From Delays to Delivery: Kanban Optimizes Inventory & Boosts Profits for Machine Manufacturing

Introduction:

Kanban Transforms Machine Manufacturing: From Chaos to Cost Savings. Our client Machine Manufacturing is a medium-sized company specializing in the production of industrial machinery for plastic processing. They have a diverse product line ranging from Extruder machines to automatic machines used in various plastic industries such as beverages, chemicals etc. 

Challenges:

1. Inventory Management: The company faces challenges in managing inventory levels of components and parts used in machine manufacturing.
2. Production Delays: There are frequent delays in production due to a lack of visibility into the status of work orders and bottlenecks in the manufacturing process.
3. Overproduction: Occasional overproduction of certain components leading to increased inventory costs and waste and space occupation.

So, we took the project of kanban to manage inventory.

Implementation of Kanban:

Phase 1 : Planning and Preparation

1. Stakeholder Alignment: The management team and production staff are briefed about the concept and benefits of Kanban.
2. A Class items list: A cross-functional team lists out the items that are critical to production.
3. Defining Workflows: Workflows are defined for each stage of production, from raw material procurement to finished product assembly.

Phase 2 : Implementation

1. Visualizing Workflows: Kanban boards are set up in key production areas to visually represent the workflow stages. Each stage is represented by columns such as “To Do,” “In Progress,” and “Done.”
2. Limiting Work in Progress (WIP): WIP limits are established by us for each stage to prevent overloading and to maintain a smooth flow of work.
3. Inventory Management: Kanban cards are used to track inventory levels of components. When inventory reaches a predefined minimum threshold, a signal is sent to replenish stock.

Phase 3 : Monitoring & Improvement

1. Daily Stand-up Meetings: We prepared a daily meeting schedule so Daily meetings are held where teams review progress, identify bottlenecks, and adjust the Kanban board as needed.
2. Continuous Improvement: Regular retrospectives are conducted to gather feedback from teams and implement process improvements.
3. Integration with Suppliers: Kanban is extended to suppliers, allowing for a pull-based system where suppliers replenish inventory based on actual demand.

Results Achieved :

1. Improved Visibility: Kanban provides real-time visibility into the status of work orders and inventory levels, enabling better decision-making and reducing production delays.
2. Reduced Lead Times: By limiting WIP and streamlining workflows, lead times are significantly reduced, allowing the company to respond more quickly to customer demands.
3. Cost Savings: Reduced inventory holding costs due to optimized inventory levels and minimized overproduction.
4. Enhanced Collaboration: Kanban fosters better collaboration and communication between different departments, leading to smoother production processes.
5. Increased Efficiency: Overall, the implementation of Kanban has led to increased efficiency and productivity in machine manufacturing operations. 

Monetary Benefits :

1. Inventory Holding Cost Savings: $30000 per year.
2. Reduced Labor Costs: $2,000 per year
3. Decreased Machine Downtime: $18000 per year.
4. Cost of Poor-Quality Reduction: $15000 per year
5. Overall Cost Savings: $2000 + $30000 + $18000+ $15000 =$65000 Total Annual Savings

By quantifying these monetary benefits, Machine manufacturers can assess the return on investment (ROI) of implementing Kanban and justify the expenditure on process improvement initiatives.