Kanban: Lean thinking at Miller Fabrication Solutions

During a mid-1900s visit to the United States, Japanese industrial engineer Taiichi Ohno noted that a supermarket chain kept its shelves stocked with just the right amount of each product to allow shoppers to buy what they needed, when they needed it. The grocery ordered more of each product as supplies were purchased. Ohno wondered: Could the right-product-at-the-right-time system be modified to streamline manufacturing?

Ohno, who was employed by Toyota, had already identified seven categories of waste in the manufacturing process. Keeping a large inventory of parts or materials was one waste. So was overproduction. Ohno knew that if Toyota could signal when new parts or products were needed, the company could match inventory levels to consumption. Modeling the U.S. grocery store approach, he implemented a system he called Kanban (pronounced “kon-bon”) on Toyota's factory floor.

The Japanese word kanban translates to “visual signal” or “billboard.” In manufacturing, Kanban supports just-in-time manufacturing in a lean production environment. It is recognized as a sign that instructs suppliers to take a specific action, usually to replenish a certain set of parts or materials. Ohno attached a kanban, or card, to every part used during production. When workers emptied a bin of materials being used on a production line, the cards went back to Toyota's warehouse, notifying warehouse workers to send a new bin of materials to the factory floor. The warehouse simultaneously sent a card to the supplier as an instruction to replenish the consumed parts.

Like grocery store shoppers, end users expect greater responsiveness and efficiency than ever before – and manufacturers increasingly rely on suppliers as allies in meeting those customer expectations. With some softness predicted in manufacturing sectors through Q2 and uncertainty surrounding the economic impact of the novel coronavirus, manufacturers who find ways to improve production and delivery efficiencies have potential to gain market share in the months ahead.

Kanban drives change and results
Miller Fabrication Solutions, the firm where I work in Brookville, Pennsylvania, implemented the Kanban system in mid-2019 to align work flow with inventory and customer demand.

The company had come through the Great Recession and begun regaining its pre-recession footing by 2012. But some of our customers found fault with our performance during the rebound. Having kept staffing levels as lean as possible to endure the downturn, our response time to the influx of new product orders fell short of customer expectations. Delivery times and product quality both suffered. Skilled laborers, unable to find jobs in their fields during the recession, had moved on to other kinds of work. At a time when the company needed to staff back up, too few workers were available.

Several customers, with whom the company had long-standing, trusted relationships, helped us make select improvements, but the changes were too limited to provide a comprehensive solution. Having always ordered parts and maintained inventory based on a forecast, rather than on real-time need, we were unable to create the efficiencies needed without dramatically shifting that model.

After a deep dive into the study of lean management techniques and a trip to Japan to see a Toyota supplier's use of the Kanban system firsthand, company executives decided to test the system's effectiveness on a single production line. Among other products, Miller produces turntables for boom lifts. A supplier that provides parts for one turntable type agreed to participate in the pilot project. Miller chose laminated note cards as signals, and the turntable parts supplier agreed to replenish consumed parts on a daily basis.

Kanban delivered results quickly. In just two weeks, we had eliminated the backlog of the turntable. The right parts were consistently available when production workers needed them, but without being overstocked. By the end of 2019, three production lines and all of the company's 192 individual turntable parts had been incorporated into the Kanban system.

Based on the results to date, which include a decrease in inventory from $2.3 million to $1.6 million and a reduction in work-in-process velocity from 10 days to seven, the company is now assessing how it might also implement Kanban in its product shipping process and partner with additional suppliers.

While traditional manufacturing purchasing models have tended to place buyers and suppliers at odds, the lean model focuses on partnership and cooperation. When suppliers engage in helping to create a manufacturing company's product-service strategy, both entities can reduce lead times and inventory management costs, better respond to customer demand and more effectively navigate marketplace fluctuations.

Rich Steel is director of lean manufacturing at Miller Fabrication Solutions, a strategic supply chain partner offering metal part manufacturing and value-added solutions for global OEMs across oil and gas, mining, material handling, construction equipment and other heavy equipment industries.

SC
MR