Did you know that a simple visual card system revolutionized global manufacturing practices and set new standards for operational efficiency? The history of Kanban represents one of the most significant developments in production management of the 20th century.

Kanban, a Japanese term meaning "visual card" or "signboard," emerged as a scheduling system for lean manufacturing and just-in-time (JIT) production. Its elegant simplicity belies its profound impact on how goods are produced worldwide. This system, which began on Toyota's factory floors, has fundamentally altered our understanding of efficient manufacturing processes.

In this blog post, we'll trace the history of Kanban from its origins in post-war Japan through its evolution into a cornerstone of modern manufacturing. While Kanban has expanded into various industries today, it has continued to play a transformative role in manufacturing—where its principles continue to drive operational excellence to this day. 

The Roots of Kanban: Toyota and the Birth of JIT (1940s-1970s)

Post-War Japan and Toyota's Competitive Challenge

In the early 1950s, Japan's industrial landscape was dramatically different from the manufacturing powerhouse we know today. Toyota, now a global automotive giant, was struggling to compete with American car manufacturers. The disparity was stark—American manufacturers were producing at rates approximately ten times higher than their Japanese counterparts.

This competitive disadvantage prompted Toyota's leadership to seek innovative solutions. As Kiichiro Toyoda, Toyota's CEO at the time, boldly declared, the company would "equalize productivity with American automotive manufacturers in three years." While ambitious, this goal set Toyota on a path toward revolutionary process improvement.

Taiichi Ohno: The Architect of the Toyota Production System

The history of Kanban cannot be told without highlighting the contributions of Taiichi Ohno, an industrial engineer who joined Toyota Motor Company in 1943. Rising quickly through the ranks, Ohno became a machine shop manager by 1949 and a director by 1954.

Ohno's genius lay in his ability to identify inefficiencies in the production process. He categorized seven types of waste (or "Muda" in Japanese) that decreased system throughput and performance:

1. Overproduction
2. Waiting
3. Transportation
4. Over-processing
5. Inventory
6. Motion
7. Defects

The challenge was clear: how could Toyota reduce waste while maintaining production efficiency? The answer came from an unexpected source.

American Supermarkets: The Unlikely Inspiration

In 1956, Ohno visited the United States and observed American supermarkets with keen interest. He was particularly impressed by how chains like Piggly Wiggly managed inventory. Rather than stocking shelves based on projected demand, these supermarkets replenished products only as they were purchased.

This "pull" system of inventory management sparked Ohno's imagination. As he later explained: "To produce only what is needed, when it is needed and in the amount needed."

The supermarket approach solved a fundamental paradox in manufacturing: overproduction was wasteful, but so was keeping large inventories of raw materials. The solution was to produce items just in time to meet demand—no sooner, no later.

The Birth of the Kanban Card System

Upon returning to Japan, Ohno began implementing a card-based signaling system in Toyota's factories. These "Kanban" cards became the visual cues that triggered action within the production process.

The system worked as follows:

• Kanban cards were attached to every finished product
• When a product was sold, its card would move back to the production line
• Workers could only begin producing a new item when they received a card signaling demand
• Production would only start once the number of pending Kanban cards reached a defined threshold

This elegant system accomplished several critical objectives:

• It reduced stockpiles of both raw materials and finished goods
• It improved throughput by ensuring production matched actual demand
• It provided high visibility into the entire production process

By 1963, this Kanban system had spread throughout Toyota's Machining Division, and plans were developed to implement it company-wide. By the early 1970s, nearly all processes at Toyota operated under this system.

Toyota's Six Rules for Kanban Implementation

For the Kanban system to function effectively, Ohno established six fundamental rules:

1. Each process issues requests (Kanban) to its suppliers when it consumes its supplies
   
   
2. Each process produces according to the quantity and sequence of incoming requests
   
   
3. No items are made or transported without a request
   
   
4. The request associated with an item is always attached to it
   
   
5. Processes must not send out defective items, ensuring finished products are defect-free
   
   
6. Limiting the number of pending requests makes the process more sensitive and reveals inefficiencies
   
   

These principles ensured that the Kanban system maintained its integrity and delivered the intended benefits. As Ohno stated, "to be effective, Kanban must follow strict rules of use."

Toyota's Transformation: From Struggling Manufacturer to Global Leader

The impact of the Kanban system on Toyota's operations was profound. From operating at a loss in the post-war period, Toyota transformed into a global competitor renowned for quality and efficiency. Taiichi Ohno's career paralleled this rise—he became an executive vice president in 1975, having fundamentally changed not just Toyota but manufacturing practices worldwide.

The Toyota Production System, with Kanban at its core, laid the foundation for modern lean manufacturing techniques that continue to influence industries globally.

Kanban Principles and Core Properties in Manufacturing

Visualizing the Workflow: The Power of Visual Management

At its essence, Kanban is a visual system. In manufacturing environments, this visualization typically takes the form of Kanban boards that represent different stages of production. These boards provide immediate, at-a-glance information about the status of work throughout the factory floor.

The visual nature of Kanban boards serves multiple purposes in manufacturing:

• It creates transparency across all levels of the organization
• It enables quick identification of bottlenecks or delays
• It facilitates communication between different departments or processes
• It provides real-time status updates without the need for meetings or reports

This visualization principle remains one of the most powerful aspects of Kanban in manufacturing settings, where complex processes must be coordinated with precision.

Limiting Work in Progress (WIP): Optimizing Flow and Reducing Waste

A fundamental principle of Kanban systems in manufacturing is the limitation of work-in-progress (WIP). By restricting the number of items that can be in production at any given time, manufacturers can achieve several critical benefits:

• Reduced cycle time (the time it takes for an item to move through the entire production process)
• Decreased inventory costs
• Improved quality through greater focus on fewer items
• Earlier detection of problems or defects
• More predictable delivery times

As Don Reinertsen, a leading authority on product development flow, suggests, teams can start by observing their initial work in progress and then define WIP limits for each stage as being equal to half the average WIP.

In manufacturing environments, WIP limits are often set at 1 to 1.5 times the number of people working in a specific stage. These limits not only help team members finish current tasks before taking on new work but also communicate to stakeholders that there is limited capacity—encouraging better planning and prioritization.

Managing Flow: The Heart of Manufacturing Efficiency

In manufacturing, "flow" refers to the smooth movement of materials and components through the production process. Kanban systems help optimize this flow by highlighting stages of the workflow and the status of work in each stage.

The effectiveness of flow management depends on how well the workflow is defined and how appropriate the WIP limits are. When implemented correctly, work moves smoothly within WIP limits. When problems arise, work begins to pile up, signaling capacity issues that require attention.

A key aspect of flow management in manufacturing Kanban systems is analyzing intermediate wait stages—the handoff points between processes. Reducing time spent in these wait stages is crucial for reducing overall cycle time and improving production efficiency.

Making Process Policies Explicit: Clear Rules for Consistent Production

For a manufacturing Kanban system to function effectively, all participants must understand how work should be performed. This requires making process policies explicit—clearly defining and communicating the rules that govern the production process.

These policies might include:

• Entry and exit criteria for each production stage
• Quality standards that must be met before work can progress
• Procedures for handling defects or exceptions
• Guidelines for prioritizing different types of work

By displaying these policies directly on the Kanban board, manufacturers ensure that all team members have a common understanding of expectations, leading to more consistent and higher-quality outputs.

Examples of Kanban Systems in Manufacturing

Several variations of Kanban systems have emerged to address specific manufacturing contexts:

Two-Bin Kanban System

This system uses two physical bins and Kanban cards to manage inventory of critical parts. When one bin is emptied, a Kanban card signals the need for replenishment, while production continues using parts from the second bin. This approach ensures continuous production while maintaining minimal inventory.

Interestingly, this system was employed in manufacturing British Spitfire planes during World War II, predating Toyota's formal Kanban implementation.

Three-Bin Kanban System

For supplied parts where there's no in-house manufacturing, the three-bin system provides additional security. One bin is on the factory floor, one in the factory store, and one at the supplier. When a bin is emptied, it triggers a chain of replenishment that ensures continuous supply without excessive inventory.

Kanban Pull System for Production Inventory Management

This lean manufacturing technique eliminates raw material waste by supplying only what is needed when required. Suppliers are "pulled" into the production process only when there is actual customer demand, reducing waste and improving efficiency.

Benefits of Kanban in Manufacturing

The implementation of Kanban systems in manufacturing environments yields numerous benefits:

• Reduced inventory costs: By producing only what is needed when it's needed, manufacturers can significantly reduce inventory carrying costs.
• Increased efficiency: With clear visualization and optimized flow, production processes become more efficient, reducing waste and improving resource utilization.
• Improved quality control: By limiting WIP and making process policies explicit, manufacturers can focus on quality at each stage, reducing defects and rework.
• Enhanced flexibility: Kanban systems allow manufacturers to respond quickly to changes in demand or priorities.
• Greater transparency: Visual management creates transparency across all levels of the organization, facilitating better decision-making and problem-solving.

These benefits explain why Kanban has remained a cornerstone of lean manufacturing for decades, even as technologies and markets have evolved.

Kanban Beyond Manufacturing: A Brief Overview

While our focus remains on the history of Kanban in manufacturing, it's worth noting that the principles of Kanban have transcended their original context. The methodology has been adapted for various knowledge work environments, including software development, IT operations, marketing, and project management.

In 2004, David J. Anderson developed a Kanban system for a Microsoft XIT Sustaining Engineering Group, marking the first significant application of Kanban principles to knowledge work. This adaptation retained the core principles of visualization, WIP limits, and flow management while adapting them to non-manufacturing contexts.

The versatility of Kanban principles demonstrates their fundamental soundness and applicability across diverse work environments. However, the manufacturing sector remains the birthplace and a primary beneficiary of Kanban methodologies.

The Future of Kanban in Manufacturing

Electronic Kanban (e-Kanban): Digital Evolution of a Physical System

As manufacturing has embraced digital transformation, traditional physical Kanban cards have evolved into electronic Kanban (e-Kanban) systems. These digital solutions retain the core principles of Kanban while leveraging technology to enhance functionality and reach.

E-Kanban systems offer several advantages over traditional physical cards:

• Elimination of manual entry errors and lost cards
• Real-time visibility across global supply chains
• Integration with enterprise resource planning (ERP) systems
• Automated data collection for analytics and optimization
• Faster signal transmission throughout the supply chain

Organizations like Ford Motor Company and Bombardier Aerospace have implemented electronic Kanban systems to improve their processes, demonstrating the continued relevance of Kanban principles in modern manufacturing.

Data Analytics and Kanban: Optimizing Manufacturing Processes

The integration of data analytics with Kanban systems represents a significant advancement in manufacturing process optimization. By collecting and analyzing data on cycle times, lead times, throughput, and other key metrics, manufacturers can:

• Identify patterns and trends in production efficiency
• Predict potential bottlenecks before they occur
• Optimize WIP limits based on historical performance
• Make data-driven decisions about process improvements
• Quantify the impact of changes to the production process

This marriage of Kanban principles with advanced analytics capabilities enables manufacturers to achieve unprecedented levels of efficiency and responsiveness.

Kanban in Industry 4.0 and Smart Manufacturing

As manufacturing enters the era of Industry 4.0—characterized by automation, data exchange, and smart technologies—Kanban principles continue to play a vital role. The visual management and flow optimization aspects of Kanban complement the technological advancements of smart manufacturing:

• Internet of Things (IoT) sensors can automatically trigger Kanban signals
• Artificial intelligence can optimize WIP limits and flow based on real-time conditions
• Digital twins can simulate and optimize Kanban systems before physical implementation
• Blockchain technology can secure and verify Kanban transactions across complex supply chains

Rather than being rendered obsolete by technological advancement, Kanban principles are being enhanced and extended through integration with Industry 4.0 technologies, ensuring their continued relevance in the manufacturing landscape of the future.

Implementing Kanban with Arda: Start Small, Scale Big

Worried about the complexity of overhauling your entire inventory system? With Arda's approach to Kanban implementation, you don't have to. Unlike traditional inventory management overhauls that require facility-wide disruption, Arda allows you to start rolling out Kanban with just one production line or a handful of critical parts.

Our Incremental Implementation Approach:

• Identify your most problematic inventory items (those with frequent stockouts)
• Set up Arda's physical cards with QR codes for just those items
• Train your team on the simple scan-and-reorder process
• Monitor the results and expand to additional items at your own pace

Many Arda customers begin with just 10-20 critical components and experience such dramatic improvements that they quickly expand the system across their entire operation. This low-risk approach ensures minimal disruption to your current processes while demonstrating clear ROI.

"We started with just our cutting tools and abrasives," says John M., a machine shop owner. "Within two weeks, stockouts disappeared completely. We've now implemented Arda across our entire inventory and can't imagine running our shop any other way."

Ready to take the first step toward inventory control? Schedule a consultation to design your custom Kanban implementation plan with Arda.

Conclusion

The history of Kanban represents a remarkable journey from a simple card system in Toyota's factories to a fundamental principle of modern manufacturing excellence. What began as Taiichi Ohno's pragmatic solution to post-war production challenges has evolved into a sophisticated methodology that continues to drive efficiency and quality across the global manufacturing sector.

The enduring power of Kanban lies in its elegant simplicity. By visualizing workflow, limiting work in progress, managing flow, making policies explicit, and continuously improving, manufacturers can achieve remarkable results without complex technologies or radical organizational changes.

As we've explored throughout this article, the history of Kanban in manufacturing is characterized by continuous evolution and adaptation. From physical cards to electronic systems, from isolated factory implementations to global supply chains, Kanban principles have proven their versatility and value.

For modern manufacturers seeking operational excellence, the lessons from Kanban's history remain as relevant as ever. By embracing these time-tested principles while leveraging modern technologies, today's manufacturing organizations can achieve the perfect balance of efficiency, quality, and responsiveness that Taiichi Ohno envisioned over seven decades ago.

‍