Lean Inventory Control Techniques: Kanban

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Lean ManufacturingLean Manufacturing. Most of us have heard of the term and understand the elements of LEAN. That said, many people struggle with the relationship between LEAN and ERP.  In North America, the LEAN movement started with JIT - or Just in Time. When it was first introduced, JIT was often presented as an “all or nothing” alternative to MRP. This started mythology that LEAN manufacturing and ERP were two incompatible concepts.  In my experience, many LEAN consulting firms completely ignore the ERP system used by the client. I think this is a huge mistake!

Lean Manufacturing

Lean is a manufacturing management framework, and it’s made up of a large number of tools and one basic concept - eliminating waste in any kind of process.  The tools are various methodologies that people have figured out over time that allow them to achieve the concept.  What I want to discuss in this post are some of the really common tools in Lean, and how they can be achieved with an ERP, or how they need to interact with your ERP.

Kanban

I have seen many attempts to implement Kanban in manufacturing companies that have led to serious problems in ERP. The implementation on the shop floor is extremely simple and easy.  Tying it into your ERP is a real problem in many, many cases.

Kanban is a common concept in Lean manufacturing and is a key tool to use in achieving Just in Time.  The idea behind Kanban is that we eliminate the centralized planning process and let employees on the shop floor replenish parts without needing an order. In NAV this means producing a part without a Production Order or sometimes ordering a part without a Purchase Order.

Kanban can be tricky because people often implement it such that you are moving inventory around without telling your ERP. For instance, I’ve seen people use Phantom BOMs on their Bill of Material to account for parts made via Kanban. They do this because this seems the most logical way to record the use of the components, but in fact, it's a bad idea. The trouble is that in a product like NAV there is no obvious function to record the activity.

The result is a creep of inventory inaccuracy; usually with common items used on many finished components. These items are not always replenished with Kanban, because that process typically requires a vendor to cooperate, and sometimes that’s hard to find.  The purchasing and planning department still uses Purchase Orders to order those parts and often uses MRP.  This is where the mythology surrounding Lean and MRP comes from.  The MRP process is trying to plan orders for parts that have large inventory errors.  The results are huge problems.

There is a relatively simple fix for this problem.  The customer needs to record the Kanban as if it makes an item and outputs it from the production order, and then backflush the material. There are a variety of ways to do this. You can use an assembly to quickly record the item creation and consume the components.  I have seen some places where a tool was created so that employees could scan a barcode on a card, and the system would create a production order, consume the components and output the production all in one magic step. Customers might need their partner to make such a tool for them, but in our experience, this is the best way to handle Kanban.

If you are wondering if you need Business Central Inventory Control, this blog will give you the information that you need. 

Closing Thoughts

At Sabre Limited, we are experts in manufacturing. We stand among the best manufacturing ERP implementation partners across North America. What sets us apart from our competitors is that we use fixed fees instead of time and material billing and we always put the customer first. 

Our areas of expertise include:

Be sure to reach out to us if you'd like to learn more about Business Central for manufacturing.

If you're interested in learning more about what Sabre Limited can offer, we've been dedicated to helping small to medium-sized manufacturers learn and adopt Business Central. Reach out, and let's explore how we can contribute to the success of your manufacturing journey. Contact us at info@sabrelimited.com or call (519) 585-7524. We look forward to hearing from you.

I also recently wrote two blogs called 5 Best Practices for Inventory Control in Business Central and Microsoft Dynamics NAV | 5 Tips for Inventory Control that give more information about inventory control.

You can also check out a short clip from our Inventory Control Best Practices webinar that provides more information on KanBan: https://youtu.be/i_4axybSY2U.

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