How to Successfully Manage Kanban Inventory

Mindaugas Gluchovskis ·

2019 - Present Marketing specialist Innovative content marketeer with MSc in International Communication, Mindaugas brings fresh ideas and inspiration about project management and beyond.

Kanban Inventory

The 21st-century customers demand speed. They expect orders to be fulfilled faster than ever before, especially now that they can place orders with a simple tap on their mobile devices.

But as supply chains stretch across multiple locations and become more and more complex, traditional inventory management methods fall short. This is where the Kanban inventory system comes into play. It offers an approach to help your business cut costs and give you a much-needed competitive edge.

In this post, I’ll dive deep into how Kanban inventory management can transform your business operations. You’ll discover the core elements that make Kanban work for businesses, see real-world examples of Kanban in action, and learn the best practices that top companies follow to manage their inventories. 

I’ll guide you through each step of implementing a Kanban system in your own business and highlight the tools that will make the process more efficient.

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What is Kanban inventory management?

Kanban inventory management is a method that helps control stock levels and streamline production by replenishing inventory only as needed. This approach uses a system of colored cards that track progress in the production cycle and alert when it’s time to order more materials. The goal is to enhance the flow of materials through production in order to reduce waste and make resource use more efficient.

How does Kanban eliminate excess inventory?

Kanban principles focus on maintaining only the necessary amount of inventory at any given time. By using visual signals—like cards or digital markers—to indicate when supplies are low, Kanban triggers replenishment only when it’s actually needed. This method prevents the buildup of excess stock and aligns inventory levels with real-time demand.

Main elements of Kanban inventory 

Kanban boards

Kanban boards are a central element of Kanban inventory management, and they come in two main types: physical and digital Kanban boards. A traditional physical Kanban board typically features a whiteboard divided into vertical columns that represent different stages of work, using sticky notes to mark tasks.

simple kanban board
A simple Kanban board structure

Digital Kanban boards support remote collaboration, allowing your team to track inventory asynchronously and maintain complete visibility of processes, regardless of location. This digital transformation has made Kanban boards more flexible and accessible.

Kanban inventory cards

A Kanban card is a key component of the Kanban system for managing physical inventory. It functions like a visual marker, each representing a specific item in your inventory. These Kanban inventory cards can be either physical or digital. They are used primarily to track the movement and status of inventory items through various stages of the supply chain. As items move from ordering to delivery and stocking, the corresponding Kanban card is moved along the board to represent its current status in the inventory cycle visually.

Each card represents a specific inventory item and includes essential details such as:

  • Item name and description
  • Ideal stock level
  • Supplier information (if relevant)

How do I use Kanban cards for inventory?

Using Kanban cards for inventory management is a straightforward and powerful process that helps streamline operations and maintain efficient inventory levels. Here’s how you can implement it:

  • Set up a Kanban board: Create a board with columns that represent different stages of your inventory process. Typical columns might include “To Order,” “Ordered,” “Received,” and “In Stock.” This visual setup helps track the flow of inventory items at a glance.
  • Assign Kanban cards: For each item in your inventory, assign a Kanban card and place it in the appropriate column on the board. The card should represent the current status of the item. As items are used and stock levels decrease, physically move the cards along the board to accurately reflect their progression through the inventory stages.
  • Monitor and reorder: When a Kanban card reaches the “To Order” column, it signals that the associated item has hit its reorder threshold and needs to be replenished. Respond by placing an order for the necessary stock, then move the card to the “Ordered” column to track that the order has been made.
  • Update as items move through the system: Continue to update the position of the Kanban card as the ordered items are processed. Once the items are received, move the card to the “Received” column. Finally, when the items are stocked and ready for use, shift the card to the “In Stock” column.
rich kanban board cards
Rich Kanban board cards

Other elements include:

  • Columns: In a Kanban system, columns are used to represent different stages of your inventory or production process. For instance, you might have columns labeled “To Order,” “Ordered,” “Received,” and “In Stock” to clearly depict the flow of physical goods through the inventory cycle.
  • Work-in-Progress Limits: This feature of Kanban helps control the number of items within each stage of the inventory process at any one time. Setting limits prevents overstocking at any stage and maintains a balanced, smooth flow of inventory through the supply chain.
  • Swimlanes: Swimlanes are horizontal divisions across a Kanban board that categorize inventory into different streams or types based on certain criteria, such as product type or priority
  • Commitment and Delivery Points: The commitment point in an inventory system is the stage at which an item is confirmed for reorder; it’s a commitment to replenish this item. The delivery point is the stage where the item is received and ready to be moved to final storage or sales floors.

Kanban inventory examples

Toyota: Toyota is well-known for pioneering the Kanban system back in the 1950s. The company uses a structured, visual Kanban system to manage inventory and production processes across its factories. 

Starbucks: Starbucks implements a Kanban system inventory to regulate inventory at its retail locations. Each store maintains standard levels for items like cups, lids, and syrups. When these items dip below specified levels, baristas use visual cues to signal the need for replenishment from the central warehouse.

GE Healthcare: GE Healthcare employs a Kanban system inventory to manage the inventory of medical equipment and supplies at its manufacturing sites. This system adopts rapid and adaptable responses to demand changes to keep inventory levels optimal and minimize the risks of overstocking or running out of essential supplies.

What are the best practices of Kanban inventory management? 

Let’s dive into the best practices of Kanban inventory management. Understanding and implementing these principles can improve the efficiency and effectiveness of your inventory system.

How to effectively run Kanban inventory 

  • Visualize the Production Cycle: Set up Kanban boards that outline each stage from start to finish. For instance, an electronics retailer might use a board with columns labeled “Stock Needed,” “Order Placed,” “Stock Received,” and “Stock on Shelf.” This setup helps the inventory management team to clearly visualize the flow of stock and swiftly address any shortages or excesses.
  • Standardize Processes: Establish clear guidelines for each step of the inventory process. For example, a retail clothing store could standardize its replenishment process with clearly defined stages such as “Inventory Review,” “Order Placement,” “Receiving and Inspection,” and “Stocking Shelves.” Standardization makes sure that every team member knows what is expected at each stage.
  • Monitor the Production Flow: Regularly check the progression of inventory through the Kanban system. For example, a car manufacturer might track the movement of vehicle components through various stages on a digital board to quickly identify and address any delays in parts supply or assembly line issues to avoid production bottlenecks.
  • Limit Work in Progress: Implement limits on the number of items in each phase to prevent overloading. For instance, a manufacturing plant might set a cap on the number of items awaiting quality inspection to make sure each product is thoroughly evaluated without creating backlogs. 
  • Encourage Collaboration: Create a collaborative environment where team members across various departments, such as receiving, stocking, and shipping, actively coordinate using a shared Kanban board. This approach allows everyone to track the progress of items and guarantees seamless movement from one stage to the next.
  • Aim for Continuous Improvement: Continuously seek feedback and look for ways to refine the Kanban system. A logistics company, for example, might hold regular review meetings where staff can suggest adjustments to the Kanban board, such as optimizing reorder points for high-demand items to better align with customer needs.

How to implement a Kanban inventory system

Now that I have gone over the best practices, it’s time to explore how to set up a Kanban inventory system. This section will guide you through the steps necessary to implement Kanban so that your inventory levels are optimized, and your workflows are smooth.

Step 1: Identify key inventory items

kanban priority
Kanban inventory prioritization

To implement an online Kanban inventory system, identify the key physical inventory items that are crucial to your operations. These might include components vital for manufacturing processes or high-demand products that drive your sales. 

For instance, a bicycle manufacturer would prioritize items like frames and gears. By pinpointing these essential items, you can effectively monitor and manage their levels so that you always have just enough stock to meet demand without overstocking.

Step 2: Determine the Kanban card types

Next, decide on the types of Kanban cards you’ll use in your system. These cards can vary based on their purpose within the inventory process. Common types include:

  • Order Kanban Cards, which signal when new stock needs to be ordered.
  • Move Kanban Cards, which are used to indicate when items should move from one stage of the process to another.
  • Emergency Kanban Cards, for urgent restocking needs due to unexpected shortages.

Step 3: Calculate the number of Kanban cards

The third step involves calculating how many inventory Kanban cards you will need. This calculation makes sure you maintain a smooth flow of inventory without interruptions. Use the formula:

Number of Kanban Cards = (Demand * Lead Time) / Container Capacity.

Here, Demand refers to how much of the item you need during a specific period, Lead Time is the time it takes to receive the item once ordered, and Container Capacity is the amount of the item that a single container can hold. With this formula, you can determine the right number of cards to manage your inventory and prevent both overstock and stockouts.

Step 4: Design the physical or digital Kanban board

The next step is to design your Kanban board, which can be either a physical board or a digital interface, depending on your preference and needs. Your board should be organized into columns that reflect different stages of the inventory process, such as “To Order,” “Ordered,” “Received,” and “In Stock.”

Each Kanban card placed on the board should include essential details such as the item name, the quantity needed, and the source or destination location. This setup helps everyone involved easily track where items are in the process and what actions need to be taken next.

Step 5: Establish a pull system

The next step in setting up your Kanban inventory system is to establish a pull system. This involves defining clear trigger points that indicate when to produce or move the next item or batch. These triggers make sure that production or movement only occurs in response to actual demand.

Additionally, you should create mechanisms for team members to provide feedback on the system’s efficiency. This can include regular meetings or digital platforms where employees can share insights and suggest improvements. This feedback loop helps continually refine the process so that it stays efficient and responsive to changing needs.

Step 6: Continuous monitoring and iteration

Once your Kanban inventory system is up and running, the key to sustaining its effectiveness is continuous monitoring and iteration. Schedule regular reviews of the system to assess its performance and identify any areas for improvement. During these reviews, look at real-world results and gather feedback from team members who interact with the system daily.

Tools to help you with managing Kanban inventory

Effective Kanban inventory management relies heavily on the right tools to visualize workflows, track progress, and manage stock levels.

One of those tools is Teamhood, which offers dynamic Kanban boards tailored for physical inventory management. These platforms allow you to customize boards with columns for each stage of your inventory process, such as “To Order,” “Ordered,” “Received,” and “In Stock.” You can attach detailed information on each Kanban card, such as item descriptions, quantities, and location details. 

Other valuable tools include:

  • Inventory Management Software: These tools help you track stock levels, manage orders, and analyze inventory data to maintain optimal stock levels.
  • Collaboration Software: Tools like Slack or Microsoft Teams facilitate communication across departments and teams, which makes it easier to share updates and collaborate on inventory-related tasks.
  • Analytics Tools: Software like Google Analytics or Tableau can provide deep insights into inventory trends so that you can make data-driven decisions to refine your Kanban system inventory.

Wrapping up

The Kanban inventory system is an effective way for you to manage inventory that aligns with the fast pace of modern business demands. 

By strategically using Kanban boards and cards and implementing the processes thoughtfully, you can meet customer demands, streamline your operations, and sharpen your competitive edge. Whether you’re just beginning to explore Kanban or aiming to optimize an existing system, the principles and steps I’ve discussed will help guide you toward more effective and efficient inventory management.

Start Managing Kanban Inventory

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