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This
Week’s Topic:
Kanban – A
Strategic Approach to Operational Excellence
Most companies claim to understand the benefits of Kanban.
Many have functioning
systems for selected items. But very few utilize this
powerful tool to even a small fraction of its true
potential.
It’s no surprise that the easiest Kanban
applications
are those that have stable demand, short lead times,
reliable quality and delivery, and small batch sizes.
Understandably, these are often a company’s first Kanban
attempts. There is nothing wrong with this approach since
some solid success stories are a great way to generate
enthusiasm and understanding.
But after the easy applications are exhausted the next
tier of Kanban becomes more complicated as one or more of
the following obstacles emerge. By the way, each of these
problems can come from an external or internal supplier.
- Component quality. Expected material
is found to be unusable, often at incoming inspection
- Delivery reliability. A supplier
proves unable to consistently meet delivery commitments
- Long lead times. The longer the lead
time, the more inventory is required to meet demand during
a replenishment cycle
- Package quantity. Large package
quantities also drive up the average inventory on hand
during a replenishment cycle
- Lumpy demand for the item. Truly
uneven customer demand does require Kanban quantities sized
to meet peak periods. However, our experience is that
often the source of uneven demand is internal batching and
is another reason for smaller batches with the ultimate
objective of one piece flow
- Transportation or handling costs.
Suppliers that are not yet Lean themselves may
impose additional charges for smaller quantities
A good Kanban sizing formula can mathematically handle
any of these situations. In other words, Kanban
quantities can be calculated to maintain a reliable on-hand
supply. However, the amount of inventory a first-pass
analysis says is required may be unacceptable.
This is exactly the point where many organizations fail
to see the strategic impact of Kanban. Effective use of
Kanban is not just a continuous search for the next item
that neatly fits the formula. Instead, extending Kanban
logic requires solving the underlying problems that lead to
high on-hand balance.
If this sounds like a lot of hard work, there is a
logical answer: Of course it is! If solutions to
any of these issues were easy, they would have been
implemented long ago. (And, by the way, there wouldn’t be a
need for any of us to fix them.)
All kidding aside, the resolve to dig into the
obstacles preventing effective Kanban is what
differentiates companies that are achieving the maximum
benefit from their Kanban systems. Those organizations
that simply apply Kanban to the “low hanging fruit”
typically see some modest benefit. However, the companies
that doggedly tackle underlying supply chain management
problems and steadily increase the percent of components on
Kanban generate ongoing cost savings. Over time, those
savings and the efficiencies of a superior supply chain can
become a real competitive advantage.
Consider the effort required to develop Kanban as an
annuity policy. The upfront investment to break through
the barriers will generate a long lasting return by a
reliable, cost effective, and largely self-managing system
for material management.
Do you have a Kanban success (or failure) to contribute to
the discussion? To add your experience follow the link to
Our Blog.
Interested in more ways to improve operations and
increase earnings at the same time? We invite you to
download our white paper “Targeted Lean Six
Sigma". You are also welcome to browse the
list of
free white papers and other articles at Free Resources.
If you have a topic that you
would like addressed, or an Insight you would like to pass
along, e-mail us at: Jack.Rink@rmdonovan.c
om
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