molding 2,200 1,800 7,200 900 1.17 0.97

Plating 2,100 1,800 5,400 900 0.92 0.79

Assembly 1,900 1,800 0 0 1.10 1.05

Inspection 1,800 1,800 0 0 0.10 0.10

3. Emblem VXI Injection Molding 1,700 1,440 5,760 720 0.91 0.78

Plating 1,600 1,440 4,320 720 0.24 0.22

Assembly 1,500 1,440 0 0 0.52 0.50

Inspection 1,440 1,440 0 0 0.08 0.08

Table 6 presents the before and after Kanban values of total daily production, WIP
stock/safety stock and process lead time. From the evaluation results, it is observed that
daily production, in case of Emblem Maruti Suzuki has reduced from 3,500 units to
2,640 units. In case of Emblem S Mark, it has reduced from 2,200 units to 1,800 units;
and in case of Emblem VXI, it has reduced from 1,700 units to 1,440 units. If we consider
the sum of WIP stock/safety stock kept in between processes for each part, then it is
observed that in case of Emblem Maruti Suzuki, it has reduced from 22,620 units to
8,580 units; in case of Emblem S Mark, it has reduced from 14,400 units to 3,600 units;
and in case of Emblem VXI, it has reduced from 11,520 units to 2,880 units. Finally,
reduction in daily production quantity and safety stock/WIP stock led to reduction in
process lead time of the parts. It is observed from Table 5 that the lead time has reduced
in each process. The process lead time in case of Maruti Suzuki reduced from 6.47 days
to 5.74 days; in case of Emblem S Mark, it reduced from 3.51 days to 3.11 days; and in
case of Emblem VXI, it reduced from 1.93 days to 1.75 days.

The Effects of Implementation of Kanban System on Productivity: 65

A Case Study of Auto Parts Company
 Table 6: Evaluation Results

Maruti Suzuki S Mark VXI

Daily Production Before 3,500 2,200 1,700

After 2,640 1,800 1,440
Reduction % 25 18 15
WIP Stock Before 22,620 14,400 11,520
After 8,580 3,600 2,880
Reduction % 62 75 75
Process Lead Time Before 6.47 3.51 1.93
After 5.74 3.11 1.75
Reduction % 11 11 9

Conclusion
Based on the findings of the study, it is concluded that after Kanban implementation
the daily production quantity has reduced for Emblem Maruti Suzuki, Emblem S
Mark and Emblem VXI by 25%, 18% and 15% respectively. The WIP stock/safety
stock has reduced by 62%, 75% and 75%, and finally, the process lead time has
reduced by 11%, 11% and 9% for Emblem Maruti Suzuki, Emblem S Mark and Emblem
VXI respectively.

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68 The IUP Journal of Operations Management, Vol. XVIII, No. 1, 2019

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