Just the other day I became interested in what had evolved regarding kanban tools and I did a quick search of the internet. A couple of hours later, I was more than a bit surprised by the number of point solutions that were targeted at helping companies identify where kanban might be utilized to drive significant savings in inventory. Some companies even offered 30 day trials and promoted easy integration approaches for acquiring the data required to deliver value. Given my past experience in implementing Lean, I was intrigued by the sales pitch to implement a point solution rather than leverage kanban as part of a much larger initiative to create a Lean value chain. I’m not at all convinced that the uninitiated will recognize the very importance difference and potential limitations or pitfalls of a purely point solution.
What these companies are offering is a tool that will essentially do the math to recommend kanban parameters (total kanban inventory and re-order point quantities) and incorporate logic to address demand variation as a safety factor. Based on the results, the suggested level of inventory is compared to the actual levels and inventory savings is calculated. Seems simple, and to a large degree it is, but the decision is completely removed from the value chain perspective. At this point you are probably thinking that I am offering some kind of zen based perspective driven by a Lean ideology. The truth is much simpler, the source of data for these solutions is historical stock issues (for demand variation) and MRP calculated demand for the future requirements. This information can be the equivalent of a mile distant from the actual customer demand associated with those parts. Between the customer demand for the end item and the component demand can be a wide of variety of “Just-in-Case and Efficiency Based” planning strategies at various subassembly levels including lot sizing, minimum and multiple order quantities, and various safety stock strategies. Each of these strategies contributes to lumpy demand patterns at the component levels and a correspondingly erroneous picture of true demand requirements and variation. While implementing a kanban system at the component level alone without consideration for the larger value stream “might” yield some inventory savings, it is little like putting in a 10 watt bulb in your clothes closet. The light isn’t bright enough to dress by and the result will likely have some undesirable and comical side effects.
Taking the value stream approach means that you look at all of the supply chain connections from the customer down to the shipping dock and the rules which govern the execution process. It is holistic in nature and links how the decisions at each stage influence later stages. Demand at all levels is linked to the customer expectations and the goal is to eliminate unnecessary waste at every stage. Inventory buffers are strategically determined based on manufacturing cycle times and customer responsiveness expectations. For example, rather than maintaining inventory to support demand variation at the component level, this inventory maybe maintained at a higher assembly level to support a responsiveness expectation that cannot be met otherwise. In addition, the Lean efforts would seek to minimize setups and the need for batch sizes with the ultimate goal of single piece production (not always practical or possible where investments to achieve this are unrealistic). The bottom line is that the holistic view makes sure that the investment in kanban systems is maximized and true aligned with ultimate goals for minimizing waste while maximizing the value delivered to the customer. Therefore, beware that investing in the implementation of a kanban system without evaluating the connection to the rest of the value stream may not yield the benefits expected. In fact, the kanban inventory levels that are calculated may be significantly more than is really necessary and the desired level of flexibility may still not be adequate to meet customer expectations based on the cycle time distance between the component inventory and the end product.
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Kerry,
To be clear, I am not sure if you are referring to the implimentation of Kanban using (Vendor Managed Inventory) VMI or internally managed Kanban with implimentation assited by a consultant. But from here I will discuss as if this were a VMI approach . . .
I think the question you are asking is in essence answered at the same time. You highlight the importance of evaluating the whole system to understand the full value of the proposed change. Therefore, the decision of wether or not to impliment the system, cannot be made until this evaluation is complete. I do think these activities are worth going through, especially with a supplier who is willing to work cooperatively with you with the upfront work required to make that decision, and a supplier who also supports the value approach.
I am writing from a position of bias since I am a supplier/distributor of these systems you discuss. However, we spend much time researching our customers to determine the answer to this very question and verify that value is what our customers will receive. With evaluation of the customer system, we can determine which VMI solution is the best fit. We offer a Kanban type service, as well as a BossCode – a barcode system (which reads watermarked inventory levels) and SmartBin which electronically monitors inventory levels for real time response. Each solution has benefits different from the other and there are certainly ways to negotiate exactly how lean the line can be kept. All of this has to be reviewed with a bill of material on hand so factors such as part part usage, weight, volume, box qty can be figured in.
If you would like to discuss further, I’d be glad to hear from you – sbernstein@bossard.com
- Sarah -
I have been involved in many Kan(visual) Ban(signal) implementations over the past thirty some odd years and I have yet to just do Kan Ban by itself.
The key to a successful Kan Ban implementation is to make sure that other initiatives are also implemented through the use of Kaizen or some similar methodology.
Kan Ban is based on “trust”, “effective communication”, “visibility”, and “speed”.
At present I have been implementing a Kan Ban program for a very successful company in Oklahoma and they are doing this as part of an extensive “lean” initiative.
Good luck to those who do not feel the “need for speed”.
I agree that the solution lies within a more encompassing value stream approach where a visual pull system such as kanban should be integrated in a culture that is on the path of lean maturity and beyond more basic elements such as 5S, etc. Consultants sell a service and many ‘consumers’ are unaware that there is a process (or art, if you will) to implementing a lean roadmap. I am wondering what these service providers do to measure the maturity in order to know if the client can maintain the solution. My own mfg experiences tell me that this particular area requires great commitment and diligence from the implementing site. I have seen many kanban systems fail withing 6 mos of implementation.
Seems simple enough that one would think of using the supply chain to make such a decision but that is not where the efforts should start, at least in my opinion. I believe that the effort should start with education. Education occurs in at least three levels of management:
1. Top Management
2. Middle Management
3. User level
Additionally, this education needs to occur across the supply chain. Applying the principles in isolation is a wasted effort when EVERYONE does not understand the end goal, the path to get to the goal and the effort required to get the SUPPLY CHAIN to that level. What good is a supply chain that is out of sync with itself?
Michael A. Roman, CPIM
Management Consultant
Stu,
I was directly involved in the implementation of Lean and JIT systems for many years and I appreciate your perspective and understanding of the role these tools play in the larger picture.
Regards
Kerry Zuber CPIM
We are actively using a home-grown [DB/access/excel based] solutions to drive our pull system.. It drives a electronic kanban on the FG side since our warehouse / DC is a few thousand miles away and visual pull on lower level and sub assemblies. In fact, we also have our cafeteria, processing and janitorial supplies on pull!! Yes – our business does run on these “point solutions”, but one thing it definitely does not do is remove the decision from the value stream. Our inventory levels are recalculated by one of the point solutions once every month and the end result is left completely at the discretion of the buyer/planner/value stream owner. He/She can see the past say 12 months demand / usage and figure out if the new increased / reduced safety levels are due to a one time spike / drop in demand. Off the shelf products will even go to the extent of identifying these for you i guess. and yes – we do keep more of sub assemblies than components – that was a conscious decision plugged into the system logic. And we setup the system in such a way that everyday customer demand at the DC drives our build schedule by use of a small qty [loosely referred to as MOQ]. Even these “suggested” build schedules are converted over to actual builds at the discretion of value chain entity involved.
Why are we or any other co. using off the shelf / home-grown kanban products? Well, for one, new and improved best practices [wrt business logic] are always easier to be implemented in these point solutions that then handshake the results with whatever “not so easily configurable” ERP / MES system that the company may have in place. And even if the “big brother” software IS configurable to incorporate complex logic, its usually financially constraining to do so. We decided on a home grown edition because its easily portable and modifiable as business needs changed and user training required is very minimal. IT departments in larger companies will definitely be against such deployments since they dislike maintaining non-standard “spreadmarts”. These kind of homegrown systems or even some of the off the shelf systems will happily run off of a very maintainable “corporate server” – so IT can breathe a sigh of relief. Dont’ get me wrong, I’m as much an IT person as I’m a supply chain professional. My roles have always been more or less 50-50.
The funny part in the above scenario is that the end users are being dictated by IT as to what they can have rather than users having a say. At the end of the day, its the end users’ efficiency that is going to make the value stream better rather than IT’s, isn’t it? I’m usually faced with the dilemma of which side to take in this constant tussle..