The Kanban inventory system is related to lean and JIT (just in time) production. A Kanban system is a signaling system to trigger when inventory needs to be ordered. The way this system works is by figuring what parts need to be manufactured, when manufacturing of that part will start and stop, how many need manufactured and where they need to be delivered. The customers orders come through and then the inventory withdrawals.

Implementing a Kanban system can be extremely profitable for your manufacturing business. In many situations much value is lost in inventory due to the cost of storing, theft, counting, damages and more. This is diminishing the overall profit of the business and can end in up to 50% of your inventory value/cost.

With the help of the Kanban inventory system, inventory is reduced while maintaining the same amount of order fills and there are shorter lead times while providing same service practices for all your customers. Due to the large reduction in inventory the profit becomes much greater which also reflects other cost such as less labor, less space and less insurance.

A Kanban system once implemented and running properly becomes a very powerful tool for on going improvements for your manufacturing business. It has proved itself to give organizations using the system a very durable competitive advantage.