Supply Chain Efficiencies Through E-: A Case Study Suprasith Jarupathirun Ramkhamhaeng University, Thailand [email protected] Andrew P. Ciganek Jacksonville State University, USA [email protected] Thaloengsak Chotiwankaewmanee Ramkhamhaeng University, Thailand [email protected] and Chayanun Kerdpitak Ramkhamhaeng University, Thailand [email protected]

Abstract- Electronic Kanban (e-Kanban) is full benefit of any given IT, however, it has a system of signaling that makes use of to be widely and fully adopted. Given the information technology (IT) to trigger the difficulties that many organizations often movement of raw materials to allow for a have adopting technology, it becomes real time view of inventory throughout a imperative that firms take an active approach supply chain. This paper presents a case to ensure its success. study of the use of an e-Kanban system to This research discusses a case study minimize operational and logistics issues involving the use of an e-Kanban system to for a parts supplier within the automotive minimize operational and logistics issues for industry. Measures of operations and a parts supplier within the automotive logistics performance are examined both industry. The objective of this research is to before and after the implementation of the present both the opportunities that this e-Kanban system through a series of technology presents, supported by actual observations, in-depth interviews, and performance improvements and cost savings, documentation reviews. The results as well as the challenges that still exist after indicated improvements in production implementation. A brief literature review is lead times, financial costs, effective and first presented followed by the case study efficient work processes, and reductions in results. The paper then ends with some waste. The enhancement of the e-Kanban concluding remarks. system through radio-frequency identification (RFID) is also discussed. II. KANBAN Keywords- , just A Kanban (Kan or ‘card’ and ban or in time, kanban, automotive industry, case ‘signal’) system is a manufacturing control study technique used in just-in-time or lean management to efficiently and effectively I. INTRODUCTION improve the flow of goods and inventory Organizations are consistently within business processes. It was originally looking for information technology (IT) that created by at around 1955 and since can improve performance and their bottom then, the system has been widely adopted by line. In order for organizations to attain the manufacturing firms all over the world.

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55.1 Suprasith Jarupathirun, Andrew P. Ciganek, Thaloengsak Chotiwankaewmanee, and Chayanun Kerdpitak

In the Kanban system, each the success of EDI implementations depends workstation produces and delivers products on the organizational readiness and the or components only when it receives a awareness of the potential benefits of EDI. Kanban card from the upstream workstation. Hill and Scudder (2002) argued that the key In other words, work is performed only when success of supply chain management is it is needed. The system is simple and has a based on how much EDI is fully integrated low cost to implement. Kanban helps in the supply chain. EDI can make a supply production units quickly respond to changes chain more visible through better in a supply chain by precisely and cooperation and integration among supply systematically transferring production chain members. Their study also found that information. Not all manufacturing firms, organizations are more willing to however, can benefit from implementing a accommodate customers’ needs than that of Kanban system. their suppliers’ needs when using EDI. A Kanban system is not suitable for Despite the substantial costs, the firms that have mixed and fluctuating notable benefits of implementing EDI are demand, poor quality production processes, improvements in terms of quality, timeliness, or having a relatively large variety of administrative costs, strategic advantage, and products. Sudden decreases or increases in (Bergeron and mix or demand of products can also cause Raymond, 1992). As EDI has become more problems for a Kanban system. As widespread in addition to advances in manufacturing processes involve more parts Internet technologies, Internet based EDI on or product mixes, they can increase the virtual private network technology provides complexity of a Kanban system, which in more opportunities for organizations of all turn can lead to a system breakdown. If a sizes to realize the benefits of being EDI situation does not perform as expected, the capable. whole manufacturing process has to be shut In this study, we examine a company down. that has implemented EDI with a Kanban III. ELECTRONIC DATA system, known as electronic or e-Kanban, to INTERCHANGE improve its logistics processes through observation and documental analysis. Pfeiffer (1992) states that electronic data interchange (EDI) is an information IV. CASE STUDY RESULTS technology system adopted by at least two A parts supplier within the partnering business organizations to automotive industry that produced a cockpit exchange transaction data via module (CPM) for a Japanese car telecommunication links. In the past, many manufacturer was the organization that was organizations, especially small and medium examined in this study. This case study was sized enterprises, have been reluctant to conducted through a series of observations, acquire EDI capabilities due to the high costs in-depth interviews, and documentation of implementation and maintenance (Smith, reviews. We examined the work processes 1990). Thus, for EDI to provide full benefit both before and after the implementation of for all business partners, the system has to be the e-Kanban system (see Figure 1 for the widely and fully adopted to share the costs material and CPM flow for the organization (Bouchard, 1993). examined in this study) and then analyzed Iacovou et al. (1995) interviewed the impact that this technology had. seven executives of small organizations and found that their main reason to adopt EDI was due to the external pressures exerted by more powerful trading partners. However,

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55.2 Supply Chain Efficiencies Through E-Kanban: A Case Study

Sort Kanban cards 15 Prepare materials and attach 50 Kanban cards Deliver materials to the factory 30 Bring the materials to the 70 production floor Total Lead Time 255 Figure 1. Material and CPM Flow for the Organization Examined in This Study After implementing e-Kanban, the company was able to eliminate steps in the First, the customer (a Japanese car process and reduce a lead-time of production manufacturer) broadcasted its cockpit into 190 minutes. In addition, the e-Kanban module delivery schedule on its website. The system only needed to process 24,000 items, company then retrieved the schedule and which resulted in 14 million baths of imported it into a SAP program (an inventory costs and 170 square meters of enterprise resource planning [ERP] system) storage area. The steps in this new work to process and send purchasing orders to its process include collecting and scanning suppliers. The bottleneck of this supply chain Kanban into the EDI system, transferring process occurs when the third party logistics provider delivers materials from the external information, printing the Kanban barcode warehouse to the production line. This is and attaching it to the prepared materials, done using a traditional Kanban system and delivering it to the factory, and putting the the loss of Kanban cards happens during the materials on the production floor (see put in, pick off, delivery, and production TABLE 2 for the e-Kanban system process processes. As a result, a company often times). cannot deliver CPMs to its customer TABLE 2 according to the issue schedule. E-KANBAN SYSTEM PROCESS TIME Before implementing e-Kanban, the company had to process 52 material parts Process Time Steps and over 26,000 items each day in operation. (minutes) Collect and scan Kanban into EDI Its process of material delivery involved 40 steps including picking up Kanban cards and system emptying baskets in the line production, Transfer information via network 0 Print Kanban barcode and attach it to 50 collecting Kanban cards and making a the prepared materials record, moving empty baskets and bringing Deliver materials to the factory 30 Kanban cards back to the warehouse, sorting Put the materials on the production 70 the Kanban cards, preparing the materials floor and attaching the Kanban cards, delivering Total Lead Time 190 the materials to the factory, and bringing the materials on the production floor. This The benefits of implementing the e- results in 255 minutes in lead-time, 219 Kanban system in this study were a reduction square meters of storage area, and 19 million in the overall steps in the work process, lead baths in inventory costs (see Table 1 for the times, Kanban circulation, amount of traditional Kanban system process times). materials, storage area, and inventory costs TABLE 1 (see TABLE 3 for a comparison of the TRADITIONAL KANBAN SYSTEM PROCESS supply chain before and after the TIME organization implemented the e-Kanban Process Time Steps (minutes) system). With the cost savings in inventory Pick up Kanban cards and empty alone, the company was able to break even 40 baskets in the line production with the e-Kanban investment and operations Collect Kanban cards and record 15 within 18 months. To further improve the Move empty baskets and Kanban 35 process, the company is seeking to the cards back to the warehouse implement radio frequency identification

International Conference on IT to Celebrate S. Charmonman's 72nd Birthday, March 2009, Thailand 55.3 Suprasith Jarupathirun, Andrew P. Ciganek, Thaloengsak Chotiwankaewmanee, and Chayanun Kerdpitak

(RFID) technology instead of utilizing the opportunities that an e-Kanban system current bar code process. The company has presents, supported by actual performance to balance the trade off between the benefits improvements and cost savings, as well as gained from using RFID and the cost to the challenges that remained after its implement RFID. implementation. The results indicated TABLE 3 improvements in production lead times, COMPARISON OF THE SUPPLY CHAIN BEFORE financial costs, effective and efficient work AND AFTER IMPLEMENTING THE E-KANBAN processes, and reductions in waste. A SYSTEM discussion of the challenges that exist after Before After implementation were also identified as well Change e-Kanban e-Kanban as additional opportunities for technology Steps in the (e.g., RFID) to improve organizational work 7 steps 5 steps 2 steps performance. process Lead-time 225 mins 190 mins 65 mins Indeed, organizations are consistently Numbers of scanning their environment to identify new Kanban 700 cards 530 cards 170 cards technologies that can improve performance circulation Amount of 26,226 24,479 1,747 and their bottom line. This research presents materials items items items the implementation of one such technology, Storage 220 sq 170 sq 50 sq e-Kanban, and the benefits made possible areas meters meters meters through its utilization. It is through such Inventory 18.83M 14.59M 4.24M cases that an organization considering the costs baths baths baths adoption of a particular technology can

understand the benefits and challenges that Although there was much enthusiasm the technology present to them, and allow from the managers for the cost savings from that firms to take an active approach to adopting e-Kanban, issues still exist ensure a successful implementation. regarding the performance of e-Kanban. These issues are related to the inconsistent REFERENCES performance of its current EDI service provider as the EDI system must often be 1. Bergeron, F. & Raymond, L. (1992). The Advantages of Electronic Data Interchange. shut down or is unable to operate. As a Database. 23(4), 19-31. result, the company feels that it is losing 2. Bouchard, L. (1993). Decision Criteria in the control of the performance of the e-Kanban Adoption of EDI. Proceedings of the 14th system. In addition, the company still lacks International Conference on Information the IT personnel that can further integrate Systems. 365–376. 3. Hill, C. & Scudder, G. (2002). The Use of EDI within all aspects of the company’s Electronic Data Interchange for Supply Chain operations. Consequently, there are still Coordination in the Food Industry. Journal of many issues that still need to be addressed so Operations Management. 20, 375-87. that the full benefits of the e-Kanban system 4. Iacovou, C. L., Benbasat, I., & Dexter, A. (1995). can be realized. Electronic Data Interchange and Small Organizations: Adoption and Impact of Technology. MIS Quarterly. 19(4), 465–485. V. CONCLUSION 5. Pfeiffer, H. (1992). The Diffusion of Electronic This research presented a case study Data Interchange. Springer-Verlag, New-York, NY. of the implementation of an e-Kanban 6. Smith, T. (1990). Unwilling Partners Handicap system to improve the supply chain of a parts EDI Users. Network World. 7, 23–26. supplier within the automotive industry. This case study was conducted through a series of observations, in-depth interviews, and documentation reviews. The objective of this research was to present both the

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