Kanban

What Is Kanban?

Kanban is a visual system for managing and optimizing work as it flows through a process. Originating as a scheduling system within lean manufacturing, Kanban falls under the broader category of project management methodology. It enables teams to visualize their work, limit work in progress (WIP), and manage flow, thereby enhancing efficiency and reducing waste. The core aim of Kanban is to improve workflow by making processes transparent, identifying bottlenecks, and fostering a culture of continuous improvement.

History and Origin

Kanban's roots trace back to post-World War II Japan, specifically to Toyota Motor Corporation in the late 1940s. Industrial engineer Taiichi Ohno developed Kanban as a scheduling system for Toyota's production system. His inspiration came from observing the efficient shelf-stocking practices in American supermarkets, where new stock was ordered only when existing inventory was nearly depleted,¹⁹,¹⁸. This concept aligned with Toyota's pursuit of just-in-time (JIT) production, aiming to minimize waste and align inventory levels with actual consumption,¹⁷.

The system initially used physical cards (the word "Kanban" translates to "visual signal" or "signboard" in Japanese) attached to parts or products. When a part was used, its Kanban card signaled the need for replenishment from the preceding process or supplier¹⁶,¹⁵. This pull-based system became a foundational element of the Toyota Production System (TPS), which emphasizes the complete elimination of waste and maximizing efficiency¹⁴. By 1963, Toyota had widely implemented the Kanban system across most of its business processes¹³.

Key Takeaways

• Kanban is a visual workflow management system designed to improve efficiency and flow.
• It originated at Toyota in the late 1940s as a scheduling system for lean manufacturing.
• Core principles include visualizing work, limiting work in progress (WIP), and managing flow.
• Kanban aims to reduce waste, identify bottlenecks, and promote continuous improvement.
• Its applications have expanded from manufacturing to various industries, including financial services and software development.

Formula and Calculation

While Kanban itself does not have a single mathematical formula in the traditional sense, its effectiveness is measured through various metrics that can be calculated. These metrics help teams analyze their workflow optimization and identify areas for continuous improvement. Key performance indicators often include:

• Lead Time: The total time from when a task is requested to when it is delivered to the customer.
• Cycle Time: The time taken for a task to move through the "in progress" stages of the Kanban board, from when work starts until it is completed.
• Throughput: The number of tasks or items completed within a specific period.

These metrics are typically tracked and analyzed to understand the flow and predict future delivery. For instance, if a team measures its cycle time, they can better estimate how long similar tasks will take in the future.

The relationship between work in progress (WIP), Cycle Time, and Throughput can often be understood through Little's Law, although it's a theoretical model and not a direct Kanban formula. Little's Law states:

Where:

• (L) = Average number of items in the system (work in progress)
• (\lambda) = Average arrival rate (Throughput)
• (W) = Average time an item spends in the system (Cycle Time)

This law suggests that by limiting WIP, a team can improve its cycle time if throughput remains constant.

Interpreting the Kanban

Interpreting Kanban primarily involves understanding the visual cues on a Kanban board and the metrics derived from the workflow. A Kanban board typically organizes work into columns representing different stages of a process, such as "To Do," "In Progress," and "Done." Each task is represented by a card that moves across these columns.

The core principle of Kanban lies in its "pull system." Instead of tasks being pushed through stages, each stage "pulls" tasks from the preceding stage only when it has the capacity. This mechanism helps to limit work in progress (WIP) and prevent bottlenecks. When interpreting a Kanban board, a team looks for columns where cards are accumulating, indicating a bottleneck that needs attention. An ideal flow is one where cards move smoothly and consistently across the board without significant waiting times in any single column. Regular review of metrics like lead time and cycle time provides quantifiable insights into the system's performance and areas for continuous improvement.

Hypothetical Example

Consider a financial planning firm that uses Kanban to manage client requests for financial analysis reports.

1. Visualize Workflow: The firm sets up a Kanban board with columns: "New Request," "Data Collection," "Analysis In Progress," "Review," and "Ready for Client."
2. Limit WIP: The "Analysis In Progress" column has a WIP limit of 3, meaning only three reports can be actively analyzed at any given time.
3. Manage Flow:
   • A new client requests a portfolio analysis report, and a Kanban card is created in "New Request."
   • An analyst pulls the card into "Data Collection" when they complete their current data task. They gather necessary financial statements and investment data.
   • Once data collection is complete, and if the "Analysis In Progress" column is below its WIP limit, the analyst pulls the card into that column and begins the detailed analysis.
   • After analysis, the report moves to "Review." A senior planner reviews the report for accuracy and quality.
   • Finally, the report moves to "Ready for Client" after review.
4. Continuous Improvement: The team notices that reports often sit in "Review" for too long. By analyzing the cycle time for the "Review" column, they identify a bottleneck. They might then decide to dedicate more senior planner time to reviews or streamline the review process itself, improving overall productivity.

This visual system helps the firm identify where client requests get stuck, ensuring a smoother flow of work and timely delivery of reports.

Practical Applications

Kanban's utility extends beyond its manufacturing origins, finding widespread application across various industries due to its adaptable nature as a workflow optimization tool.

In the financial services sector, Kanban is increasingly adopted by teams involved in areas such as:

• Software Development: Financial technology (FinTech) companies and IT departments within larger financial institutions use Kanban to manage the development of trading platforms, mobile banking apps, and analytical tools. It helps them visualize development pipelines, limit work in progress (WIP), and accelerate delivery of features and updates¹²,¹¹. This application is part of the broader adoption of agile methodology in finance, which aims to streamline processes and improve efficiency¹⁰.
• Compliance and Operations: Teams managing regulatory compliance tasks, audit processes, or back-office operations can leverage Kanban to track discrete tasks, ensuring all necessary steps are completed and nothing falls through the cracks. It enhances transparency and accountability in complex, rule-driven environments.
• Financial Planning and Analysis (FP&A): FP&A departments can use Kanban boards to manage budgeting cycles, financial reporting schedules, or ad-hoc analysis requests. It helps visualize workloads, allocate resources effectively, and ensure timely completion of critical financial activities⁹.

The ability of Kanban to provide real-time visibility into workflow and facilitate responsive adjustments makes it a valuable tool for enhancing productivity and managing the flow of tasks in dynamic financial environments.

Limitations and Criticisms

Despite its widespread adoption and benefits, Kanban is not without limitations, especially when misapplied or poorly implemented.

One common criticism is that Kanban, in its simplest form, can lead to the oversimplification of complex tasks, potentially overlooking intricate dependencies and resources required⁸. This can make it less suitable for highly complex project management initiatives that require detailed upfront planning, unlike the continuous flow it typically manages⁷.

Another challenge arises from the lack of explicit timeframes or deadlines inherent in basic Kanban. While it excels at managing flow, it may not effectively convey when specific tasks or an entire project are expected to be completed, which can be a drawback for projects with strict deadlines⁶. This can also make it difficult to track long-term progress or overall project outcomes, as Kanban is primarily designed for current work and short-term tasks⁵.

Teams can also face challenges in implementing Kanban due to resistance to change from team members accustomed to traditional methodologies, or a lack of clarity and comprehension regarding Kanban's core principles⁴. Issues like overloading the Kanban board, ignoring work in progress (WIP) limits, or inconsistent updates can also undermine its effectiveness³,². When WIP limits are disregarded, it can lead to increased multitasking, reduced efficiency, and longer cycle times, obscuring underlying process issues¹.

Kanban vs. Scrum

Kanban and Scrum are both popular agile methodology frameworks used for managing work, particularly in software development and project management, but they differ significantly in their approach and structure.

Confusion often arises because both frameworks employ visual boards (Kanban boards for Kanban, sprint boards for Scrum) and aim for enhanced productivity. However, Kanban is more about managing a continuous stream of work and improving the current process flow, while Scrum emphasizes delivering specific increments of work within time-boxed iterations. A team might choose Kanban for ongoing support tasks or maintenance, where a steady flow is desired, and Scrum for developing new products or features with defined delivery cycles.

FAQs

What are the core principles of Kanban?

The core principles of Kanban include visualizing the workflow (typically on a Kanban board), limiting work in progress (WIP), managing and optimizing the flow of work, making process policies explicit, implementing feedback loops, and using the scientific method for continuous improvement.

How does Kanban improve efficiency?

Kanban improves efficiency by making workflow transparent, allowing teams to identify and address bottlenecks in real time. By limiting work in progress (WIP), it encourages teams to focus on completing tasks before starting new ones, reducing multitasking and improving throughput.

Can Kanban be used outside of manufacturing?

Yes, Kanban has evolved significantly from its manufacturing origins and is now widely used in diverse industries such as software development, financial services, marketing, and healthcare. Its principles of visual workflow management and continuous improvement are applicable to any process involving a series of tasks.

What is a Kanban board?

A Kanban board is a visual tool used to manage work. It typically consists of columns representing different stages of a workflow (e.g., "To Do," "In Progress," "Done") and cards that represent individual tasks moving through these stages. The board provides an at-a-glance overview of the current status of work and helps identify areas where tasks are accumulating, indicating potential bottlenecks.