Pull Profits Back into Your System with Pull/Kanban

Producing excess inventory can cause a major drain on margins. The loss incurred by inventory stored for a year can reach as high as 25 percent of the value of the product. In today's economy, that creates an unacceptable pressure on already tight margins. A major shortcoming of traditional manufacturing, with its emphasis on batch processing, is the cost of production and storage of excess inventory. Not only is overproduction costly, but it is sometimes used to cope with defects within a process rather than tackling quality issues upfront. The characteristic slow turnaround in traditional batch manufacturing also stifles responsiveness to custom orders, thus further limiting customer satisfaction.

Some of the fundamental goals of lean manufacturing include the reduction of waste, increases in productivity and improved quality. Through the use of "pull systems," companies accomplish these goals, providing the worker with everything required - all the necessary parts, tools, materials, training, guidance, and opportunity - at the right place and at the right time.

Use Pull Systems to Normalize Production Rates

A Pull system is a method of controlling the flow of resources by replacing only what has been consumed. A pull system relies on customer demand. A Kanban system is a Pull system that uses color-coded cards attached to parts or part containers to regulate the upstream production and delivery flow. In a Kanban system, you establish the minimum and maximum on-hand quantities for raw materials, supplies, and each assembly or product manufactured.

As an example, a color-coded card is used to indicate that a specific quantity of parts needs to be made. When the card is delivered to a machinist, he or she will create the specified number of the part ordered - no parts are made until this card is received. Another simple Kanban incorporates a color-coded carton that will always contain a particular part. The container is delivered back to the producing department for refilling when it becomes empty, triggering the creation of more of that specific part.

When customer demand drives the flow of resources and delivery of product in this way, you reduce the wastes incurred by overproduction. Since your workers are not spending time making excess product, overall turnaround times decrease. This decrease in turnaround time increases customer satisfaction, as well as your ability to compete for orders, and decreases your investment of time and resources in forecasting and scheduling systems.

Kanban is Key at Hampel Corp.

The Hampel Corporation is a small thermoforming company in Germantown, Wisconsin that has been in business for 25 years. They sell $17 million of product per year, operating with a 100,000 square foot facility. They have incorporated Kanban methods into the manufacturing of their proprietary portable toilets. Hampel produces 10,000 portable toilets per year, processing over 1 million pounds of plastic in that line using Kanban methods. Tim Koyen, the plant manager, explained the Kanban systems that are being used:

(1) Kanban cards for Maintenance, Repair and Operations (MRO) supplies. Reordering of MRO supplies is triggered by a Kanban card, which indicates the specified product and the quantity required. This system regulates reordering, avoiding unnecessary expenses for excess supplies while ensuring that the correct products are in place when needed for either routine or emergency MRO operations.

In other operations, Kanban cards are exchanged between the consumer and producer of products or services.Information on the cards may include an indication of how many parts are needed, part number, consumer and producer location and containers.Kanban cards are often colored, and the colors give an indication of the area and priority of the Kanban and its contents.

(2) Audit sheets:People complete an audit sheet on a weekly basis. This method is used for reordering raw materials and for stocking finished goods in the supermarket (a supermarket is a storage area that holds finished product and serves as a shock absorber for sudden demand). This monitoring by audit sheets ensures that quantities do not vary outside the specified minimums and maximums. It reduces stock-outs and minimizes interruptions in production.

(3) Containers return to the supplying operation when they are empty. This is a signal for the need to produce more items.The container must be properly marked with a number or color to show which material needs priority. When an agreed-upon level of inventory is produced, it is shipped automatically to selected customers, without the customer needing to place a specific order. The benefit of this system is that production is more level and administrative overhead is reduced. The customer's demand has been normalized, so that routine shipments are now made.

(4) Centralized scheduling and production control is a visual system on a magnetic board, on which production runs are scheduled. Supervisors have the latitude to make adjustments and fill in gaps when they see them.

"It's a constantly evolving process for us," Koyen stated. "Our business is seasonal, so we adjust the Kanban levels regularly. It does work; you have to stay on top of it to make sure you're operating at the right levels."

Koyen further commented, "We think Kanban makes us much more efficient. We also do special orders for customers. At one time, our fulfillment time was several weeks. Now, we can fulfill most orders within 48 hours."

Produce to Demand with Pull/Kanban

The overall result of pull systems is that you become far more responsive to your customers while, at the same time, you're cutting costs.Production becomes more efficient and lead times, storage space and expenses are reduced. Customer demand even becomes smoother over time as they realize the new responsiveness of your systems to their real needs.

Reducing overproduction and excess inventory can bring new efficiency and greater customer satisfaction to your systems - and unlock your margins. Pull/Kanban could be just the thing you need to push ahead of the competition and secure more business as you go.

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WMEP provides technical expertise and hands-on implementation assistance to small and midsize manufacturing firms on advanced manufacturing technologies and business practices includinglean manufacturing, ISO, value chain management, and strategic repositioning services for manufacturers and manufacturing facilities located in Wisconsin.