- In the early 20th century,
the United States built a lot of large warehouses.
That's why for most of the 20th century,
you see the U.S. relying on large inventory manufacturing.
A car company could build 1,000 cars,
and then the cars would sit on parking lots
until someone decides to buy them.
But this type of system doesn't work well
if you're an island nation like Japan.
For one, space is much more difficult to find.
It's also costly for all the different manufacturers
to buy large warehouses.
It's all time-consuming.
Remember that the manufacturer has
to carry the entire cost of their inventory,
so a car manufacturer would build 1,000 cars
and then may have to wait months to recoup their investment.
That's why in the 1960s,
Japanese companies started experimenting
with something called just-in-time manufacturing.
Here a manufacturer would create cars
in much smaller batches.
So instead of 1,000 cars,
a Japanese manufacturer might just make 100.
Then they would take these small batches
and then send them directly to car dealerships.
They have to worry about storing them
for months in a parking lot.
Ideally, this system shortened the length
between car and cash.
It would go right from the manufacturer to the dealership.
The customer might even buy it the next day
so the manufacturer shoulders less of the investment.
That's why it's called just-in-time.
The product arrives just in time for the customer.
The system works so well
that the Japanese automaker Toyota adapted it
to work with their productions system.
They tweaked it and started to create a new version
which they called lean manufacturing.
One of the core ideas was that
instead of pushing products into dealerships,
they would instead have the customer pull the car
through the system.
So when the customer buys up to 100 cars,
that the signal the manufacturer needs
to build another batch.
The idea of a pull system versus a push system
became the central idea in kanban.
Kanban merges lean manufacturing
with a practice that was used in Japanese grocery stores.
In fact, the word kanban is Japanese for signal card.
The kanban card was a signal to the grocery store
that they needed to pull in new products.
The system uses these kanban cards as a way to signal
when you needed to pull more products into the pipeline.
So if there were 40 cans of soup
and they were down to 10 cans,
they would put a red kanban card next to the soup.
Then the manager would go through the store
and reorder anything that had a red card.
The Toyota production system mixed these kanban practices
with lean manufacturing.
They could use these cards to show
when the auto inventory was getting low.
Toyota might need 100 car seats to build their cars,
so they might put a kanban card next to the car seats
when they reached a critical level.
That way Toyota was pulling new car seats
from their manufacturer.
This also kept Toyota from having
to store extra seats on the production floor.
It helped the car seat manufacturer
make sure they're building exactly what the customer needed.
Now, in the early 1990s,
a consultant named Don Reinertsen started to write
about using these same concepts for product development.
Instead of using lean manufacturing to build cars,
he said you could use it to deliver products.
The trick was to deliver them in small batches
and do your best to manage this batch or queue size.
The idea was to keep the queues small
and to minimize the time
that the product goes through your system.
That way you could predict how many you need
to get to the finished product.