Kanban in Manufacturing: 3 Success Stories
Lean is a business philosophy that utilizes the Kanban methodology for work management. As a pull system, Kanban helps shift processes from ones based on large batches and demand forecasting to ones where products are replenished in parallel to their consumption (just-in-time production).
It was developed at Toyota and revolutionized their production. But is it not the case that tens of other companies have also enjoyed the benefits of Kanban and Lean in the last 20 years? And, has the common utilization of large ERP applications like SAP rendered Kanban useless? The answers are: yes to Kanban still eliciting benefits, and a resounding no to Kanban being replaced by ERPs.
Nike goes on Gemba
By implementing Lean and Kanban principles Nike went from being on the backfoot to becoming a customer favorite.
In the late 1990s, Nike experienced bad publicity when poor factory conditions, and an imperfect treatment of workers were exposed. The news got out that Nike suppliers’ factories demanded long working hours, under-age staff, and poor air quality conditions, which led to public boycotting of their products and a sales drop of up to 8 percent. The Nike boycott was so profound that many people still use it today to exemplify what public pressure can do to corporations.
Nike sent one of their top directors, Jill Ker Conway, to their overseas factories. She performed their first Gemba Walk. She examined the working conditions and implemented extensive staff surveys to learn their perspective on working in the factories.
Based on the information received, Nike leadership initiated Lean training and started to transform their manufacturing lines. The nature and quality of the relationship between workers and managers was the core area of focus. In two years, they had improved their labor standards compliance score by 15%.
Nike drove down the overtime in its supplier factories and improved factory worker wages. One of the ways they did this was by eliminating late orders and sudden changes in materials. It allowed for work standardization and made the demand for work stable and sustainable, all of which are the basics of a Kanban pull system. This Lean initiative was so effective that Nike has set a new standard for worker well-being in its sector and has committed to getting all its factories up to the newly reached sustainability index.
With over a million factory workers, and half a million products, the Nike example shows that Lean can benefit production processes regardless of company size. Through Lean and Kanban practices, they have also improved innovation.
A fundamental practice of Kanban is to evaluate a company value stream to identify waste and reduce it. Nike took this to the next level and utilized their waste to become a new product, called Nike Grind. The product has now enjoyed 20 years of success - it takes waste from old products, recycled by customers to create training surfaces for athletes.
Lean and Kanban practices at Jaguar
The cost of product delays in the motor industry is enormous. E.g., it’s been calculated, that Ford loses around 1 Billion dollars per year on product delays and defects in quality. That is why, when Hamish McMinn, a Jaguar project manager, mentioned that through Kanban and the implementation of small batches, he could significantly reduce time to market on new product designs, Jaguar Land Rover Automotive piloted the idea.
Before 2014, Jaguar used to take at least 12 weeks to get feedback on designs and design concepts. This knowledge work was expensive, adding 12 weeks of waiting time for every update. They reduced the size of the batches submitted for feedback. Using the concept of minimum viable products, they only provided the information that the stakeholders needed to make decisions. It reduced the feedback loops from 12 weeks to just a few days.
The pilot project was such a success that by the end of 2016, Jaguar had ten programs operating with Kanban. The changes lead to -not only shorter delivery times - but also quality improvements due to 30% smaller design teams. During daily stand-ups, design teams focused on their Kanban boards to drive the workflow each morning.
Jaguar didn’t stop at product development but looked at their entire value stream. The manufacturer has become so successful at Lean that it started to offer Lean experience days. At their Halewood plant, they take business people around and show them how to benefit from Lean.
Phase 2 - making ERP subservient to Kanban
The company Phase 2 was a medical device manufacturer (now NextPhase Medical Devices). Their focus was always to improve manufacturing methodology by increasing quality and throughput, all within the target cost range. How did they achieve it? They measured their business using a Golden Triangle, which proved their quality commitment to the customers, subsequently leading to more business.
But, because of how well the initiative worked, Phase 2 found themselves running out of container space for the demand on their products. Having been committed to Lean already, they focused on meeting the demand without increasing the storage space. In other words, they looked for ways to optimize the flow further still.
The challenge was that Phase 2 had an ERP system that often worked in direct opposition to their Kanban system. ERP systems, such as SAP, often suggest processing large batches to minimize logistic challenges and supply costs, but Kanban prefers smaller batches, focusing purely on demand. Hence, Phase 2 contracted a software company to integrate the two systems into a shared dashboard.
The company would then have a daily stand-up, during which a supply chain associate presented copies of the dashboard that ensured correct orders placement. It resulted in an increase in flow through the warehouse, enabling them to reduce storage allocation by 33%, subsequently making a new warehouse no longer needed.
Working with Lean & Kanban is a journey, and a company can never claim to have gained all possible benefits of the method. The continuous improvement process is never complete. But these three examples show how using Lean & Kanban to move from a push to pull work management system can cause dramatic changes for the better. All these companies improved their working conditions and the quality of the products, and have done so without increasing staff working hours. And their improvement is ongoing.
Some of the benefits these companies have achieved through their use of Kanban are:
- Sales increase
- Reduction of lead times and quicker times to market
- Increased first pass rates
- Increased customer buy-in and trust
- Happier and more productive staff
- Reduction of defects and cost associated with them
- Production variability reduction
- Up to 100% increase in meeting customer promised times
- Reduction of staffing overheads
- ROI increase through a reduction in capital expenditure
- Increase in health and safety
- Reduction of the environmental impact
- Innovation increase
- Nike accused of tolerating sweatshops (2001)
- How Nike Used Lean to Solve its Sweatshop Problem
- Nike Sourcing & Manufacturing Sustanability Index