ECONOMICS

Detailed explanation-1: -Kanban (Japanese for sign) is an inventory control system used in just-in-time (JIT) manufacturing to track production and order new shipments of parts and materials. Kanban was developed by Taiichi Ohno, an industrial engineer at Toyota, and uses visual cues to prompt the action needed to keep a process flowing.

Detailed explanation-2: -Toyota has six rules for the effective application of Kanban: 1) Never pass on defective products; 2) Take only what is needed; 3) Produce the exact quantity required; 4) Level the production; 5) Fine-tune production; and 6) Stabilise and rationalise the process.

Detailed explanation-3: -The Strategy in Use at Toyota Toyota started using JIT inventory controls in the 1970s and took more than 15 years to perfect its process. Toyota sends off orders to purchase production parts only when it receives new orders from customers.

Detailed explanation-4: -In a Kanban inventory system, a company can use Kanban cards or bins to signal when stock needs to be refilled. In the Kanban bin system, companies rely on visual cues to start the restocking process. Workers have two containers of inventory and work through the supplies in one bin before moving on to the other.

Detailed explanation-5: -It was calculated that three years after the introduction of the kanban system, Toyota achieved a 75% reduction in all inventory and a 95% reduction in shortages. Production increased by about a quarter, while at the same time the production space was reduced by about 10%.