Kanban in Manufacturing: 3 Success Stories
Lean is a philosophy of doing business that utilizes the Kanban methodology for work management. Kanban, as a pull system, shifts manufacturing processes from large batches and demand forecasting to replenishment of items as they are consumed, on a just-in-time basis. It was developed at Toyota and revolutionized their production, but haven’t a multitude of other companies 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
Through the implementation of Lean and Kanban principles Nike went from being on the backfoot to becoming a customer favorite. In the late 1990s Nike had experienced some bad publicity, as their factory conditions and treatment of workers were exposed. The news got out that Nike’s supplier factories were shown to demand long working hours, under-age staff, and poor air quality conditions, which led to public boycotting of their products and a decrease in sales of up to 8 percent. The Nike boycott was so profound, that many people still use it today as an example of 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 saw the conditions and also implemented extensive staff surveys to discover their experiences in the factories. From the information gleaned, Nike’s leadership committed with their managers to go on Lean training and transform their manufacturing line, placing focus on the relationship between workers and managers. 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 workers’ wages. One of the ways that they did this was by eliminating late orders and sudden changes in materials. It created work standardization and sustainable demand for work, 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 have committed to getting all their factories up to its sustainability index.
With over a million factory workers, and half a million products, Nike’s 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’s 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 huge. E.g. it’s 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 stakeholders needed to make a decision. This 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 10 programs operating with Kanban. These changes not only lead to 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 flow of work 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. The way they achieved it was by measuring their business on a Golden Triangle, which showed their customers their commitment to quality, subsequently leading to more business. But thanks to how well the initiative worked, they’ve found themselves running out of container space for the demand on their products. Having been committed to Lean already, they focused on how they could meet the demand without increasing storage space, so for ways to further optimize flow.
The challenge was that they had an ERP system that was often working 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, that focus 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 the correct orders were always being placed. 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 done. 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. Each of 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 time through 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
- Payback times reduction
- 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