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Story One: The keynote speaker at a recent APICS (American Inventory and Production Control Society) regional meeting featured a senior executive from a hospital supplies company, one of the largest in the country. After an informative but somewhat lackluster presentation, during question period, a hand went off. “How are Kanban methods used in your hospital supply chain strategy?” was the question. After a brief stag moment in the headlights, the speaker replied, “What is Kanban?”
Story Two: A recent meeting in Las Vegas of hospital supply chain professionals featured a speaker on the topic of Kanban. The pushback from the crowd was harsh, with one person after another emotionally defending the Par Level system currently in use at their hospital. The speaker was able to respond well to each challenge, but the discussion came to an end when one of the participants stood up and said, “Hi guys. Let’s be honest. Par Level doesn’t work that well. Kanban is the future. Get over it. That. . “
You may have two questions in mind at this point in the article: what is Par Level and what is Kanban? These two terms refer to the methods used to manage supplies and materials, in a hospital or anywhere. We associate the Par Level system with hospitals because hardly anyone else uses it, for reasons we’ll see. Both methods share the idea that we should set a target quantity of material for any given item and location, never have more than that quantity, and never run out. On these points, the two methods agree. Where they diverge is in the way they set out to achieve these goals.
The Par Level system proposes that we count the number of items left in a specific location, and simply replace the items that are necessary to bring the quantity “up to par”, that is, back to the target quantity. What could be easier, right? Of course, that means counting frequently, which is a wasteful and non-value-adding activity, and requires frequent trips back to the warehouse, which is another wasteful and non-value-adding activity. Worst of all, the required count is so onerous that most supply handlers don’t do it, they simply “look” at the materials and make an educated guess about the supplies that need to be refilled. Many supply handlers are experienced and manage to stay on top of things most of the time, but as the saying goes, that’s an amazing way to run a railroad. The bottom line: certainly overexertion and probably sub-par results, as measured by shortages, organization of storage areas, and staff satisfaction.
As we said, the Kanban method has the same general goals but approaches the replenishment process differently. Kanban is a Japanese word that means “sign”, and creating a clear sign is the essence of the Kanban method. Instead of counting everything all the time, Kanban proposes that we establish a signal system so that we can respond only to those items that need to be recharged. We do this by dividing the quantity to be stored into several sub-quantities. For example, we could take a pair level of 100 pieces and divide it into two quantities of 50. No action is necessary until the first 50 are used up. Then we will replace 50, but we will continue to use the remaining 50 during the reload process, so there is no delay due to lack of supplies. The actual Kanban or sign could be an empty container, a card that is removed and placed in a collection box, or a flag that is raised on the container.
This is not rocket science, but using the Kanban method can reduce the number of items to be counted daily to zero (none!) And the number of trips to the warehouse by at least 50%. This is why Kanban is the method of choice for world-class organizations around the world. And it’s also the reason why the Par Level system would never be considered.