Inventory is the lifeline of any manufacturing company. Customer service levels are gated by availability of Finished Goods. Production is highly dependent on availability of Work In Process and Raw Materials. Every manufacturer therefore spends a lot of time, effort and money to come up with an optimized inventory plan. A Material Replenishment Plan is what is needed to segment the items based on their consumption velocity and replenishment frequency. Some percentage of parts, which can vary based on the type of business, would be highly conducive to Electronic Kanban (eKanban) replenishment. In a made-to-order or made-to-stock manufacturing environment, we have seen these eKanban parts ranging from 40% to 90% of total spend.
Today’s manufacturing environment is fast-paced, complex, and it is global. In order to maintain a competitive edge and achieve success, manufacturers must be able to demonstrate agility within this environment. Moreover, within this environment it is essential that manufacturers be able to actively engage customers and suppliers by providing access to data and metrics central to the supply chain process. The reality is that Electronic Kanban can dramatically simplify the replenishment process by delivering the right part at the right place at the right time.
Even though Manual Kanban provides visibility inside the four walls of the factory floor, it fails when the replenishment moves beyond the four walls such as Customers, Distribution Centers and Suppliers. Additional challenges with manual Kanban challenges include:
- Limited capabilities to communicate in real-time;
- Inability to access/obtain data in real-time;
- Limited ability to adapt to changes in customer demand;
- High error rate;
- Time consuming;
An eKanban system is a powerful and proactive closed-loop Kanban system that delivers supplier collaboration, visibility into real-time order flows, as well as shipment and receipt information. An eKanban system ensures manufacturing supervisors and planners that material is available for production and replenished based on consumption. Moreover, an eKanban system facilitates continuous improvement projects synchronized with specific lean manufacturing goals.
Here are 4 Reasons why eKanban Should be Part of Your Material Replenishment Plan:
- Elimination of Excess Inventory in the Supply Chain
An eKanban system is pull-based rather than push- or forecast-based. Because of this, eKanban systems routinely realize inventory reductions of 20-75% over other systems.
- Improved Agility
Communication and collaboration is essential to replenishment. Traditional methods of communicating with supply chain partners such as email, phone, and fax fall into the category of open-loop processes. An eKanban system, on the other hand, uses a closed-loop process where every material replenishment transaction is tracked in real-time from the time the signal is released to a supplier until the time the materials are received. The data gathered enables manufacturers to be more agile.
- Improving Material Availability
An eKanban system improves material availability by proactively monitoring on-hand inventory and alerting the buyers/planners on potential stock out risks. Simply put, if there are no potential shortages then there is no reason to expedite. Companies that deploy supplier ekanban report 90% less time expediting and reduced administrative costs by 50%. Additionally, premium freight can increase logistics costs by 50-150% or more. Since supplier eKanban prevents the root causes of material availability issues, the result is less money spent on premium freight.
- Building a Demand Driven Supply Chain
Successful manufacturing firms have recognized that a properly deployed eKanban system can be a catalyst for building a demand driven supply chain by providing a tool set that systematizes best practices; a benefit to both the manufacturing firms and their supply chain partners.