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Market Demands Require Demand Driven Supply Networks

Increasing business complexity and volatility have forced many manufacturers to re-look at their entire manufacturing and supply chain management approaches. For years manufacturers oriented supply chains around a push-based model, a model that was inside-out in its thinking and function. What are the results? Higher inventory levels, typically of the wrong things. However, as global competition has increased, so has the market pressure to implement lean manufacturing techniques and establish demand driven supply networks that re-orient operations to being pull-based, or outside-in.

Critical to the success of any push-based system is the accuracy of the demand planning and forecasting process. By contrast, kanban is a part of a pull-based system that determines the amount of product to be manufactured based on the actual demand of the customers. As a result, kanban acts as a supply replenishment signal that helps to ensure better inventory control throughout the supply chain. Kanban is essential, then, to the movement to a demand driven supply network or lean supply chain.

The other thing a proper implementation of a kanban system will do, and this is the least understood part of kanban, is provide a visual system to identify problems and prioritize which problems should be solved first. Let's use an analogy. Imagine a boat cruising on the open seas. In this example the water represents inventory. The unseen rocks below the surface represent the problems you can run into. As you reduce the water (inventory), the problems begin to surface. Many times people beginning a lean manufacturing program arbitrarily remove inventory and expose more problems than they can handle. You can see how the ship would become grounded. By using kanban to remove inventory "one less at a time", you can manage the improvements and prioritize problem resolution. Each problem requires a decision, can we remove the rock or do we put more inventories back into the system? There are obvious improvements to costs, operations performance and flow by removing the rock. If you start removing inventory systematically with kanban, you will immediately identify problems in the process flow. If you are at a work center with a full inbound queue and no authorization to replenish, this means there is a problem at the downstream node because they are not releasing kanban. If you have authorization but nothing in the queue, there is a problem at the preceding node. Kanban immediately highlights flow issues for timely problem resolution before there is negative impact.

Lean Manufacturing in Volatile Markets Requires the Right Tools

Kinaxis™ RapidResponse™ was designed to help manufacturers manage increasing business complexity and achieve operations performance breakthroughs. As such, it provides a critical enabling tool to a lean manufacturing system by providing essential kanban capabilities, such as:

• The ability to calculate a recommended re-order-point (the total authorized kanban inventory) and kanban bin quantity (both for supplier and shop kanban's). Re-order-point and bin quantity calculations can be quite complex and therefore are often infrequently done. As a result, the wrong amount of inventory is authorized in the system, either too much causing excess or too little causing stock outs. With RapidResponse, the analysis can be easily performed on a scheduled or on-demand basis to ensure that kanban's are adjusted as needed to reduce the risk of execution shortages or unneeded inventory.
• The ability to emulate the kanban execution model and thereby predict late demands and kanban shortages caused by demand spikes. Real life events can introduce demand patterns that exceed the design limits of the kanban settings. RapidResponse's kanban planning analytics emulate the kanban execution behaviour and can therefore identify when this type of problem is going to occur.

The business requirement for lean supply chains has become obvious in light of the increasing business complexity and volatility most manufacturers face today. The implementation of lean manufacturing requires the right tools to support essential processes such as kanban replenishment, and tools like RapidResponse were designed to facilitate these processes in the face of real world volatilities.