What is Kanban inventory management?

No costly stockouts, no overflowing shelves, no last-minute orders. This kind of precision is ideal for business owners who rely on having the right amount of inventory at the right time in order to operate efficiently. Achieving this balance requires a well-structured approach like the Kanban system.

Kanban inventory management is a highly effective method that can be used in a range of industries from manufacturing to e-commerce to improve workflows and bottom lines. In this article, we’ll cover the essentials of Kanban inventory management, including how it works and how you can easily implement it into your business. Plus, we’ll show you a new Kanban inventory management tool to empower your business to achieve its inventory-related goals: Jotform Boards.

Introduction to Kanban inventory management

A key principle of the Kanban inventory management system is that inventory is restocked only when necessary. By keeping the minimum amount of stock on hand at all times, businesses can avoid purchasing more than necessary, reducing waste and improving business workflows. 

First developed in the 1940s by Taiichi Ohno, an industrial engineer at Toyota and the father of the Toyota Production System, “kanban” is a Japanese word that means “visual cards.” In this system, physical or digital cards (e-cards) are used to track inventory levels and signal when stock needs to be replenished. 

Though developed for the manufacturing industry, kanban can be easily applied to other industries. Since it’s a just-in-time or demand-driven system, which is core to lean manufacturing, it does not require businesses to make future sales predictions and order inventory accordingly. Instead, stock is only ordered when needed, improving overall efficiency. 

Lev Tretyakov, CEO and Head of Sales at Fortador, a steam cleaner manufacturing company, manages inventory with the kanban approach. “It is a system that ensures we have the right amount of what we need and when we need it. Kanban inventory is what makes sure we don’t drown in excess or scramble during shortages.”

How Kanban inventory works

Traditional inventory management systems are “push” systems, where inventory or stock is replenished based on future forecasts and planned demand. If the forecast is incorrect, businesses can end up with either too much or not enough stock. 

In contrast, kanban uses a “pull” approach, where actual demand triggers stock replenishment. This means that businesses always have the right amount of inventory available for their customers. 

The Kanban system uses a kanban board to manage the different stages of the inventory ordering process.  This board contains signals or cards, which are visual cues that show when inventory needs to be ordered based on when it is consumed. 

The approach uses a two-bin system, where each bin represents a specific quantity of stock items. When a bin reaches its reorder point, the organization moves the card associated with the bin to the appropriate column on the kanban board. 

Following is an example of the Kanban inventory replenishment cycle. (Note that while this example uses physical bins, organizations can also use digital representations.) 

1. Bin 1 is in use: Bin 1 is placed in the inventory picking area. Staff members pull items from this bin to fulfill customer orders. 
2. Bin 1 is emptied: Staff have pulled all items out of Bin 1, and it is now empty. This means that the items in Bin 1 need to be replenished. 
3. Kanban card is triggered: The kanban card associated with Bin 1 is moved to the appropriate column on the kanban board to trigger an inventory replenishment order. 
4. Bin 2 is in use: Staff move Bin 2 to Bin 1’s place in the inventory picking area. They now pull items from this backup bin to fulfill orders. 
5. Replenishment order is placed: The inventory team replenishes the exact quantity needed to refill Bin 1. 
6. Bin 1 is refilled: The inventory is received. Staff move Bin 1 in place behind Bin 2. When Bin 2 is emptied, staff pull inventory from Bin 1 again. The inventory replenishment cycle repeats itself. 

Your organization can customize your kanban board based on your specific needs and processes, using a mathematical kanban formula that takes into account demand, lead time, capacity, and other factors. 

The columns on the kanban board typically align with the Kanban inventory replenishment cycle, which can include 

• Inventory in bin
• Inventory to be ordered
• Orders placed
• Orders in transit
• Orders received 

“Each stage of the process communicates its needs to the previous one,” says Tretyakov. “Therefore, every restock is based on consumption instead of projections.”

Benefits of Kanban inventory for businesses

There are many benefits of kanban you can make use of to help run your business more effectively. Here are some notable advantages of this inventory management approach:

• Lower inventory carrying costs: There is no extra inventory based on planned demand, which can improve your business’s cash flow . “Kanban freed up our capital by ensuring we only hold stock we actively need,” says Tretyakov. “We no longer sit on dead inventory. It freed up thousands of dollars, part of which we reinvested in customer experience.”
• Improved production efficiency and lead times: Time is money, as they say, and the Kanban approach is highly efficient and accurate when it comes to production flow. “Kanban reveals bottlenecks,” says Tretyakov. “We see where the process slows down, be it internally or externally. If a specific part of our steam cleaning machine is delayed, the backup cycle on the kanban board alerts us and we act before the delay affects production.” 
• Minimized stockouts and overstock situations: In a product-based business, not having stock a customer wants is a sign of poor inventory management. On the other end of the spectrum is having too much stock that isn’t moving. As a pull-based system, Kanban eliminates both of these situations. 
• Better use of warehouse space: With the right amount of inventory, your organization can optimize its storage operations. “Our warehouses no longer have excess stock that we might need just in case,” says Tretyakov. “Every square foot is cleaner, organized, and serves an active purpose.” 
• Enhanced collaboration between suppliers and manufacturers: Supply chain efficiency is one of the key benefits of the Kanban approach. With this inventory management process, workflows are transparent for all parties in the supply chain so suppliers and manufacturers know what inventory the business needs, and when.

Implementing Kanban inventory: Best practices

How can organizations enhance their warehouse management processes, improve production workflow, and ensure the business holds just the right amount of inventory? Here’s how to implement Kanban inventory management effectively:

• Assess current inventory management challenges: Where does your organization struggle with inventory? Do you experience frequent stockouts, dead inventory, long lead times, or something else? Identify the specific challenges that make effective inventory management difficult.
• Choose the right Kanban method: Depending on your inventory type and warehouse processes, determine which Kanban method will work best for your needs and will manage team tasks effectively. The physical two-bin system works well for small inventory items. Businesses  selling larger items may need to use the e-Kanban approach.
• Set up Kanban rules and stock thresholds: To effectively manage workflow and prevent bottlenecks, determine the number of tasks that can be placed in each Kanban column at one time. These are the work-in-progress limits. How much stock do you need to have on hand at each stage? “Every member of the team needs to know what signals a reorder and how to act on it,” says Tretyakov.
• Integrate Kanban with existing inventory software: Seamless data sharing between your kanban board and your inventory management software is key. “Not all tools will support kanban efficiently,” says Tretyakov. “Opt for tools such as integrated inventory management software that will connect directly with sales platforms to create a synchronized network. Tools you cannot integrate will result in disconnected data, delays, and manual workarounds.”

Jotform Boards: Kanban inventory management and beyond

Jotform Boards is a kanban-style board that is ideal for inventory management, task management, and more. Featuring drag-and-drop functionality, you can use it to visually organize your entire inventory replenishment process to ensure there are no more stockouts or overstocks.

Here’s what makes Jotform Boards a great choice for Kanban inventory management:

• Easy board customization: Tailor the board to fit your inventory management process. You can edit board groups to reflect workflow steps and adjust task layouts by removing or adding fields. Personalize the board’s background theme to align with your company’s branding.
• Automated workflows: Automatically create tasks from various channels to ensure nothing gets missed. You can even connect forms to your kanban board and turn form submissions into board tasks.
• AI-powered processes: Connect AI agents to your kanban board, using them to create tasks when customers submit orders or request items in conversations. Multiple agents can create tasks in the same board, or a single agent can create tasks in multiple boards.
• Effective task management: Search and filter tasks, and use key task fields that align with your business needs. Keep everything structured in the kanban style so you can see at a glance what needs to be done.
• Smooth collaboration: Enable teams to work together seamlessly. Share boards, assign tasks, add comments, and more, tracking changes throughout the inventory replenishment process.
• Mobile responsiveness: Access your kanban inventory board from anywhere, 24-7. It syncs in real time so you can optimize inventory management and task management wherever you are.

Jotform Boards is free to get started, so you can dive into the world of kanban right away. Create an account and customize your kanban inventory management board to streamline your operations. Get started with Jotform today!