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Kanban is a signal in a visual form used to tell a producer what to produce, when to produce and how much to produce. The word kanban has a Japanese origin that means “card you can see” or “billboard.”
Electronic (or e-kanban) systems are now common, and are able to improve on some of the drawbacks of manual kanban systems.
Kanban’s starting point is the customer orders themselves, which provide an updated number for the production flow. Since orders supply the basis for pulling parts requests, this term is also known as a "pull system."
Toyota first introduced kanban in the 1950s as a means of standardizing the flow of parts through a relay system applied in its production lines. Kanban was among multiple systems developed by Toyota to guarantee that customer orders were the basis of calculating inventory, rather than estimations carried out by managers.
A kanban card is a label that indicates a certain part number and is attached to the part before installation. An operator detaches the label and creates a record indicating that the part was used and more parts may be needed. As a manufacturing standard, only those parts with kanban labels attached are accepted in an inventory order.
One example of using the kanban system could be in the three-bin system for inventory parts:
1. One bin indicates the factory floor
2. Another one indicates the factory store
3. The final bin indicates the supplier store
These supplier store bins typically have removable labels containing more technical specifications for the part.