“Kanban” is a pull-based material replenishment system that uses visual signals, such as color-coded cards, to signal to upstream workstations when inputs are required at a downstream workstation. In effect, Kanban is a communication tool for pull-based production. A Kanban could be an empty bin, a card, an electronic display or any suitable visual prompt.
Typically there are two main kinds of Kanban:

1. Production Kanban – A signal from the internal customer to the internal supplier that something is required from the internal supplier.

2. Withdrawal Kanban – A signal from the internal supplier to the internal customer that the supplier has produced something which is available to be withdrawn by the internal customer. In such case the internal supplier doesn’t produce more until the withdrawal is made by the internal customer.

There are many variations on the Kanban system and in fact there are many books dedicated to the topic of how to best apply Kanban.

Many people think the Toyota production system a Kanban system: this is incorrect. The Toyota production system is a way to make products, whereas the Kanban system is the way to manage the Just-in-time production method. In short, the kanban system is an information system to harmoniously control the production quantities in every process. It is a tool to achieve just-in-time production. In this system what kind of units and how many units needed are written on a tag-like card called Kanban. The Kanban is sent to the people of the preceding process from the subsequent process. As a result, many processes in a plant are connected with each other. This connecting of processes in a factory allows for better control of necessary quantities for various products. The Kanban system is supported by the following:
  1. Smoothing of production
  2. Reduction of set-up time design of machine layout
  3. Standardization of jobs
  4. Improvement activities
  5. Autonamation
Kanban is usually a card put in a rectangular vinyl envelope. Two kinds are mainly used: Withdrawal Kanban and Production-ordering Kanban. A Withdrawal Kanban details the kind and quantity of product which the subsequent process should withdraw from the preceding process, while a Production-ordering Kanban specifies the kind and quantity of the product which the preceding process must produce. The Withdrawal kanban shows that the preceding process which makes this part is forging, and the carrier of the subsequent part must go to position B-2 of the forging department to withdraw drive pinions. The subsequent process is machining. The Kanban that shows the machining process SB-8 must produce the crank shaft for the car type. The crank shaft produced should be placed at store F26-18. These cards circulate within Toyota factories, between Toyota and its many co-operative companies, and within the factories of co-operative companies. In this manner, the Kanban can contribute information on withdrawal and production quantities in order to achieve Just-in-time production. Suppose we are making products A, B, and C in an assembly line. The parts necessary to produce these products are a and b which are produced by the preceding machining line. Parts a and b produced by the machining line are stored behind this line, and the production-ordering Kanbans of the line are attached to these parts.

The carrier from the assembly line making product A will go to the machining line to withdraw the necessary part a with a withdrawal kanban. Then, at store, he picks up as many boxes of this part as his withdrawal kanbans and he detaches the production-ordering kanban attached to these boxes. He then brings these boxes back to his assembly line, again with withdrawal kanbans. At this time, the production-ordering Kanbans are left at store a of the machining line showing the number of units withdrawn. These Kanbans will be the dispatching information to the machining line. Part a is then produced in the quantity directed by that number of Kanbans. In this machining line, actually, parts a and b are both withdrawn, but these parts are produced according to the detached order of the production-ordering Kanban.