Kanban Vs MRP
Kanban and MRP are two methods manufacturers use to manage production and inventory. Here’s what you need to know:
- Kanban is a pull-based system that produces items only when there’s actual demand. It uses visual cues (like cards or boards) to control inventory and reduce waste. Best for environments with steady demand and shorter lead times.
- MRP (Material Requirements Planning) is a push-based system that relies on forecasts to plan production and inventory. It’s ideal for complex manufacturing with long lead times but can lead to overstock if forecasts are inaccurate.
Quick Comparison
| Aspect | Kanban | MRP |
|---|---|---|
| Production Trigger | Real customer demand | Demand forecasts |
| Inventory Levels | Low, just-in-time | Higher, forecast-based |
| Flexibility | Highly responsive | Less adaptable |
| Waste Generation | Less waste | More waste |
| Shortage Risk | Higher during demand spikes | Lower with buffer stock |
| Best For | Simple, repetitive processes | Complex, multi-component systems |
Choosing the right system depends on your production needs. Use Kanban for flexibility and waste reduction, or MRP for detailed planning in complex environments. Many manufacturers combine both for optimal results.
How Pull and Push Systems Work
The main distinction between Kanban and MRP lies in how they initiate production activities.
How Kanban Uses Pull Methods
Kanban operates under a straightforward rule: produce only when there’s actual demand. Production kicks off only when an order is placed or inventory reaches a minimum threshold. Visual signals, like cards or digital alerts, are used to indicate when materials or components are needed.
For example, when a product sells, it sends an upstream signal to request just the necessary materials. This approach aligns production directly with real customer demand rather than relying on forecasts.
A medical device company showcased how effective Kanban can be after transitioning from a traditional system. Their results were striking: daily backorders dropped from 40–50 to just 1–2, inventory levels fell by about 50%, and their fulfillment rate improved from the mid-80% range to 96%. They also eliminated the need for external warehousing entirely.
This pull-based method offers incredible flexibility. Teams can adapt quickly to shifting priorities or changes in market demand without causing major disruptions. Managers gain real-time insights into capacity usage and can adjust work priorities as needed. This dynamic system significantly improves production efficiency and inventory management, both critical concerns for manufacturers.
How MRP Uses Push Methods
MRP takes a different approach, relying on forecasts to push products through the supply chain. Instead of waiting for actual orders, production begins based on projected future demand to ensure products are available when needed.
This push system is built on key elements, including a master production schedule, a bill of materials, and current inventory data. These components determine what to produce, when to produce it, and in what quantities, often weeks or months in advance.
“A push system initiates production in anticipation of future demand, while a pull system initiates production as a reaction to present demand.” – Atul Bhandari, Supply Chain Professional
However, this forecast-driven method has a major drawback: forecasting accuracy is often limited. Most companies achieve only 50–70% accuracy, with even top performers rarely exceeding 85%. When forecasts fall short, manufacturers risk overstocking, higher storage costs, and waste from unsold products.
That said, push systems are well-suited for complex products with long lead times, where waiting for real demand could cause unacceptable delays. They also help avoid stockouts in cases where consistent product availability is critical for customer satisfaction. Like the pull system, the push method plays a significant role in addressing production efficiency and inventory management challenges.
These contrasting triggers set the foundation for a closer comparison of the two systems.
Pull vs Push System Comparison
The key differences between pull and push systems become evident when viewed side by side. Each method addresses distinct manufacturing challenges and market conditions.
| Aspect | Pull System (Kanban) | Push System (MRP) |
|---|---|---|
| Production Trigger | Real customer demand | Demand forecasts |
| Inventory Levels | Low inventories | High inventories |
| Waste Generation | Less waste | More waste |
| Communication | Real-time updates | Delayed, plan-based updates |
| Shortage Risk | Higher risk of shortages | Minimal shortage risk |
| Flexibility | Highly responsive | Less adaptable |
Choosing between these systems often depends on factors like demand patterns and product complexity. Pull systems shine when demand is steady and focused on a small product range, while push systems perform better with complex, high-variety products requiring long lead times.
Interestingly, many manufacturers don’t stick to just one approach. According to a recent survey, over 60% of manufacturing professionals use a blend of both pull and push systems in their operations.
Inventory Management Methods
Expanding on the concepts of pull and push systems, inventory management takes these ideas further by offering distinct approaches. Each method handles inventory differently, affecting stock levels and how capital is utilized.
Kanban Inventory Control Methods
Kanban is built around a straightforward idea: maintain only what you need, exactly when you need it. It relies on real-time visual signals – like cards, digital boards, or bin markers – to trigger replenishment based on actual usage. These signals are activated when inventory drops below preset thresholds, which are determined by factors such as demand, lead times, and consumption rates.
Toyota Motor Corporation was the first to develop this system, using it to minimize excess inventory and work-in-progress while optimizing just-in-time production. This approach helped Toyota cut waste, improve workflow, and quickly respond to shifts in customer demand.
Take Eriks Inc., for example. This industrial service provider implemented Kanban across 60 distribution centers, reducing inventory levels by 25%. They also improved product availability through vendor-managed inventory, where suppliers monitored Kanban bins and restocked items automatically based on real usage data. Similarly, Sunshine Makers, Inc., a nutraceutical manufacturer, adopted Kanban pull signals between production stages. This move cut lead times by 50%, boosted productivity by 20%, and significantly reduced work-in-progress inventory.
Kanban’s standout benefit is its ability to eliminate waste. By syncing inventory with actual consumption, it avoids overproduction and cuts storage costs. Many companies have reported inventory reductions of 40–50% using this method.
MRP Inventory Planning Methods
MRP, on the other hand, uses a forecast-driven approach to inventory management. This push-based system calculates production needs based on sales forecasts, bills of materials, and lead times. It aims to maintain enough inventory to prevent stockouts while balancing costs tied to component requirements and production schedules.
However, this method isn’t without its challenges. Relying on forecasts means that errors can lead to overstock, higher storage costs, and waste from unsold products. Despite these drawbacks, MRP works well for manufacturing complex items with multiple components and long lead times, where waiting for real-time demand could cause delays.
Inventory Management Comparison
The table below highlights the main differences between Kanban and MRP approaches:
| Aspect | Kanban | MRP |
|---|---|---|
| Inventory Levels | Low, just-in-time | Higher, forecast-based |
| Replenishment Trigger | Visual signals, actual usage | Forecasts, planned schedules |
| Waste Reduction | Reduces excess inventory | Risk of overstock from errors |
| Capital Requirements | Lower inventory investment | Higher inventory investment |
| Stockout Risk | Higher during demand spikes | Lower with buffer stock |
| Flexibility | Adapts quickly to changes | Slower to adjust to shifts |
The financial implications of these methods can be striking. For instance, a medical device manufacturer cut its inventory in half, freeing up $10–15 million in capital. Additionally, 83% of teams using Lean methodologies leverage Kanban to visualize and actively manage their processes.
These strategies have a direct impact on production adaptability and capital efficiency. Choosing between Kanban and MRP ultimately depends on factors like the complexity of the product, demand variability, and tolerance for risk. Kanban is ideal for stable demand and standardized products, while MRP is better suited for complex manufacturing environments with fluctuating lead times and multiple components.
Response to Market Changes
As we’ve already explored in workflow and inventory management, the principles of Kanban and MRP also play a key role in how businesses respond to market changes. In manufacturing, the ability to adapt quickly to shifting customer preferences or unexpected supply chain disruptions can make or break a business. The system you rely on directly impacts whether your operations stay ahead or fall behind during these challenges. Let’s dive deeper into how these systems handle market disruptions through their production triggers.
Kanban’s Quick Response Ability
Kanban, with its pull-based approach, shines in situations where market conditions change suddenly. Because production is driven by actual customer demand instead of forecasts, companies using Kanban can adapt swiftly without the burden of excess inventory or outdated products.
Take Zara, for example. The fast-fashion giant uses Kanban at both its store and manufacturing levels. Store managers “pull” new stock based on real-time customer behavior and analytics. This setup allows Zara to move a product from the design phase to store shelves in just over two weeks. In a world where fashion trends shift rapidly, this kind of agility gives Zara a clear edge over competitors stuck with rigid seasonal forecasts.
Kanban’s real-time adaptability also means production levels can be adjusted instantly based on market signals. If demand suddenly surges, production ramps up without the delays tied to forecast revisions and lengthy planning cycles. On the flip side, when demand dips, production naturally slows down, reducing the risk of overproduction and freeing up financial resources to navigate market turbulence.
MRP’s Reliance on Forecasts
MRP systems, on the other hand, are heavily reliant on forecast-driven planning, which can be a major drawback when markets become unpredictable. Any deviation from forecasted demand can ripple through the supply chain, creating costly inefficiencies.
Recent tariff increases highlight these challenges. For example, tariffs projected for 2025 are expected to raise price levels by 2.3% in the short term, directly affecting product costs and profit margins. MRP systems often struggle to adapt to such changes because they depend on fixed supplier relationships and rigid planning cycles.
When forecasts miss the mark, MRP systems can lead to overstocked materials that are suddenly subject to unexpected tariffs or trade restrictions. This creates a double financial burden: companies pay more for materials they don’t need immediately, while tying up capital in inventory that risks becoming obsolete.
Market Response Comparison
Here’s a quick breakdown of how Kanban and MRP differ in their ability to respond to market changes:
| Response Factor | Kanban | MRP |
|---|---|---|
| Adaptation Speed | Immediate response to demand changes | Requires forecast updates and replanning |
| Inventory Risk | Low risk of obsolete stock | High risk during forecast errors |
| Supplier Flexibility | Can work with multiple suppliers | Often locked into fixed relationships |
| Cost Impact | Reduces waste during volatility | May increase costs through overstock |
| Lead Time Adjustment | Automatically adjusts to demand | Struggles with changing lead times |
| Market Uncertainty | Excels in unpredictable conditions | Performs poorly with forecast errors |
The financial differences between these systems are striking. Companies using Kanban often reduce inventory costs by 20–30% while boosting service levels. Pull-based networks have also led to inventory reductions of 30%, perfect order improvements of 20%, and revenue growth of 10%. In contrast, trade policy uncertainty could shrink global merchandise trade by 1.5% in 2025, making agility more critical than ever. Kanban’s ability to align production with real customer demand minimizes the risk of overstocking, especially when costs are unpredictable.
Ultimately, the choice between Kanban and MRP depends on your market environment. For businesses operating in stable, predictable markets with long planning horizons, MRP’s structured approach can be effective. But if your market is prone to frequent demand shifts, supply chain disruptions, or volatility, Kanban’s adaptability offers the flexibility needed to stay profitable and meet customer expectations.
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Implementation Steps for Each System
To maximize efficiency and resource use, it’s crucial to implement Kanban and MRP systems correctly. These two approaches differ significantly in terms of complexity, timelines, and resource demands.
Steps to Implement Kanban
Kanban thrives on a “start small and scale gradually” philosophy, reducing risks while keeping operations flexible. You don’t need to overhaul your entire system from day one. For instance, Nike successfully adopted lean principles and Kanban to streamline demand management and cut down on late orders.
The process starts with mapping out your manufacturing workflow to identify waste and bottlenecks. Take Dynisco, a plastics extruder and sensor manufacturer, as an example. They first introduced design-for-manufacturing and assembly practices before transitioning to a manual Kanban system.
Next, determine inventory limits for each Kanban card or container by setting maximum stock levels and lead times. Seattle Children’s Hospital used a two-bin Kanban system, relying on a year’s worth of operational data to optimize stock levels. This approach reduced storage needs and minimized the risk of perishable goods expiring.
Visual triggers, like cards or boards, play a key role in signaling when inventory replenishment is needed. Jaguar adopted a Kanban board to improve their design feedback process. By focusing on minimum viable product concepts and cutting batch sizes, they reduced feedback loops from 12 weeks to just a few days.
Training is essential to ensure continuous improvement. As Parag Shah, Head of Software Engineering Process Group at StarAgile, explains:
“Kanban’s purpose is not simply to help businesses coordinate work through visualisation. Kanban was also created to foster continuous improvement.”
Finally, regular reviews and updates keep the system efficient. For example, Dynisco automated their Kanban process to integrate real-time supplier and inventory data with their existing CRM and ERP systems, achieving a 40% reduction in active inventory.
While Kanban focuses on simplicity and flexibility, MRP requires a more data-driven and structured approach.
Requirements for MRP Implementation
Unlike Kanban, which responds to real-time demand, MRP relies on forecasting and detailed planning. Implementing MRP demands a significant upfront investment of time, money, and organizational change. At the heart of MRP lies the need for accurate data. Steve Kalina, Sr. Managing Consultant for Microsoft Dynamics NAV, highlights this:
“With reliable MRP, a company could expect to see an increase in on time shipments, additional happy customers, lower inventory carrying costs and less inventory shortages.”
To avoid planning errors, establish strong data governance with thorough data cleansing and validation.
Another challenge is employee resistance, as MRP often involves new workflows and skillsets. Comprehensive training is key to overcoming this hurdle. Additionally, integrating MRP with existing systems like ERP can be both complex and costly, often requiring phased implementation to ensure success.
When implemented effectively, MRP can deliver impressive results. Some studies report an average 54% improvement in overall company performance and a 42% increase in on-time deliveries.
Using Both Systems Together
Kanban and MRP don’t have to be an either-or choice. Combining the real-time adaptability of Kanban with the structured planning of MRP can significantly enhance manufacturing performance. Many manufacturers have adopted this hybrid approach, leveraging the strengths of both systems.
Typically, MRP is used for plant-wide material planning, while Kanban manages execution at the local cell level. For example, NextPhase Medical Devices integrated Kanban’s small-batch workflow with their ERP system’s batch planning. Daily standups helped coordinate order placement, leading to a 33% reduction in storage requirements. In such setups, MRP determines the number of Kanban cards per cell, while local teams control production timing.
Research supports the effectiveness of this hybrid approach. Studies show that combining push (MRP) and pull (Kanban) systems can result in lower inventory levels and better responsiveness to demand changes. As one study noted:
“The hybrid approach seems to combine many of the advantages of MRP approaches while retaining much of the simplicity of kanban/pull systems.”
To implement a hybrid system, start by using MRP for material planning and Kanban for execution. Advanced planning and scheduling (APS) software can help bridge the two systems. Begin with a small-scale model to test and refine the integration before scaling up.
Software Tools for Kanban and MRP
In today’s manufacturing landscape, advanced ERP platforms have become indispensable for seamlessly integrating Kanban and MRP methodologies. These platforms serve as a bridge between the two systems, allowing manufacturers to adapt to either approach – or even combine them – to achieve optimal efficiency. By supporting both pull and push production strategies, these tools play a pivotal role in streamlining operations.
How Procuzy Supports Manufacturing Systems
For manufacturers looking to blend Kanban and MRP systems, robust ERP software is a necessity. Procuzy’s cloud-based ERP platform is specifically designed to meet the demands of both pull-based Kanban workflows and push-based MRP planning. Its real-time inventory tracking aligns perfectly with Kanban’s demand-driven principles, while its demand forecasting tools are tailored to MRP’s planning-centric approach.
In Kanban setups, Procuzy’s automated stock alerts provide a hands-free way to trigger replenishment whenever inventory dips below a set threshold. This eliminates manual oversight and ensures that production continues uninterrupted, based on actual consumption rates.
For MRP workflows, Procuzy’s dedicated Material Requirement Planning (MRP) module takes the guesswork out of planning. By analyzing production schedules and demand forecasts, it calculates material needs, processes complex bill-of-materials data, and generates purchase orders automatically. This automation eliminates tedious manual planning, saving time and reducing errors.
Procuzy’s ability to support hybrid systems is a game-changer for manufacturers. As the company explains:
“Procuzy manufacturing ERP software seamlessly integrates with your existing business tools, thus providing a unified, streamlined workflow that enhances productivity and eliminates operational friction.”
The platform’s impact is evident in real-world applications. For instance, in October 2023, Alabhya, a business supplies and equipment company, reported cutting waste by 15% thanks to insights from Procuzy’s analytics tools. Another user, Adarsh, highlighted how the platform boosted profits by improving inventory management, preventing stockouts, and streamlining overall manufacturing processes.
Main Features of Procuzy
Procuzy is packed with features that address the unique challenges manufacturers face when implementing Kanban or MRP systems. Some of its standout capabilities include multi-location support, batch tracking, barcoding, and business intelligence dashboards. These tools provide real-time visibility and simplify production tracking across multiple facilities.
Batch tracking and barcoding are particularly critical for ensuring traceability throughout the manufacturing process. These features not only enhance quality control but also help meet regulatory requirements. Whether you’re using Kanban’s continuous flow model or MRP’s batch-focused planning, these tools integrate seamlessly.
Another strength of Procuzy is its ability to work with existing business systems. By eliminating data silos, it makes the transition from manual to automated workflows much smoother, whether you’re adopting Kanban, MRP, or a hybrid approach.
The results speak for themselves. Companies using Procuzy have reported a 60% reduction in waste, 1.5x faster turnaround times, and a 22% drop in operational costs. These improvements highlight the platform’s capacity to optimize manufacturing processes regardless of the chosen methodology.
User feedback further underscores Procuzy’s effectiveness. With an impressive overall rating of 4.7/5, it scores particularly high for customer support (5.0), ease of use (4.7), and value for money (4.7). One reviewer, Vrushali, noted in October 2023 how Procuzy helped lower costs, enhance quality control, and track manufacturing processes more effectively.
Procuzy’s pricing model is designed to accommodate businesses of all sizes. Whether you’re a small manufacturer needing basic inventory tools or a large enterprise requiring advanced analytics and production planning, the platform scales to meet your needs. This flexibility allows manufacturers to start with essential features and expand as their operations grow, ensuring they can maintain efficiency and agility in their workflows.
How to Choose the Right System
Deciding between Kanban and MRP comes down to understanding your manufacturing environment and goals. By carefully evaluating key factors, you can choose the system that best supports your operations.
What to Consider When Choosing
Demand patterns play a major role in determining which system fits your needs. For businesses with consistent and predictable demand, MRP’s forecast-driven approach can effectively plan production schedules and material requirements. On the other hand, if your demand is unpredictable or varies frequently, Kanban’s pull-based system is more responsive to actual consumption, avoiding reliance on potentially inaccurate forecasts.
In fact, most companies only achieve 50–70% forecasting accuracy, with very few surpassing 85%. This makes Kanban an appealing choice for businesses dealing with high demand uncertainty, as it reacts in real time to consumption rather than relying on projections.
Production complexity is another crucial factor. As mentioned earlier, MRP thrives in environments with intricate, build-to-order processes, long lead times, and complex supply chains. Meanwhile, Kanban is better suited for straightforward, repetitive processes with short lead times. Its visual signals and clear replenishment cues are ideal for streamlined, efficient workflows.
Your inventory management goals also matter. Kanban focuses on minimizing raw material stock levels without sacrificing efficiency, aligning with lean principles and waste reduction. In contrast, MRP uses forecast-driven planning to ensure materials are available when needed, making it a better fit for operations focused on cost control and efficiency.
Organizational objectives should guide your decision as well. As Mark DeLuzio puts it:
“When you get your process right, you’ll improve your quality, reduce your lead time, and your productivity will take care of itself”.
If lean principles and cutting waste are your top priorities, Kanban naturally supports these goals. If detailed planning and cost optimization are more important, MRP offers the tools to achieve them.
Lastly, think about your resource constraints and bottlenecks. MRP provides robust capacity planning tools to manage complex resource allocation across multiple production stages. Kanban, with its visual management approach, works best in environments where bottlenecks are minimal or well understood.
| Factor | MRP | Kanban |
|---|---|---|
| Demand Patterns | Stable, Predictable | Volatile, Dynamic |
| Production Processes | Complex, Long Lead Times | Simple, Short Lead Times |
| Supply Chain Complexity | High | Low |
| Inventory Management | Forecast-driven | Demand-driven |
| Organizational Goal | Efficiency, Cost Optimization | Lean Principles, Waste Reduction |
| Forecasting Reliance | High | Low |
These considerations provide a framework to help you decide which system aligns best with your operational needs.
Main Points to Remember
Each system has strengths that make it suitable for specific manufacturing environments. MRP is ideal for managing complex, multi-product systems or build-to-order scenarios. Kanban, on the other hand, shines in build-to-stock settings due to its flexibility and ability to respond quickly to changes.
Many organizations find success using a hybrid approach – leveraging MRP for high-level planning while relying on Kanban for execution on the shop floor. This combination allows you to benefit from MRP’s detailed forecasting while taking advantage of Kanban’s responsiveness and efficient inventory management.
Ultimately, the right choice depends on your unique operational reality. High-volume production with predictable demand often favors MRP, while environments requiring adaptability and quick responses to demand changes are better suited to Kanban. Evaluate your team’s capabilities, existing systems, and long-term goals to make the best decision for your business.
FAQs
How can manufacturers choose between Kanban, MRP, or a hybrid system for their production processes?
Choosing the right system – Kanban, MRP, or a hybrid approach – comes down to understanding your production requirements and how your workflows operate.
Kanban is a pull-based system, designed for manufacturers who face varying demand. It emphasizes just-in-time production, where workflows are triggered by actual consumption. This approach helps keep inventory levels low while staying flexible to meet customer needs.
In contrast, MRP (Material Requirements Planning) is a push-based method that relies on demand forecasts to schedule production. It works well for manufacturers dealing with steady demand and intricate processes. While it ensures materials are ready when needed, it can sometimes result in higher inventory levels.
A hybrid approach blends the benefits of both systems, making it a smart choice for businesses juggling both stable and fluctuating demand. This method helps strike a balance between inventory management, production efficiency, and the ability to adapt to changing needs.
What challenges might arise when using a Kanban system instead of an MRP system?
Implementing a Kanban system comes with its own set of challenges, especially when compared to an MRP system. Kanban relies on visual cues and real-time workflows, which can sometimes cause teams to overly focus on immediate tasks. This might lead to poor prioritization, where long-term objectives are overlooked. Additionally, because Kanban doesn’t emphasize detailed upfront planning, there’s a risk of misunderstandings or mistakes cropping up during production if processes aren’t clearly defined.
By contrast, MRP systems rely on demand forecasting, which introduces its own hurdles. Predictions can sometimes miss the mark, leading to overproduction or stockouts – especially when demand shifts unexpectedly. While Kanban is more flexible and can adjust to changes faster, it demands a high level of discipline and effective management to keep workflows running smoothly and avoid interruptions.
How do Kanban and MRP systems respond to unexpected changes in demand or supply chain disruptions?
Kanban and MRP systems handle demand fluctuations and supply chain disruptions in completely different ways. Kanban, a pull-based system, thrives on its ability to adapt quickly. It adjusts production in real time based on actual demand, which helps manufacturers avoid overproducing, keeps inventory levels manageable, and reduces the risk of running out of stock. This makes Kanban particularly useful in industries where market conditions can shift rapidly or unpredictably.
In contrast, MRP operates on a push-based model, relying heavily on demand forecasts to guide production planning. While this approach can offer a sense of stability, it struggles with agility. Sudden changes in demand or supply can lead to inefficiencies, such as excess inventory or stock shortages, because MRP systems aren’t built for immediate adjustments.
Ultimately, Kanban shines in fast-moving, unpredictable markets, while MRP provides a more structured but less flexible framework.
