SOLUTIONS

Microsoft Dynamics AX
®

Lean Kanban
User Guide

Date: August 2009

http://www.microsoft.com/dynamics/AX
Table of Contents
Introduction ................................................................................................ 4
Assumptions ........................................................................................................................ 4
Kanban defined .................................................................................................................... 4
Process overview .................................................................................................................. 4

Setting up kanban ....................................................................................... 5

Overview ............................................................................................................................. 5
Kanban base parameters ....................................................................................................... 6
Control tab ....................................................................................................................... 7
Replenishment tab ............................................................................................................. 8
Kanban setup ....................................................................................................................... 9
Setup - basic tab ............................................................................................................... 9
Setup - advanced tab ........................................................................................................ 11
Setup - advanced static tab ............................................................................................... 12
Temporary kanbans tab ..................................................................................................... 13
Replenishment tab ............................................................................................................ 14
Versions tab ..................................................................................................................... 15
Tote size tab .................................................................................................................... 16
Subcontract tab ................................................................................................................ 16

Fixed kanbans ........................................................................................... 17

Fixed kanban types – Overview .............................................................................................17
Fixed purchasing kanban ......................................................................................................18
Setup purchased kanban – Overview/Setup - basic tabs ........................................................ 19
Setup purchased kanban – Setup - basic tab ........................................................................ 20
Receiving process for purchased vendor supplied kanban ....................................................... 21
Fixed replenishment kanban ..................................................................................................22
Setup replenishment kanban – Overview tab ........................................................................ 22
Setup replenishment kanban – Setup - basic tab .................................................................. 23
Setup replenishment kanban – Replenishment tab ................................................................ 23
Create replenishment kanbans ........................................................................................... 23
Kanban replenishment ....................................................................................................... 24
Fixed manufacturing kanban .................................................................................................24
Manufacturing kanban – General tab ................................................................................... 24
Setup manufacturing kanban – Setup - basic tab .................................................................. 25
Create manufacturing kanbans ........................................................................................... 25
Manufacturing kanban completion ....................................................................................... 26
Lean order schedule (LOS) Processing of manufacturing kanbans ........................................... 27
Subcontract kanban .............................................................................................................28
Subcontract scenarios ....................................................................................................... 28
Subcontract kanban setup ................................................................................................. 28
Subcontract tab ................................................................................................................ 29
Subcontract Receipt method .............................................................................................. 30
Payment methods ............................................................................................................. 30
Journal setup ................................................................................................................... 31
Subcontract only kanban ................................................................................................... 31
Subcontract partial process kanban ..................................................................................... 34

LEAN KANBAN
Other kanban types................................................................................... 38
Target and phased target kanbans .........................................................................................38
Target kanbans – Overview ................................................................................................ 38
Target kanbans – Example ................................................................................................. 39
Auto-create kanbans ......................................................................................................... 40
Phased target kanbans – Overview ..................................................................................... 43
Phased target kanbans – Example ...................................................................................... 43
Black hole kanbans ..............................................................................................................47
Black hole kanban – Overview ............................................................................................ 47
Black hole kanban – Example ............................................................................................. 48
Temporary and dynamic kanbans...........................................................................................51
Temporary kanbans – Overview.......................................................................................... 51
Temporary kanbans – Example ........................................................................................... 51
Dynamic kanbans – Overview............................................................................................. 52
Pull-to-order and template kanbans .......................................................................................52
Overview ......................................................................................................................... 52
Example .......................................................................................................................... 52
Setup item template ......................................................................................................... 53
Check primary parameters ................................................................................................. 55
Generic kanbans ..................................................................................................................57
Overview ......................................................................................................................... 57
Example .......................................................................................................................... 57

Kanbans – Additional topics ...................................................................... 59

BOM printing on kanban ticket ...............................................................................................59
Converting manufacturing to subcontract kanban ....................................................................61
Date-constrained kanban ......................................................................................................62
Firming percentage ..............................................................................................................63
Free text printing on kanban ticket.........................................................................................64
PTO replenishment kanbans for manufacturing kanbans ...........................................................66
PTO replenishment kanbans for subcontract kanbans ...............................................................69
Quantity-constrained kanban.................................................................................................72

Kanbans and scrap .................................................................................... 73

Scrap percentage in production .............................................................................................73
Scrap replacement ...............................................................................................................76

Kanban visuals .......................................................................................... 79

Inventory status on visual board ............................................................................................79
Visual production .............................................................................................................. 80
Manufacturing stop go ..........................................................................................................81
Heijunka scheduling .............................................................................................................81

LEAN KANBAN
Introduction
The kanban feature in Lean Manufacturing for Microsoft Dynamics AX 2009 provides a comprehensive
solution for the management of kanban within a production environment.
In order to support the diverse production environments of users, there are several variations of
kanban available, all of which are interoperable within a single company environment. These are:
1. Fixed
2. Target and phased target
3. Black hole
4. Temporary and dynamic
5. Pull-to-order and templates
6. Generic
All types of kanbans can support purchasing, manufacturing, or internal (store-to-store)
replenishment.
This white paper discusses the principles of the kanban functionality and introduces the reader to
initial configuration, methods of issue, and resupply.
Lean Manufacturing and quarantine management are not designed to be totally integrated.

Assumptions
It is assumed that the user will have knowledge and experience of the following modules in Microsoft
Dynamics AX:
 Production
 Inventory management
 Accounts payable

Kanban defined
The word kanban is Japanese for visible record. As such, kanbans have been adopted by many
industries as a method of controlling production and internal supply.
Kanban is an essential part of a pull system of supply which is itself a critical element of Lean
production and supply. When a kanban has been consumed, it should be passed (triggered) to the
supplier, production, or supermarket that will replenish it.
Kanban may be cards or electronic records. Lean Manufacturing for Microsoft Dynamics AX 2009 will
support both approaches, but greater benefits can be obtained through the use of alert capabilities
that are linked to the use of electronic kanbans, which will provide a paperless, integrated internal and
external supply chain, while providing high visibility throughout the business.

Process overview
The kanban feature is a central component of Lean Manufacturing for Microsoft Dynamics AX 2009.
The feature defines how kanbans are to be used by associating a kanban record with its source of
supply and its destination, the point of consumption.
You can also set rules for supply, trigger supply instructions, and, upon receipt of a full kanban,
update inventory through purchasing, production, or an inventory transfer.

LEAN KANBAN
 Lean Manufacturing Environment
Customer
Internal Requirement
Manufacturing
Supplied
Kanban
External
Purchase Kanban
Supplied Cell Pull

Kanban
Kanban Cell Pull

Pull
Cell Replenishment
Supermarket
Supplied

Figure 1 – How a kanban record is related to points of consumption and sources of supply
A unique kanban record will be created for each location where an item will be stocked and consumed
(the stock point). Stock points will be represented by warehouses in Microsoft Dynamics AX, and it is
normal practice to create a warehouse record for each work center or cell where materials are
consumed. Therefore, if an item is consumed in three cells within a production unit, there will be three
kanban records created and these will be linked to three warehouses. For each kanban record, rules
will be set to determine how many physical kanbans are used at each stock point, the quantity of
component carried, and the method of resupply for those kanban.

Setting up kanban
Overview
Kanban replenishment forms one of the key elements of a pull-based production system.
Kanban tickets are used to act as the trigger for product to be delivered from one step in the
production process to another. As such, it is important to understand that a kanban card is only
presented to the point of supply when the items are required. No material is being supplied unless
there is a demand for it.
In Microsoft Dynamics AX, the kanban functionality is designed to replicate the operation of a kanban
pull system.

LEAN KANBAN
 Kanban Relationships

As a minimum, the kanban feature allows material issues and replenishment to be managed by using
a simple process that can be reflected throughout Microsoft Dynamics AX. Thus, the receipt of a
kanban from production triggers a series of processes that raise a work order, perform a goods
receipt, and optionally back flush materials as one step.

Kanban base parameters

Lean manufacturing > Setup > Kanban parameters

LEAN KANBAN
Control tab
Icon visualization: Turns on the icons for the kanban planning board.
Kanban stock corrections journal: This journal name will alter the Microsoft Dynamics AX stock
position, but it will not invoke the Kanban amendment form.
Empty color (kanban empty): Sets display color in session kanban parameters for all empty kanbans.
In use color (kanban warning): Sets display color in session kanban parameters for all in use
kanbans that are not full or empty.
Nominal color (kanban full): Sets display color in session kanban parameters for all full kanbans.
Subcontract BOM journal: When a subcontract kanban of type Part of process or Final process is
used, then the item that is transferred to the subcontractor is the parent item with the component
items being consumed. This is achieved by standard BOM journal that you select here.
Subcontract transfer journal: The journal that is associated with the moving to and from the
subcontractor warehouse.
Production order status: The status that the production order is closed to: Finished or Ended.

LEAN KANBAN
Replenishment tab

Create PTO from sales orders: Will generate a PTO (replenishment) kanban to pull inventory from a
warehouse to a shipping warehouse based on the kanban parameter setup (including template).
(For more information, see the Use LOS when kanban quantity insufficient field on the Lean
order parameters form.)
Pull PTO kanban directly from source: If this parameter is selected, the PTO sales kanban will pull
directly from a manufacturing cell if there is insufficient inventory in any intermediate warehouse.
Kanbans in free locations: Normally locations are specified on the kanban (and the recommendation
is, where possible, to not use locations). It is possible to hold kanbans in any location and allow the
system to find them. See your administrator before setting this parameter.
Standard work package: A standard work package in this context relates to the amount of
replenishment pulls that can be executed in any given period. Execution in this context is the actually
physical process of getting inventory from the supermarket to its point of use. This parameter actually
controls the number of tickets that will be printed within the standard work package.
Job horizon: Number of days ahead that will be displayed on the Kanban replenishment form.
Empty kanban journal: Accounting journal used to empty a kanban.
Black hole journal: The profit/loss journal that is used to transfer material into a black hole
warehouse.
Days ahead on replenishment: This is the number of days ahead that kanbans will be displayed
automatically on the Kanban replenishment form.
For example, if Days ahead on replenishment is set at 3 days, today’s date is May 20, 2006, and
the kanban was dated May 24, 2006, it would not be displayed.

LEAN KANBAN
Kanban lead time: Picks up the lead time (kanban offset) that is associated with the kanban to
determine the delivery date.
Delivery date for LOS release: Uses the delivery date in calculating the release date of PTO
manufacturing kanbans.
Green hands only: Prints the kanban tickets when the inventory status of the kanban is Available
(this is symbolized by an icon of a green hand).
For example, if one sales order produced two pulls, and one could not be satisfied, then this order
would not be included in the standard work package.
Free standing kanban item: Lean Manufacturing for Microsoft Dynamics AX 2009 produces pulls
based on the item code and the point of use (normally a warehouse). This is known as the kanban
parameter and defines whether the item is under kanban control. Lean Manufacturing for Microsoft
Dynamics AX 2009 supports items under pull control and traditional control. Where we would like to
create a pull (on a nonlean item), we do this by linking the item with the warehouse as a point of use.
The system will automatically create these pulls based on the template item (item code) and a
template code.
Kanban template group: The default kanban template group (template code) that can be used if
there is not one specifically set up for an item.

Kanban setup
Lean manufacturing > Kanbans

Setup - basic tab

Work cell: Work cell where the kanban is manufactured (if manufactured kanban).
Item number: Item number to be associated with the kanban.
Warehouse: The point of use, that is, where the kanban is stored.
Active: Activates the kanban.
Item name: Item name to be associated with the kanban.

LEAN KANBAN
Subcontract: Indicates if the kanban will incur the subcontracting process.
 None: No subcontracting is associated with the kanban.
 Subcontract only: The components are given to the vendor who performs the service (for
example, the assembly of the item) and returns the finished item, which goes directly into stock.
 Start process: This represents the situation where a subcontract operation is to be performed
before any other in-house operations. This is currently not supported.
 Part of process: This represents the situation where a subcontract operation is to be performed
during the overall process. That is, in-house operations will occur both before and after the
subcontract operation.
 Final process: This represents the situation where a subcontract operation is to be performed as
the last operation, after which the item is deemed to be finished goods.
Quantity: The quantity of the item contained within one kanban. The quantity for the totes.
Kanban level: The number of kanban held at point of use. The number of totes to be generated.
Group code: The group code that is used for generating the unique kanban order records. Used for
generating the sequential number for the kanban (ticket).
Item origin: The type of kanban: Replenishment, Manufactured, or Purchased.
Pull-to-order kanban: Indicates a pull to order kanban (versus fixed). It should be noted that pull-
to-order kanbans are designed to work with fixed kanbans and not target.
Profit/loss journal: The profit loss journal to be used in the background inventory transaction. Used
for putting stock in/out of Microsoft Dynamics AX (for example, Initial stock load).
Transfer journal: The transfer journal to be used in the background for inventory transfer
transaction. Used for replenishment kanbans.
Vendor account: The vendor account that is associated with the kanban. Used for supply chain
management.
Purchase order: Purchase blanket order in association with the purchased kanban.

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Setup - advanced tab

Kanban in use: Identifies which unique kanban record is active and being consumed.
Dynamic: Select to update the kanban levels based on usage.
Kanban offset: The number of days offset.
Use manufacturing/purchase location: When using locations, a replenishment kanban (that pulls
from a location type warehouse) would need to be set up for every location that inventory could exist
within. To avoid this problem, you can select this check box, which means that you would use the
location that was used to place the inventory into the warehouse you are pulling from.
Trigger level: Used in target kanbans to specify the level at which the creation of additional kanbans
will be triggered.
Check returned stock: Checks for material in the returned stock warehouse when deciding whether
to schedule the order line or create a PTO.
Black hole: Used to designate a kanban that replenishes or is being replenished from the black hole
warehouse.
Tote code: Specify the code used to distinguish totes.
Maximum kanban quantity: Select to define the kanban as a maximum quantity kanban. When the
total produced on this kanban reaches the defined maximum, the system will generate no more target
kanbans.
Maximum quantity: Specify the maximum inventory quantity above which target kanbans will no
longer be generated.
Total quantity produced: A field that displays the running total of items produced. It is used in
conjunction with a maximum quantity kanban.
Date constrained kanban: Select to define the kanban as a date constrained kanban. Beyond the
specified constraint date, the system will no longer generate target kanbans.
Constraint date: Specify the constraint date beyond which kanbans will no longer be replenished.

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LEAN KANBAN
Setup - advanced static tab

High kanban boundry: The boundary at which the kanban color turns from green to yellow.
Low kanban boundry: The boundary at which the kanban color turns from yellow to red.
Kanban display group: Assigns the kanban to a particular kanban group. Used in determining the
kanban planning board visualization.
Use warehouse management: Triggers activities in a third-party warehouse management system.
Use combined warehouse: Used for the kanban template setup. If selected, you do not need to
state a supply warehouse. By selecting this check box, you would be using this rule, regardless of
where it comes from. If you do have to state a supply warehouse, for each point of consumption you
would need an individual template.
Customer account: The customer account that is associated with the kanban.
Manual kanban: Indicates that the kanban is manually emptied.
This means that back flushing is not being used and kanbans are not automatically emptied.
Minimum quantity: This is normally used on the stop/go board and as the minimum position (of
inventory in the Kanbans form) that should be maintained within a cell.
Ratio: Ratio in terms of the item's consumption of drumbeat.

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LEAN KANBAN
Temporary kanbans tab

Number of temporary kanbans: The number of temporary kanbans to be created.

Temporary kanbans are used to accommodate temporary surges in demand. The kanban will not
renew after the end date.
Temporary quantity: The quantity per temporary kanban.
To date: The period where the temporary kanban is active until.
From date: The period where the temporary kanban is active from.

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LEAN KANBAN
Replenishment tab

Kanban location: If the item uses the storage dimension Location, specify a location for the item
within the point of use warehouse.
Replenishment warehouse: The warehouse that is used to replenish this kanban. The
replenishment warehouse is often referred to as the supermarket.
Replenishment location: If locations are used in the supermarket (warehouse), this field will define
the location from where material is picked to replenish this kanban.
Black hole: Used to designate a kanban that replenishes or is being replenished from the black hole
warehouse.

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LEAN KANBAN
Versions tab

BOM: The BOM version to be associated with the kanban.

Route number: The route number to be associated with the specific kanban instead of using the
default.
Quantity: The physical stock recorded in Microsoft Dynamics AX.

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LEAN KANBAN
Tote size tab

Kanban group code: The group code that is associated with the kanban tote. Used for generating the
sequential number for the kanban (ticket).
Tote code: The code that is used to distinguish totes.

Subcontract tab

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LEAN KANBAN
Warehouse: The subcontract warehouse that is used to hold the item/inventory while the goods are
at the vendor (subcontractor).
Vendor account: The vendor account defines the vendor (subcontractor) who undertakes the service.
Select the vendor account that represents the subcontractor.
Blanket order: The blanket order for the subcontract arrangement.
Payment item: The payment item is from the line on the blanket order that will be used to pay the
supplier. The price comes from the item/blanket order line.
Receiving method: When determining how to move the inventory from the subcontractor warehouse
to the kanban warehouse for Part of Process and Final Process type kanbans, there are two options:
Production order or Transfer journal.
The following are the recommended settings:
 Subcontract only: Production order (must be used if components need to be consumed).
 Start of process: Production order (must be used if components need to be consumed).
 Part of process: Production order.
 Final process: Transfer order (either can be used).
Sub contract kanban type:
 Consignment: This is where material has been supplied to the subcontractor by another route;
for example, on consignment and it is not being supplied with the kanban. This means that when
the kanban is sent to the supplier, no material actually moves to the subcontractor as he already
has it. This is only applicable on subcontract kanbans of type All subcontract.
 Discrete: This is where material moves to the subcontractor with the kanban.

Fixed kanbans
Fixed kanban types – Overview
There are three types of fixed kanban that are used for purchasing, replenishment, and
manufacturing.

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 Supplier
PURCHASE
KANBAN

Main

Warehouse

REPLENISHMENTK
ANBAN

Cell

Warehouse

MANUFACTURING
KANBAN

Associated with a
Main Work Cell

Warehouse

Note: A true Lean enterprise would deliver the product directly to the cell warehouse, and the
replenishment kanban process would not be required.

Fixed purchasing kanban

Before purchasing kanbans that can be used, it is necessary to create a purchase blanket order in
Microsoft Dynamics AX. This will normally be created to cover a significant period, typically one year,
and it will include the price and delivery warehouse.

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Setup purchased kanban – Overview/Setup - basic tabs
Lean manufacturing > Kanbans
New purchase kanbans are created by using the Overview and Set up tabs in this form.

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Setup purchased kanban – Setup - basic tab

 In the Item origin field, select Purchased.

 In the Vendor account and Purchase order fields, select the vendor account and purchase
blanket order.
 In the Quantity and Kanban level fields, enter the kanban quantity and kanban level.
 In the Group code field, enter akanban group code.
 In the Profit/loss journal and Transfer journal fields, select the profit and loss and
transfer journals.
 Click the Create kanbans button to create purchased kanbans.

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Receiving process for purchased vendor supplied kanban
Lean manufacturing > Journals > Kanban purchasing

In the Quantity supplied column, enter the quantity for the kanban.
The kanban is marked prior to selecting receive kanban.
A purchase order is automatically created for the kanban quantity as a call off from the blanket order.
The delivery note is generated and may be selected for printing as shown in the following screen shot.

If the vendor supplies the goods with the kanban barcode (as attached to the e-mail schedule), the
delivery may be received by scanning of the barcode.

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Lean manufacturing > Periodic > Bar code scanning > Mobile bar code scanning > Kanban
bar code entry

Fixed replenishment kanban

Setup replenishment kanban – Overview tab

Lean manufacturing > Kanbans

New kanbans are created on the Overview tab.

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Setup replenishment kanban – Setup - basic tab

In the Item origin field, select Replenished.

Setup replenishment kanban – Replenishment tab

This is the warehouse where the inventory is being pulled from. Warehouses are mandatory; the use
of locations is optional.

Create replenishment kanbans

Click the Create kanbans button to create new kanbans.

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Kanban replenishment
Lean manufacturing > Journals > Kanban replenishment
Kanbans are replenished when inventory is taken from the replenishment warehouse to the kanban
warehouse. To do this, select the Marking check box for the kanban and click Replenish.

Production of the kanban is optional, depending upon the setting of the relevant parameter.

Fixed manufacturing kanban

Manufacturing kanban – General tab

Lean manufacturing > Kanbans
New kanbans are created by using the General tab. The warehouse on the General tab is the
warehouse that the manufactured item will be moved to after production.
The cell is A1 and an associated warehouse is required to store material at the cell.

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LEAN KANBAN
Setup manufacturing kanban – Setup - basic tab

The item origin is set as manufactured for a manufacturing kanban.

Create manufacturing kanbans

Click the Create kanbans button to create three kanbans.

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Manufacturing kanban completion
Lean manufacturing > Journals > Kanban manufacturing
Completion of manufacturing is recorded by selecting the kanban, by confirming the quantity, and by
clicking Firm.

This causes a standard Microsoft Dynamics AX production order to be created, reported as finished
and posted.

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Lean order schedule (LOS) Processing of manufacturing kanbans
Manufactured kanbans can also be processed by using the Lean order schedule. This process is used
based on the parameters in the work cell that is associated with the kanbans:
LOS book to order (BTO) cell:The LOS BTO cell check causes manufacturing kanbans to be loaded
on the schedule.
Manual kanban release:The manual release check puts the manufacturing kanbans on the Heijunka
board before loading them on the schedule. They must then manually be placed on the Lean order
schedule.
Statuses:Once the manufacturing kanbans are created, they will either have the status LOS BTO
loaded or LOS BTO generated, depending on whether the Manual kanban release check box is
selected in the Work cell column.
Those with the status LOS BTO generated will automatically be scheduled on the LOS. Those with
the status LOS BTO loaded will be found on the Heijunka board and must manually be firmed before
appearing on the LOS.

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LEAN KANBAN
After the kanbans appear on the LOS, they can be processed as a normal entry, and at the point of
receive, they will then change to the status Received.

Subcontract kanban

Subcontract scenarios
The subcontract functionality allows for any of the following three scenarios:
1. Subcontract only – The components are given to the vendor who assembles the item and
returns this assembled item to use. This assembled item is then placed in stock and the kanban
updated. The components are initially transferred the subcontractor’s warehouse and then
consumed from there by a production order back flush. The vendor is then paid for the service.
This type of kanban is initially displayed on the Kanban manufacturing form. It is
recommended, but not mandatory, that a subcontractor cell that represents the subcontractor is
established.
2. Partial process – This represents the situation where a subcontract operation is to be performed
during the overall process. That is, in-house operations will occur both before and after the
subcontract operation. Here the cell performs some work (for example, converting components
into the assembled item), and then gives the assembled item to the subcontractor for some form
of service. The subcontractor then returns the item to the cell for further work. In this scenario,
the assembled item is moved to the subcontractor’s warehouse and consumed from there when
eventually finished. The subcontractor is then paid for the service.
3. Final process – This represents the situation where a subcontract operation is to be performed as
the last operation, after which the item is deemed to be finished goods. This is similar to the
partial process above with the exception that when the kanban is returned from the subcontractor
it goes to its point of use in a received state. The subcontractor is then paid for the service.

Subcontract kanban setup

A kanban is set up as one of the subcontract processes. The option None is the default value and
indicates that the kanban will involve no subcontract activity.

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Subcontract tab
This defines:
 The subcontract warehouse that is used to hold the item/inventory while the goods are at the
vendor (subcontractor).
 The vendor account defines the vendor (subcontractor) who undertakes the service.
 The blanket order for the subcontract arrangement.
 The payment item is from the line on the blanket order that will be used to pay the supplier. The
price comes from the item/blanket order line.
 The subcontract receive method allows you to choose how you want to move the inventory from
the subcontractor warehouse to the kanban warehouse, if you select subcontract kanbans of type
Part of Process or Final Process. The options are Production order or Transfer journal.
 Select the subcontract kanban type:
 Consignment: When material has been supplied to the subcontractor by another route; for
example, on consignment and it is not being supplied with the kanban. This is applicable only
to subcontract kanbans of type Subcontract only.
 Discrete: When material moves to the subcontractor with the kanban.

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Subcontract Receipt method
When determining how to move the inventory from the subcontractor warehouse to the kanban
warehouse for Part of Process and Final Process type kanbans, there are two options: Production order
or Transfer journal.

The following are the recommended settings:

 Subcontract only: Production order (must be used if components need to be consumed).
 Part of process: Production order.
 Final process: Transfer order (either can be used).

Payment methods
The payment method defines whether a purchase order is raised to pay the vendor or whether
standard auto-pay is invoked.

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Journal setup
The following journal types and journal names must be set up in Microsoft Dynamics AX:

These journals are used to move inventory to and from the subcontractor’s warehouse.

Subcontract only kanban

Kanbans are raised in the normal way.

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These kanbans are displayed on the Kanban manufacturing form. Note that the subcontract has not
been performed, and the Subcontracting button is available.

The kanban is sent to the supplier by clicking Send after selecting the required line and confirming the
quantity.
This creates a BOM journal that consumes the components following normal Lean rules (back flush
and so on). The assembled item is placed at the subcontractor’s warehouse.

The kanban is now represented at the vendor by appearing on the Subcontract kanbans form.

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The status of the kanban is Sent to contractor, and it no longer appears on the Kanban
manufacturing form:

The subcontractor now performs the service, and the assembled items arrive back and are placed in
their point of use. This is reported on the subcontractor form by selecting the Mark check box and
clicking Receive.

Confirmation of the service is printed, and a purchase order for payment created.

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Subcontract partial process kanban
Kanbans are raised in the normal way.

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These are displayed on the Kanban manufacturing form. Note that the subcontract has not been
performed, and the Subcontracting button is available.

The kanban is sent to the supplier by clicking Send after selecting the required line and confirming the
quantity.

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LEAN KANBAN
This creates a BOM journal that consumes the components following normal Lean rules (back flush
and so on). The assembled item is placed at the subcontractor’s warehouse.

The kanban is now represented at the vendor by appearing on the Subcontract kanban form.

The status of the kanban is Sent to subcontractor, and it no longer appears on the Kanban
manufacturing form:

Confirmation of the service is printed, and a purchase order for payment created.

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The kanban now reappears on the Kanban manufacturing form with the Subcontracting complete
field selected.

As this subcontract operation is only part of the process, the remaining work is completed. At this
point, the item inventory is still at the subcontractor’s warehouse until the receive action is performed.
This raises a production order (and updates the kanban) in the normal way. The warehouse that is
displayed on the BOM, however, is replaced by the subcontractor’s warehouse. The route remains the
active route for the item.

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The kanban is now received, and the inventory updated accordingly.

Other kanban types

Target and phased target kanbans

Target kanbans – Overview

Target kanbans differ from fixed kanbans in using a target inventory as the means of determining how
many electronic tickets are in circulation. A trigger level is defined for each item at its point of use and
when inventory falls below the trigger, sufficient kanban tickets are generated to authorize resupply
up to the target level.

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Target kanbans – Example
In this example, we will show the use of target kanbans to keep the inventory of a manufactured item
to a maximum of 1000.
Item setup
 Enter the new item number as a manufactured item GD7-1.
 Enter the item group Kanban.
 Enter the item type BOM.
 Set the sales warehouse as GW on the item.
 Create the work cell GD7.
Setup of target kanban
Lean manufacturing > Journals > Kanban > Target kanbans

Note entry of Target total kanban quantity (1000) and the Trigger quantity (100) on the
Overview tab. The quantity 500 is entered on the Setup - basic tab.

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Select Auto create target kanbans on the Target info tab.

Auto-create kanbans
Click the Create target kanbans button.
Two kanbans are created and can be completed by clicking the Firm button on the Kanban
manufacturing menu.

The auto create process works on the principle of virtual kanbans. As with targets, there is no physical
tote. Therefore, a pull is only executed when a virtual kanban is empty. For example:
 Inventory = 30
 Target = 30
 Trigger = 10

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In Microsoft Dynamics AX, a transaction is performed that reduces the 8. 2 pulls for 10 (total of 20)
will be executed as two virtual kanbans have been emptied. Three kanbans pulls would only be
executed if the inventory goes to 0 (zero).
Repeat the preceding process for each of the two kanbans to manufacture inventory up to the
maximum target total (1000).
Creation of a sales order to generate demand
Create a sales order from warehouse GW for a quantity (950), which will reduce inventory below the
trigger.

Both the inventory (1000) and the demand (950) are now visible on the Kanbans form.

Automatic generation of new target kanbans

If the delivery note is now posted for the full quantity (950), on the preceding order, a new kanban
will be generated.

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Demand is now 0 (zero) and inventory level is 50.

One new kanban ticket has been automatically generated.

If a second sales order is now entered for a quantity (50), to reduce the inventory to 0 (zero), a
second kanban for a further quantity (500) will be automatically generated to return inventory to the
target total (1000).

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Phased target kanbans – Overview
Phased target kanbans are a variation that allow the planner to define a supply profile that will allow
the target inventory to be achieved over several user-defined periods. For example, where seasonal
inventory is built and the quantity planned is so great that it would overwhelm production capacity,
dating the requirement will allow the inventory to be built-up in stages.
Phasing can be planned manually or derived from the sales forecast. The effect will be to generate
kanban tickets and a dated production schedule that displays the percentage of target to be produced.

Phased target kanbans – Example

Item setup
The item that is used in this example has been setup as shown in the following screen shot.

Setup of phased target kanban

Lean manufacturing > Journals > Kanban > Phased target kanbans

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In the Kanbans form, on the Overview tab, the target-dated kanban check box is selected.

The Setup – basic tab is similar to an ordinary target kanban.

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Click the Target phased (1) button to define time-phased supply profile.

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Generate Time-phased kanbans – Action.
 Click the Create phased kanbans (1) button.
 Click the View kanbans button.

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LEAN KANBAN
Click View phased schedule (y). Note how production is phased to meet the target dates.

Time-phased kanbans are built for stock. The sales order process is not used to regenerate kanbans,
but a new schedule will be generated when the first has been completed.

Black hole kanbans

Black hole kanban – Overview

In an ideal lean solution, work in progress is reduced to a minimum and is not tracked in inventory.
Material is consumed to the value stream, and the products are valuated against what is consumed
over a period of time. In this implementation this is addressed by the usage of a “black hole”. Material
that is moved into a black hole is expensed to the value stream. Products received from the black hole
create a profit for the value stream.

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Imagine a cell that produces subassembly in a totally lean visual way. We need to assist with the
material going in, and the subassembly once produced only becomes visible to the system once
produced.
Lean Manufacturing for Microsoft Dynamics AX 2009 supports both methods of operation through
black hole processing. Kanbans designated as black hole allow inventory to be received without
performing the usual range of transactions to manage the production area. Cells may be managed
through manual techniques and then a receipt transaction performed to book the manufactured item
into inventory. This method, when deployed by Lean Manufacturing for Microsoft Dynamics AX 2009,
allows both worlds to coexist, and more importantly, to work together.

Black hole kanban – Example

Replenishment kanban – into a black hole
We have 200 of part TXX05 in the main warehouse MW.

A replenishment kanban is created as detailed in the following example. The Black hole check box on
the Setup - advanced tab is selected because we are to move the parts into a black hole.
The replenish from warehouse is not a black hole, and the Black hole check box on the
Replenishment tab is not selected.

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If the replenishment kanbans are then created, and one of the kanbans is replenished, the inventory
position is as shown in the following screen shot. The kanban has moved the items into the black hole,
and they are no longer visible in inventory.

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This inventory movement is accounted for by the creation of an Inventory black hole profit/Loss
journal.

Replenishment kanban – not to a black hole

In contrast, the following examples shows what would have happened if the Black hole check box
had not been selected on the kanban Setup - advanced tab. The inventory remains visible in
inventory in warehouse 006.

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In this case, the transaction is accounted for through a normal Inventory transfer journal.

Temporary and dynamic kanbans

Temporary kanbans – Overview

It is possible to create temporary kanban records for a point of consumption. These are used when it
is necessary to increase the number of tickets in circulation to cope with temporary surges in demand,
each temporary kanban record having a start and end date. When a temporary kanban is emptied
after its end date, the system will not renew its record and thus the level of WIP is decreased.

Temporary kanbans – Example

In the following example, we have established three fixed kanbans, each with a quantity of 30.

Additional temporary kanbans may be set up on the Temporary kanbans tab on the Kanban
parameters form.

Click the Create kanbans button to generate additional kanbans, active during the period specified.

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The two additional kanbans are indicated by a T in the Kanban order column.

Dynamic kanbans – Overview

If an item is set to support dynamic kanbans, the number of tickets in circulation can be allowed to
increase or decrease automatically in accordance with sales order demand. Where the quantity
ordered exceeds the quantity covered by the kanban records in circulation, the number of tickets will
be increased to cope with the demand. As demand is satisfied, the number of kanban records will
reduce to the original level.

Pull-to-order and template kanbans

Overview
Lean Manufacturing forMicrosoft Dynamics AX 2009 provides flexibility in how kanban inventory can be
managed for low-usage and to-order items.
By designating a kanban as pull-to-order, an electronic ticket will be generated only when there is a
pull from a sales order. Where this happens, the order number forms part of the ticket’s identity and
inventory can be reserved automatically for the end-demand when the material is received at the
point of consumption. The parameter that controls the reservation is the Reserve stock parameter of
the work cell. Pull-to-order kanbans do not operate under target kanban rules.
To allow for flexibility in the supply chain, it may not be possible to define kanban rules for every
possible item and point-of-use combination. Therefore, templates are available to provide kanban
rules where customer pull requires inventory to be taken from a warehouse not usually available for
such a requirement. In such a case, a pull-to-order kanban is generated by using rules that are
defined in the template.

Example
Create item for template
An item is created for use in the kanban template.

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Setup item template
Lean manufacturing > Setup > Kanban > Grouping > Kanban templates
Open the Kanban template form, and create a kanban record as normal. The example is for a PTO
replenishment kanban.

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In the Kanban template group field, select the kanban template to be linked to the item that you
want it to be under Lean control.

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Check primary parameters
Lean manufacturing > Setup > Kanban parameters
Verify that the primary parameters are set for PTO direct from sales orders.

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Enter sales order
Create a sales order for the item. Note the Lean status on saving the order.

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Lean manufacturing > Journals > Kanban replenishment
Open the form and search for the replenishment kanban for the item. Note the from and to
warehouses based on the kanban template.

The kanban order is referenced to the sales order.

Generic kanbans

Overview
To support minor variations in item configuration, generic kanbans can be used to allow inventory to
be managed at a generic level without the complication of maintaining supply rules for all possible
variations.
For example, a component part may be used with many variations of color scheme and pattern. If
setup times and cost allow, kanbans may be maintained at the generic component level only and
when a particular variation requires replacement, a ticket can be generated manually with the user
entering details of the specific color/pattern required.
This approach may reduce dramatically the overhead required to maintain kanban rules for every
possible configuration.

Example
Lean manufacturing > Setup > Kanban > Numbers > Kanban generic number
The product options, for example, the color, are set up on the Kanban generic number form.

Before generic kanbans can be created, the item must be attached to a family group and Lean order
schedule. For more information about family groups, see the Lean Order Schedules (Book to Sales
Order) user guide.

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Lean manufacturing > Kanbans
Click the Create generic kanbans button, and enter the kanban quantity, kanban generic number
and number of tickets.

The required quantity of kanbans is created.

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Three additional kanbans of the color Red have similarly been created. They are displayed in the form
where the Kanban generic number column has been added to the standard form by the user.

Kanbans – Additional topics

BOM printing on kanban ticket
By using this functionality, it is possible to have the system print the bill of material (BOM) for the
item when printing the kanban ticket.
The BOM will print as the second page of the ticket, or on the back of the ticket if a duplex printer is
used.
Setup

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Lean manufacturing > Setup > Kanban parameters

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Converting manufacturing to subcontract kanban
By using this functionality, it is possible to convert a kanban that was originally set up as a
Manufacturing type to a Subcontract type. After this has been done, the kanban is processed in the
same manner as a regular subcontract kanban.
Lean manufacturing > Setup > Kanban parameters

Enter appropriate data, and then click OK.

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Note that the Subcontracting button is now active, and the kanban can now be sent to the
subcontractor. From this point, the kanban is processed as a regular subcontract kanban.

Date-constrained kanban
By using this functionality, it is possible to prevent any more target manufacturing kanbans from
being generated after a specified date.
This will be of help where it is necessary to limit the time period that manufacturing takes place for a
specific item.
Lean manufacturing > Journals > Kanban > Target kanbans

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Firming percentage
By using this functionality, it is possible to have the system show a warning if it is attempted to firm a
manufacturing kanban for a quantity greater than a specified percentage more than the kanban size.
This feature typically aids in preventing a user entering an erroneous value.
Setup
Lean manufacturing > Setup > Kanban parameters
The following example shows a condition where a value of 1200 has been entered when firming a
kanban of size 1000.

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Free text printing on kanban ticket
By using this functionality, it is possible to have the system print free text on the kanban ticket.

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You must previously have specified the text that you want printing at the item level by using the
document handler.
Lean manufacturing > Setup > Kanban parameters

Inventory management > Item details

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PTO replenishment kanbans for manufacturing kanbans
In the case of a manufacturing kanban, where component parts are stored in different warehouses,
you may be required to transfer all of them to a single warehouse prior to commencing manufacture.
One way of doing this is to generate PTO replenishment kanbans for the component items from the
manufacturing kanban for the finished item.
Setup
For the purpose of this example, the warehouse into which the components are moved prior to being
manufactured, we will call the Consolidation Warehouse. In this example, this warehouse is RPACK.

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It is very important that the following is set up:
 The BOM of the manufactured item must draw all of the components from the Consolidation
Warehouse, RPACK.
 The to warehouse that is specified in all of the PTO replenishment kanbans must be the
Consolidation Warehouse, RPACK.
The following screen shot shows the BOM for PItem, the item to be manufactured.

The following screen shot shows the PTO replenishment kanbans for the components, PComp1,
PComp2, and PComp3.

The setup of the PTO kanban is typical.

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In the kanban manufacturing session, selecting the required kanban, and then clicking the Release
button will generate PTO.

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After these kanbans have been executed, the regular manufacturing kanban process can be followed.

PTO replenishment kanbans for subcontract kanbans

In the case of a subcontract kanban, where component parts will be sent to the subcontractor, it may
be expedient to move them from the different warehouses where they are stored, to a single
warehouse from where they will all be shipped to the subcontractor. One way of doing this is to
generate PTO replenishment kanbans for the component items from the subcontract kanban for the
finished item.
Setup
Lean manufacturing > Setup > Kanban parameters

For the purpose of this example, the warehouse into which the components are moved prior to being
sent to the subcontractor, we will call the Consolidation Warehouse. In this example, this warehouse is
RPACK.
It is very important that the following is set up:
 The BOM of the subcontract item must draw all of the components from the Consolidation
Warehouse, RPACK.
 The to warehouse that is specified in all of the PTO replenishment kanbans must be the
Consolidation Warehouse, RPACK.

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The following screen shot shows the BOM for SCManufItem, the item to be subcontracted.

The following screen shot shows the PTO replenishment kanbans for the components, SCPTOPart1,
SCPTOPart2, and SCPTOPart3.

The setup of the PTO kanban is typical.

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In the kanban manufacturing session, select the required kanban, then click the Release button.

This will generate PTO replenishment kanbans for each item.

After these kanbans have been executed, the regular subcontract kanban process can be followed
starting with send to subcontractor.

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Quantity-constrained kanban
By using this functionality, it is possible to prevent any more target manufacturing kanbans from
being generated once a specified quantity has been produced.
Setup

Lean manufacturing > Journals > Kanban > Target kanbans

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Kanbans and scrap
Scrap percentage in production
By using this functionality, it is possible to have the system ignore any variable scrap percentage that
is specified on the BOM when executing a production order (and hence a manufacturing kanban).
This feature would typically be used when it is necessary to include scrap factor for the purpose of
BOM calculation and costing, but to exclude it when back flushing components on execution of the
production order (manufacturing kanban).
Setup
Lean manufacturing > Setup > Kanban parameters

For kanbans that are not used in relations to work cells, the scrap method is defined in the Kanban
parameters.

Lean manufacturing > Setup > Work Cell

For kanbans that are related to work cells, the scrap method is defined in the Work cell field.

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Item MfgItem has a BOM of 2x item Component, and a variable scrap factor of 10%. The cost price of
item Component is 5.00. Item MfgItem costs at 11.00, reflecting inclusion of the scrap factor.

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The following screen shot shows the firming of the manufacturing kanban.

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The results in transactions for item component is shown in the following screen shot. It reflects the
use of the BOM line quantity only, not including the scrap factor.

Scrap replacement
By using this functionality, it is possible to write off an item in one unit of measure, and write on a
different item in a different unit of measure. Both transactions will be displayed in a single journal,
providing an easy way of linking the two transactions.
This functionality is useful when a scrapped item can be recycled. For instance, if a scrapped metallic
item can be melted down and reused, then the item could be written off in unit of measure piece and
written on as feedstock in unit of measure gram.
Setup
Lean manufacturing > Setup > Kanban parameters

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Inventory Management > Item details

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The resulting journal postings are shown in the following screen shot.

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Kanban visuals
Inventory status on visual board
Lean manufacturing > Setup > Kanban > Grouping > Kanban display groups
A display group is required for the visualization of kanbans.

Lean manufacturing > Kanbans > Setup – advanced static tab

Enter the kanban display group needs in the Kanbans form for all relevant kanbans.

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Visual production
Lean manufacturing > Journals > Kanban > Visualization > Visual kanban control
Selecting a warehouse and then a display group allows the inventory of parts in the selected
warehouse to be visualized. The indicator bars show the proportion of the kanbans for each part that
has been fulfilled.

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Manufacturing stop go
Lean manufacturing > Journals > Kanban > Visualization > Kanban stop/go board
The status of the kanbans at the work cell can be viewed on the kanban stop/go board. In the
example one of the kanbans has been completed and the other two are waiting. The status of the
kanbans can be set by using the drop-down menu. The color status bar indicates consumption of
drumbeat capacity.

Heijunka scheduling
Heijunka scheduling is a smoothing process to level production by averaging the mix of products to
provide a consistent level of output. Before kanban cards will appear on the Heijunka electronic
planning board, both the LOS book to order cell and Manual kanban release check boxes must be
selected.
Lean manufacturing > Setup > Work cell

An example of the electronic Heijunka board is shown in the following screen shot.

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The top half of the form contains details about the kanbans that are waiting to be scheduled and the
bottom half contains icons that represent the work cell and its free drumbeat capacity today and for
the next two days.

For more information, see the Lean Order Schedules (Book to Sales Order) User Guide.

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