You are on page 1of 47


KANBAN – Introduction

• KANBAN means “card” in Japanese

• It is a method of controlling the production and material flow based on

the actual stock quantity in shop-floor using containers and cards

• Material that is required on a regular basis is continually provided in

small quantities

• Replenishment or production is triggered only when a higher level

material actually requires this material

• In KANBAN, the signal for material replenishment could be triggered by

a work centre that requires the material (called the demand source) by
sending a card to the work centre that manufactures / supplies the
material (called supply source)

• This card describes which material is required, the quantity of the

material required and where the material is to be delivered
Purpose of KANBAN

• With KANBAN, the production process controls itself and manual posting
is reduced as far as possible

• Replenishment is triggered directly in production using previously

maintained master data.

•The entries you have to make in the system have been reduced to a
minimum, for example, the scanning of a bar code.

• Most of the steps are carried out automatically by the system

• When receiving the material, we can automatically post the goods

receipt at the demand source, for example by scanning a barcode as
kanban signal

• The effect of this is a reduction in overall process lead time and better
control of inventory
KANBAN process flow

Assembly line Supplier/ store


Kanban Terminologies

• Supply Area

• Control Cycle

• Kanbans / Containers

• Replenishment Strategy

• Demand Source

• Supply Source

• Kanban signal

• Kanban dashboard
Kanban Control Cycle
Kanban Control Cycle contd..

• Control Cycle:

• The relationship between the demand source and the supply source
is defined in the control cycle

• Main information captured in the control cycle are:

• Replenishment type
• Number of kanbans
• Quantity per kanban

• We can specify the number of kanbans and the quantity per kanban

• However, system also provides an automatic kanban calculation.

Kanban Control Cycle contd..

• Control Cycle Calculations:

The number of kanbans as well as the kanban quantity is based on the
following criteria:
• Average consumption
• Replenishment lead time of a kanban
• Fluctuations in consumption and in the replenishment lead time
This is represented in the following formula:
Kanban Control Cycle contd..

• Control Cycle Calculations:

Production Supply Area

• Production Supply Area (also called Supply Area)

• A supply area is an interim storage location on the shop floor which is used
to provide material directly to the production line or the work center

• Goods movements are posted to the storage location assigned to the supply

• One storage location can be assigned to several supply areas, however, one
supply area cannot be assigned to several storage locations

• The person responsible is the person who (as the demand source) monitors
the further processing of the materials and the stocks at the supply area.
Process Pre-requisites for KANBAN
1. Consumption of Kanban parts should be fairly constant over a
period of time

• If the demand is not uniform over time, then larger number of

kanbans are required to guarantee material availability leading to
higher inventory levels – which defeats the purpose of kanban

2. The supply source has to be able to produce a large number of

lots within a short interval.

• For this to happen, the setup times in production have to be

reduced to a minimum and the reliability of production has to be

•Waiting till several kanbans for a material have been received at

supply source before starting production defeats the very purpose
of kanban
Kanban vs MRP:
In MRP: Planning happens at multiple levels of the Bill of Material

•The production quantities and dates of final assemblies are calculated

based on actual customer requirements or forecasts
• Sub-assembly & component requirement quantities and dates are
calculated using Bill of Material explosion

• Actual qty produced depends on the requirement qty as well as the lot
sizing procedure applicable for the material

• At each level of production, the entire lot is completely produced

before it is passed on to the next (higher) level of production

• Dates are determined at each level based on detailed planning

• Material is “Pushed” through production on the basis of these dates
and due to this reason, MRP is known to work on “PUSH” principle

• This leads to queue/wait times for production and higher inventory

KANBAN versus MRP contd.

In KANBAN: No separate higher level planning is used to control the material

flow through production

• Work-centre down the line(demand source) requests material from the

preceding work centre (supply source) only when material is actually required

• Since the materials are “pulled” from the preceding work-centre, Kanban is
said to work on the PULL principle

• For this purpose, a control cycle is created with a fixed number of kanbans
between the supply source and demand source; each kanban represents a
specific material and quantity and usually represents a container

• Production lot size depends on the kanban quantity and this quantity is
produced by supply source in one run; total production quantity depends on the
number of kanbans sent to the supply source during a given time

• Replenishment frequency is based on actual consumption – if more material is

required, the kanbans circulate more quickly; if less material is required, the
kanbans simply circulate slowly
KANBAN Procedures in SAP

• SAP supports many procedures to implement Kanban

• Classic KANBAN

• KANBAN with quantity signal

• One-Card KANBAN

• Event-driven KANBAN

• Depending upon the organization’s needs, one of the above Kanban

procedures can be implemented
KANBAN Procedures in SAP

Classic KANBAN

• In this method, all the Kanban parameters are pre-defined in the

control cycle. The parameters are as follows:

• Demand source
• Supply source
• Replenishment strategy
• Numbers of kanbans that need to circulate and
• Quantity per kanban

• Replenishment is always triggered exactly for the kanban quantity

defined in the control cycle

• We cannot circulate more kanbans than are defined in the control

cycle without changing the control cycle itself
KANBAN Procedures in SAP

Event-Driven KANBAN

• In this method, there are no pre-defined kanbans or pre-defined

kanban quantity

• Kanban creation is triggered by a certain event; A new Kanban

(container id) is created everytime material is requested and the same
is deleted subsequently upon replenishment

• Control cycle is still required to capture certain rules for Kanban qty
determination or Qty rounding off

• Event-driven Kanban is created using a separate transaction (PK23);

the required quantity is specified in this transaction

• One or more Kanbans are created by the event; the kanban quantity
and the number of kanbans depends on the required quantity and the
specifications in the control cycle
KANBAN Procedures in SAP


• In this method, there are two KANBANs in the control cycle but there is
only one card ; this is an improvement over the Classic Kanban procedure and
aims to reduce the inventory level in the demand source further

• Replenishment is triggered when the Kanban that is currently being used is

approximately half empty; new kanban is delivered before the current kanban
is completely empty
KANBAN Procedures in SAP

KANBAN with quantity signal

• In this method, the employee in shop-floor does not wait till the kanban
becomes completely empty to flag the status of the container to EMPTY;
Instead, the employee enters the individual withdrawal quantities directly in
the system using an SAP transaction (PK22)

• System thus keeps track of the actual kanban qty and automatically sets
the status to EMPTY when the kanban qty becomes zero

• This is an improvement over the Classic Kanban procedure and aims to

reduce the inventory level in the demand source further

• However, the trade-off is that user has to post multiple entries in system
to account for the material withdrawals from Kanban bin
KANBAN Replenishment: With or Without MRP

In KANBAN production control, you have two options for organizing


• Replenishment without MRP

Materials for which replenishment is only triggered by the kanban
signal are not normally planned in the regular MRP planning run.
However, you can include these materials in long-term planning.

• Replenishment with MRP:

The materials are planned in the planning run and corresponding
procurement proposals are created. These procurement proposals do
not directly trigger replenishment but provide a preview of future
consumption. Replenishment is also triggered by the kanban signal

Both options are allowed in the Classic kanban and other kanban
Kanban Statuses

• Progress of production in KANBAN is controlled by setting the

appropriate status to the kanban

• The kanban board gives an up-to-date overview of production progress for

both demand source and supply source

• Usually the two statuses “EMPTY” and “FULL” are sufficient to run a

• When all the stock in a kanban container is consumed in production, the

status is set to “EMPTY”
• Supply source immediately gets the signal to produce/refill through a
newly created replenishment element

• When material is received in the demand source, the status is set to

“FULL” and goods receipt is posted automatically by system

• Such status changes are usually done using a barcode and barcode scanner
Kanban Statuses contd..

• If required, the following other statuses are also possible:

• Applicable for a newly created kanban OR
• Material is consumed but the replenishment is put on hold temporarily

• Requested material is currently being produced by supply source

• Material is currently on its way to the demand source

• Demand source is currently withdrawing the material

• Set by system if error occurs during processing of kanban
Kanban Statuses contd..
Replenishment Strategies

Replenishment Strategy
• Controls how replenishment is to take place
• Determines which replenishment elements are created
• Is defined in the control cycle

• The following strategies are available:

• In-house production

• External procurement

• Stock Transfer
Replenishment Strategies for External Procurement

• These strategies help in procuring kanban materials from external vendors

• Pre-requisite: Storage location should be excluded from MRP
1. Replenishment using standard purchase orders:
• When the kanban status is set to EMPTY, system automatically creates
purchase order that is issued to the vendor
• Vendor and delivery address for kanban material are defined in the
control cycle
• Two options for delivery location possible:
• Delivery to a Central receipt location which is different from supply
area: here goods receipt DOES NOT HAPPEN when status is set to
FULL but is posted separately upon material receipt at supply area
• Delivery directly to Supply Area: here goods receipt is triggered
immediately when kanban status is set to FULL
Replenishment Strategies for External Procurement contd..

2. Replenishment using Stock Transport Orders (Plant to Plant):

• Used when the material required for the plant is stored in another plant in
the same company code
• When the kanban status is set to EMPTY, a stock transport purchase
order is generated requesting material from the other plant
• Supply source needs to manually post goods issue needs using mov.type 351
in the supplying plant
• When material is received in the supply area, the demand source person
can set the kanban status to FULL and this will post the goods receipt with
mov.type 101 in the receiving plant
Replenishment Strategies for External Procurement contd..

3. Replenishment using Scheduling Agreement:

• Scheduling agreement assigned in the control cycle
• When kanban status is set to EMPTY, system generates schedule lines
that need to be sent to the external vendor
• When material is received from vendor, kanban status is set to FULL and
this automatically posts the goods receipt for the SA with mov.type 101
• System pre-requisites:
• Kanban indicator should be set for the Sch.Agmt item in the
Additional Data screen
• Sch.Agmt item should be assigned to the same storage location as
the supply area
• Such materials can neither be planned manually nor through MRP, but
only through Kanban
Replenishment Strategies for External Procurement contd..

4. Replenishment with Summarized JIT calls:

• Here, we can take quantities from the production order that are relevant
for delivery and transmit them to the vendor.

• The delivery of a summarized JIT call can be specified to the hour and
minute and can also take place several times a day

• We can group together several material requirements to a JIT call

• The process is as below:

• First, you generate schedule lines from requirements planning as a
forecast, which you transmit as a forecast delivery schedule or a JIT
delivery schedule to the vendors - this is only a forecast and is not
relevant for final delivery by the vendors

• When the material is actually required in production, generate a

summarized JIT call, which is relevant for delivery, by setting a
kanban to EMPTY or create a new item in an existing JIT call
Replenishment Strategies for External Procurement contd..

5. Replenishment using source list:

• The procedure using the source list is similar to the procedure with
standard purchase orders or with scheduling agreements

• The only difference is that the system reads the source list to determine
the source of supply.

• The vendor or the outline agreement (scheduling agreement,

quantity/value contract) is recorded in the source list

• The source list entry for kanban scheduling agreement cannot be relevant
for MRP
Replenishment Strategies for Stock Transfer

• There are several replenishment strategies available for stock transfer

within the same plant

• It is not required to exclude the material from MRP for the kanban
storage location unlike strategies for procurement or production

1. Replenishment using Reservation:

• We can use this function if we want to provide components using stock

transfer with reservation

• On setting a kanban to EMPTY a reservation is generated from the

supplying storage location onto the receiving storage location

• The material is transferred with reference to the reservation to the

receiving storage location
• The transfer posting automatically sets the kanban status to FULL
Replenishment Strategies for Stock Transfer

2. Replenishment using Direct Transfer Posting:

• You use this function if you want to transfer components without any
previous reservation.

• When the kanban is set to EMPTY, goods issue is posted directly at the
supplying location and goods receipt at the consuming location
Replenishment Strategies for Stock Transfer

3. Replenishment with WM based storage locations:

• We use this function if the supply storage location is managed by WM and

the receiving (production) storage location that is MM based

• When status is changed to EMPTY, a transfer posting document is posted

in MM inventory module

• A transfer requirement is triggered automatically in WM and this needs to

be processed into a transfer order either automatically or manually by
warehouse person

• When the delivery has been done, the transfer order needs to be
confirmed through a barcode and this sets the status to FULL
Additional KANBAN functions

• The KANBAN application allows us to combine the KANBAN replenishment

strategies with additional functions

1. Cross Plant KANBAN:

• This is an additional option for stock transfer and in-house
production strategies

2. Procurement and Withdrawal to Cost Center:

• We can procure materials via KANBAN, that are not included in
the assembly BOM and therefore not backflushed
• These materials can be posted directly to cost center
• Such materials are flagged as “Bulk” material in material master

3. KANBAN with SD delivery:

• We can deliver a kanban material directly to our customer when
it is replenished

Master Data
1. Maintain the “Sloc MRP indicator” in the material master MRP4 view
KANBAN in SAP contd..

2. If required, maintain a valid MRP type in material master MRP1 view;
• This is required for example if the material is replenished using kanban for
some storage locations and MRP for other storage locations of the same plant
KANBAN in SAP contd..

Production Supply Area:

•The SAP transaction to create a new supply area is PK05

•The supply area is assigned the following objects: Plant, Storage location,
Person responsible
KANBAN in SAP contd.

Control Cycle:

• The SAP transaction to create control cycle is PK01

• Enter material, plant, supply area and select “Classic Kanban” in the control
cycle category
KANBAN Process Steps in SAP contd..

2. When one of the kanbans has been completely consumed, select the Kanban
and click on “To Empty” button - this will change the status to Red (empty)

System will create a new schedule line for the kanban qty in the background
KANBAN in SAP contd..

• Control Cycle (contd..)

Enter no of kanbans, kanban qty in the control cycle tab
KANBAN in SAP contd..

• Control Cycle (contd..)

• Enter a replenishment strategy - this has to be assigned in the

“External Procurement” tab – field “Ext.Procurement
KANBAN in SAP contd..

• Control Cycle (contd..)

• If the replenishment strategy is “scheduling agreement”, an

appropriate Kanban scheduling agreement number needs to be
KANBAN in SAP contd..

• Kanban indicator in the outline agreement

• The outline agreement item assigned to the control cycle has to be of type
Kanban; For this, the kanban indicator has to be set to “X”
KANBAN Process Steps in SAP

•The process can be explained with the below example involving Plant to Plant
Stock transfer using Scheduling Agreement
Process Steps:

1. Using SAP tcode PK13N, open the demand source kanban board
KANBAN Process Steps in SAP contd..

•When both kanbans are full, you will see two containers in green colour
KANBAN Process Steps in SAP contd..

The same status is reflected in supply source kanban board (tcode PK12N)
KANBAN Process Steps in SAP contd..

3. Once material is available in Supply source, Post the stock removal from
supplying plant using tcode MB1B
• Client can use a custom tcode to process the same.
KANBAN Process Steps in SAP contd..

4. When material is received at the supply area, click on the option “To Full”
from the demand source kanban board - this will trigger goods receipt
using mov.type 101 and make the kanban Green once again

351 and 101

postings can
be seen in
Business Benefits of KANBAN

Implementing KANBAN improves the overall process efficiency

Specifically, it gives the following benefits:

1. Transparency in material flow:

• Both demand source and supply source can view in a pictorial
dashboard, the status of the kanbans and the status of
production/replenishment/stock, on a real-time basis

2. Automation and Minimizing of errors:

• Kanban signals can be triggered using a simple barcode scan
• Creation of replenishment element and stock posting for
goods receipt automated resulting in minimized errors

3. Cycle time reduction:

• Due to improved processes, overall cycle times are reduced