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Thomas R. Cutler

Six Sigma

e-Kanban Proves Paper Isn’t Lean

Poor implementation of kanban is quickly compensated in an e-kanban environment.

Published: Wednesday, July 6, 2005 - 22:00

Kanban, in its most simplifying role, is a visual signal (or cue) that something needs to be replenished. More specifically, lean manufacturers today use kanban to drive a process to make, move or buy the appropriate parts. Thus, kanban has become one of the fundamental building blocks of a pull (or consumption-based) replenishment system. No card, no replenishment. However efficacious paper kanban is intended, the reality of cluttered transport routes, overflowing finished goods stores, immense quantities of work-in-progress and unscheduled machine downtimes often make the merits of this lean manufacturing program questionable. When there are frequent complaints about delivery problems, the reality is quite distant from the theory. Poor implementation of kanban is quickly compensated in an e-kanban environment.

Two of the primary limitations of a manual or paper-based kanban system are data availability and scalability. According to Justin Diana, vice president of Datacraft Solutions, “In a typical manual kanban implementation, most transactions and orders are placed with faxes and emails and recorded in an Excel spreadsheet. At the end of the day, this information is limited to the individual managing and recording this data. The individuals responsible for growing and improving the process, have limited or no visibility to the data. As the number of parts, suppliers and cells grow, managing this process only becomes more convoluted.”

e-Kanban, in contrast, focuses specifically on centralizing and managing all of the mission critical data. Real-time transaction capture and tracking builds a repository of information that’s ripe for process improvement analysis. Allowing an e-kanban system to handle and manage the collation and reporting of this data allows for human error reduction, which is prevalent within a manual kanban system.

The difference between kanban and e-kanban, is that the latter is more efficient and effective in a lean system. Blanket purchase orders, internal supermarket consumption signals replenishment and breeding proactive suppliers are three direct benefits of lean e-kanban. Diana also suggests that, “ One other limitation to a manual kanban system is the unpredictability and undependability of the communication. Questions such as, “Did they get it?” “Do they understand it?” and “Am I going to get it?” keep buyers awake at night. Indeed, e-kanban collaboration erases those fears. Electronic records of pull requests, receipt timestamps and electronic acknowledgements all work toward a more unified and dependable method of pull communication.

Following is an overview of the three direct benefits of e-kanban:

Blanket purchase orders—They’re essential in the e-kanban process. Sam Bayer, CEO of Datacraft Solutions noted, “They minimize the flow of information between buyers and their suppliers, while maintaining the terms, conditions and integrity of the business relationship between the two parties.”

Pacific Scientific HTL, located in Duarte, California, is the maker of aerospace safety equipment and military defense hardware. While managing a large number of suppliers with many part numbers, the company discovered that managing the integrity of blanket purchase orders became an issue. For every kanban release, it was important to make sure that: an open purchase order still existed, that there was enough remaining balance on the purchase order to cover a current purchase, when or if a new blanket purchase order would have to be issued. The new best practice became integrating the electronic kanban system with their Oracle purchasing system. Kanbans are now never sent to suppliers unless there’s a valid blanket purchase order.

Internal supermarket consumption signals replenishmentThe use of supermarkets is another lean e-kanban benefit. Supermarkets ensure steady availability of material to consuming cells, albeit at a cost of maintaining some inventory buffer. They stay stocked at the minimum inventory levels. DJ Orthopedics is a global medical device company specializing in rehabilitation and regeneration products for the nonoperative orthopedic and spine markets. With a broad range of more than 600 rehabilitation products, DJ Orthopedics electronically linked the supermarket to its internal suppliers, in this case, their machine shop.

Breeding proactive suppliersKanban implies partnership. Both parties have a responsibility to share information and strive toward process improvement. This is a great theory to be put into practice because both parties would share real time actionable information.

Once the discipline and visual aspect of kanban have been implemented internally, the next logical step is to externally apply the process to outside suppliers. Lean manufacturing heavily relies on trusted relationships with those suppliers and pre-negotiated terms of engagement. Through the use of quality certification and blanket (long-term) purchase orders, the manufacturer can accurately and effectively calculate the optimal level of inventory needed to fulfill demand requirements through the duration of replenishment lead time. At the end of the day, effective kanban is the sum of a simple calculation.

At the end, kanban will offer steady and predictable demand over a predictable period, supplied by an organization that provides virtually defect-free products in the negotiated period of time, with the negotiated quantity at the negotiated price.

e-kanban: beyond the cards
The kanban trigger of cards has been replaced by other technologies including:

  • The use of weight-dependent sensors with large containers to regulate supplies
  • Touch screens operated by workers to requisition follow-up supplies of components that aren’t stored at the processing station
  • Use of sensors in straight-through shelving that triggers a signal when the next container moves up

How e-kanban systems effectively manage supply chain performances in real time
When a relationship is set up with a supplier, a service level agreement is defined. Items such as negotiated lead times, packaged quantities, order receipt confirmations and advanced shipment notices must all spelled out very specifically. An e-kanban system checks if each of these service level agreements are being met by the supplier in real time. If they aren’t, a series of alerts and notifications starts to be issued to all interested and affected parties. This gives everyone a chance to adjust their activities to bring performance back in line in real time.

e-Kanban also captures all of this real time information and makes it available for historical analysis. It’s made available over the Internet 24 hours a day, so that all parties can see trends in performance. Late shipments, short shipments and other supply chain performances are all captured and presented in terms of percentage of conformance to the service level agreement. These visuals give everyone in the supply chain information about how to focus their continuous improvement energies.

e-kanban: fulfilling the lean manufacturing process
e- kanban is heavily based on lean and Six Sigma principles and tools, and the ability to effectively support a production system is critical to best practices. e-Kanban is a critical lean element focused on improving flexibility through the elimination of waste because it quantifies the production’s flexibility so that manufacturers and suppliers can rapidly evaluate the true capability of the system to respond to a specific change. Even a lean production system could struggle to accurately respond to a new order requirement from a customer, because it would take longer to identify the source of the constraint and begin resolving it. Implementing pull systems (e-kanban) with more customers is the increasing direction of manufacturing operations utilizing lean.

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About The Author

Thomas R. Cutler’s picture

Thomas R. Cutler

Thomas R. Cutler is the President & CEO of Fort Lauderdale, Florida-based, TR Cutler, Inc., (www.trcutlerinc.com) Cutler is the founder of the Manufacturing Media Consortium including more than 6000 journalists, editors, and economists writing about trends in manufacturing, industry, material handling, and process improvement. Cutler authors more than 500 feature articles annually regarding the manufacturing sector and is the most published freelance industrial journalist worldwide. Cutler can be contacted at trcutler@trcutlerinc.com and followed on Twitter @ThomasRCutler.