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.