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How can a Kanban process improve materials replenishment?

Manufacturing companies can improve their approach to materials replenishment by implementing a Kanban process.

Kanban has long been perceived as a Japanese-specific or automotive industry-specific approach to materials replenishment,...

but it can improve materials replenishment greatly in a wide range of manufacturing industries. Kanban is a materials replenishment process in which personnel on the shop or production floor signal that their current stock of a material is almost consumed and needs to be replenished to ensure uninterrupted production.

To determine whether a Kanban process is a viable option for materials replenishment, a company needs to evaluate if it is able to meet the following criteria for implementing Kanban:

  • The supply source must be able to deliver material quickly and in small quantities. Setup times should be short and the availability of materials and capacity to process them should be ensured.
  • The components that are controlled using a Kanban process should have steady consumption over the replenishment time. Unsteady materials consumption requires a greater number of Kanbans on the shop floor, thus increasing inventory and negating the very purpose of implementing Kanban.
  • The material replenished via a Kanban process should not be produced in advance; this leads to unnecessary materials being procured and stored.

The SAP ERP system provides complete Kanban integration in business processes involving procurement, production or stock transfer.

Figure 1 illustrates the Kanban process. A demand source is the location that requires the material for production. A supply source is a source for materials replenishment. The replenishment of materials can happen via external procurement, in-house production or even through stock transfer between two plants.

business processes in Kanban
Figure 1. Business processes in Kanban.

Figure 2 shows the demand source view of a Kanban board (the other view is supply source).

Figure 2. Example of a Kanban board in an SAP ERP system.

Two Kanbans, 1174 and 1175, are marked by production personnel as empty (denoted by the color red) and awaiting replenishment. As soon as the production person manually or via bar-code scanner sets the status of a Kanban to empty (denoted by the color green), the system creates a purchase order, a production order or a stock transfer order automatically. On receiving the requisite material, the production person manually (or via bar-code scanner) sets the status of Kanban to full and the system simultaneously issues a materials goods receipt with reference to a purchase order, production order or stock transfer order.

Next Steps

Tips for Kanban production control

Planning for production and procurement

Finding the right inventory management plan

Dig Deeper on SAP implementation