Traditional kanban systems give simple signals to suppliers that materials required to keep production lines running at optimum speeds have to be restocked.

This usually means a pull approach to inventory control. The signal (i.e., posting a card, hoisting a flag, moving a bin) that supplies are needed at a production position triggers a delivery. At first, kanban did not involve computers, but as plants have become more dependent on electronically exchanged information both internally and externally, some have sought to integrate kanban into their e-business infrastructures. Despite the discomfort switching to e-kanban can cause at first, the move has the potential to increase visibility and decrease costs.

When does it make sense to move to an e-kanban system?

This Vista, Calif., dj Orthopedics plant, a 2005 IW Best Plants winner, cut administrative costs by switching to an electronic e-kanban system.
"Signaling more frequently runs up administrative costs, and the optimum point to move to e-kanban is when you are signaling suppliers of issues 20 times or more a day," says Sam Bayer, president and CEO of Datacraft Solutions Inc. The Durham, N.C.-based company provides automation consulting services.

When a computerized system starts to make sense, Bayer says, several adjustments must be made to make the move seamless and positive.

The primary change is to shift a kanban system from inventory pulling to a repository-based system. This step helps to narrow the differences between the analog and computerized systems and maintains the best features of both.

"This replicates the consumption cue [on the factory floor], but it's based on a supply repository that allows computerization and leads to system improvements and other benefits," Bayer says.

In the past two years, Datacraft has helped 11 companies in such diverse industries as automotive, aerospace, medical devices and food preparation machinery move to e-kanban.

Those moves included the use of blanket purchase orders to minimize friction in the flow of information between buyers and their suppliers, the creation of internal inventory "supermarkets" in which minimum inventory levels are maintained, and the development of relationships with suppliers that take action to ensure that materials always are available to production cells.

"We are changing the functionality of kanban systems to improve the process through improved administrative functions," Bayer says.

For instance, two IndustryWeek Best Plants winners, dj Orthopedics plants in Tijuana, Mexico, (2004) and Vista, Calif., (2005), consulted with Datacraft to set-up an electronic kanban linked to a supermarket. The company first perfected the system with internal suppliers and then rolled it out externally. Such changes reduce administrative costs by eliminating the need for buyers to be in constant contact with suppliers to maintain production.

In this case, dj Orthopedics was able to maintain the practice of issuing blanket purchase orders, which it liked, while eliminating the need to confirm that the blanket order was still valid each time a order was placed: The software program won't accept a supply request without a valid purchase order.

With e-kanban, buyers can focus on improving relationships with their suppliers and monitoring suppliers' performances with the help of complete audit reports generated by the computer on such issues as shipment and delivery times and production schedule problems, Bayer says. E-kanban also can ensure supplier quantities are accurate.