Kanban, Japanese for signboard or billboard, is part of the "just in time," aka "lean production," system that is an important part of the Japanese Total Quality Management (TQM) system. This is the set of ideas that changed Japanese industry from the producers of cheap but almost worthless goods in the 1950s to the leading producer of quality electronics and automobiles it is today. Setting up a kanban system in your business can make it run more efficiently, tie up less money and require less space for storing merchandise.
Analyze your production-supply-Point of sale (POS) system. This is one of the most important contributions of the kanban system--it makes you analyze your logistic resupply system. When the kanban system is in place, you can monitor the kanban to see how the system is working and how to improve it. The TQM system is called Kaizan in Japanese. It is a term that means "continuous improvement."
Decide how to detect and report the needs of one point in the supply chain to the point before it. Kanban started as cards attached to bins. When the bin containing an item and a kanban card became empty at the store, it was swapped for a full bin with a similar kanban card at the warehouse, and the empty bin passed on to the factory, where it was swapped for a full bin that went to the warehouse. In the factory, more of a product was produced only when there was an empty bin. The kanban card tells what to produce.
Model your production and supply on the supermarket. Stores only stock what was sold in a day. Purchasers only buy what they need, because they are sure there will always be more in coming days. Goods are scanned at POS and the stock reduction is reported to the warehouse, which has a small space set aside for the produce marked with a kanban card. When the space is empty or low, the kanban card is sent to the factory. Today the kanban card is often replaced by an e-kanban card, or an electronic kanban card; i.e., an electronic message. Things are produced just when they are needed and stored either in the store or in the warehouse in the smallest space that works for both producer and consumer.
Use kanban to constantly monitor your logistics system and change shelf space, warehouse space and factory orders to comply with billing practices. This is one of the advantages of the kanban system and you should use it.
Do not think you cannot institute a kanban system just because you do not have the electronic means for automatic inventory messaging. The kanban ideas of bins and cards are conceptual. For example, if you own a small grocery store, the man who drives the bread truck can replace the few loaves of bread you sell in one day, and the bill is your kanban card.