Using Kanban With Your ERP System

Whenever I used to discuss Kanban with consulting clients as part of a discussion on Lean Manufacturing their eyes would light up. For many people that I spoke with, Kanban was a standard to reach and most of them wanted it there and then.

Unfortunately it takes time to organise your manufacturing operation so that you can operate a true Kanban. Combine this with the fact that many businesses have invested so heavily into their ERP system you can understand why so many businesses fail to deploy Kanbans effectively.

Before I go into two specific ways that you can use Fraction ERP with Kanbans (yes, they don't have to be mutually exclusive!) let me give you a quick recap on what a Kanban is and how they are designed to be used. I should stress here that I am going to talk about the physical Kanbans used in manufacturing environments and not their digital equivalents used in software development.

What is the Kanban method?

In short, a Kanban is a visual pull system that synchronises demand and supply. They come in many shapes and forms and the essence of their mechanism is that production does not occur unless there is a visual demand. The visual demand may be a square on the floor that has been emptied of its WIP (Work In Progress) or an empty box on a consumables rack. The message is simple; if the box / square is empty you can produce the next unit of production. If it isn't empty don't produce anything.

Getting the right 'lot size' for production is key to making Kanbans work and this is one of the reasons why it takes time to smooth out production in your own work environment before you can deploy Kanbans. If you look at the five stages of Lean put forth by Womack and Jones, Kanbans fit into the fourth step. The steps are; clarify value, map the value stream, create flow, adopt pull systems and aim for perfection. Kanbans are a pull production system; they only trigger production when demand is present. Businesses that try to implement Kanbans when they haven't clarified their value stream and achieved a level of flow through their operation end up with lumpy Kanbans that simply stall production rather than giving the business a competitive edge!

And here is the real conflict. Kanbans are a pull production system. MRP systems (including ERP systems) are predominantly push systems. Push systems can build up stock and overload bottlenecks, the polar opposite off what Kanbans aim to achieve. However, push systems can be set up and / or integrated with true Kanbans to give you a great outcome. Let me share with you two ways that you can link your ERP system with a Kanban approach.

Method 1 - using the work to list with your Kanban visual triggers.

Your ERP system should produce a simple work to list that your production teams can follow. Normally, as with any push system, you would complete one operation / works order that is loaded on your work to list and then move to the next works order in the list. This pattern would be repeated indefinitely. Whatever is happening downstream is of no concern to you.

Linking this with a Kanban means that you wouldn't start another item on your work to list until your Kanban signal told you to do so. Whether this is a square on the floor, a traffic light system or something that is coordinated by your production control team it does not matter. No production signal means no production.

Method 2 - using the re-order levels configuration within your part setup fields

One of the key features of any ERP system is the ability for re-order levels to be used. These are, in essence, the digital equivalent of a Kanban signal. Using this approach to manage key sub-assemblies or components means that you can avoid needing to drive demand through sales orders at the parent level or forecasting stock to produce.

If you have repeating products this can be an option for your business. If it isn't then this option will be difficult to deploy.

Some businesses will be better off with a forecasting and push production method. Some businesses will need to adopt a mass customisation strategy and many other will need some form of hybrid approach. Kanbans offer a great way to reduce overproduction and inventory wastes building in your business. I hope this article gives you some inspiration that your Lean strategy and your ERP strategy don't have to be separate items. In many ways, a simple way to think of this is that Lean is about boosting productivity and reducing waste and ERP is about efficiently keeping a grip on your customer orders. You can combine these two approaches and integrate your ERP system with pull production methods. 

Fraction ERP allows you to have simple work to lists and use re-order levels. Fraction is a simple way to control your production orders and push towards a Lean organisation. If you are ready to start your Lean ERP journey today, and want a system that will help you to deploy Kanbans, then get in touch today for your free demo.

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