Japanese for ‘signal’, Kanban is used to request materials replenishment between linked operations along the production line. Traditionally it was a physical card used by a downstream operation to communicate to an upstream operation the need for additional inventory. The number of Kanban cards, together with the quantity indicated on the cards was used to control the amount of work-in-process inventory. In modern times the signaling system is most often electronic. Kanban is a commonly used tool in Just-in-time production systems.
Two kinds of cards are most commonly used: Production ordering cards and withdrawal cards. Kanbans can be used to communicate with suppliers both inside and outside a plant.
On a factory floor, carts are used to transport parts from one site to another. An empty cart at the downstream site signals a need for replenishment of the parts and the cart is moved back up to the source to be filled. The filled cart is moved once again to the ‘customer’ site, signaling the 'order’ fulfillment.
Benefits of Kanban:
1. Inventory reduction
2. Reduced scrap/rework
3. Facilitates continuous improvement
4. Makes waste highly visible and enables its elimination
5. Enhances customer-responsiveness
More on Kanban from the US EPA: - http://www.epa.gov/lean/thinking/kanban.htm