Based on my experience, I provide Kanban solutions I have implemented in production environments for the SAP purchasing (MM-PUR), inventory management (MM-IM), and production planning (PP-Kanban) modules. In the implementations I have used standard Kanban transactions to fulfill the customer’s requirements plus the signal functionalities integrated with the supply area’s containers. Although I use SAP ERP Central Component (ECC 6.0), the processes I describe also apply to previous versions.

To use the Kanban process your production department should satisfy at least the following requirements:

• The consumption of the Kanban materials should be relatively constant within a period that is longer than the replenishment lead time for procuring goods with a Kanban.
• The supply source should be capable of producing a large number of small lots within a short period to ensure the ability to satisfy the production requirements.

The main advantages of the Kanban production process are:

• The majority of the posting operations can be done automatically, based on your Kanban strategy (e.g., via automatic Kanban calculation and control signal).
• Easy management of control cycles that define the relationship between the demand source (such as a production line) and the supply source (such as an external supplier).
• Replenishments and goods receipts can be planned and executed in a simple and practical way using the Kanban board.
• The entire process can be controlled and monitored via Logistic Information System (LIS).

In case of errors, various evaluation and post-editing options are available.

Kanban Business Flow

The typical Kanban business flow is shown in Figure 1. This is done via the Kanban board. The Kanban data fulfills the standard info type that is used in the LIS. This means that the LIS can be used to evaluate the Kanban activities within a specific period.

Figure 1

Typical Kanban business flow

The logistics and production departments need to complete several steps to perform the Kanban processes in ECC 6.0 with MM-PUR, MM-IM, and PP-Kanban modules implemented. Also the main master data and customizing details are provided as prerequisites to run this process, in case of external Kanban procurement.

The business activities that I show in the system are the following:

• Master data prerequisites
• Transactional processes
  • Create a purchase order (PO)
  • Verify the PO was created correctly
  • Create a goods receipt (GR)
  • Verify the GR was posted correctly
  • Print the Kanban cards
  • Evaluate Control cycle and Kanban
  • Use LIS to evaluate the Kanban activities
• Main customizing activities

I have selected these processes to demonstrate the capabilities of the Kanban process.

Master Data Prerequisites

The following master data must be defined as prerequisites to implement the Kanban processes:

• Supply area
• Storage location view
• Contract
• Control cycle

Supply Area

A supply area is an interim storage location on the shop floor that is used to provide material directly to the production line or the work center. Goods movements are posted to the storage location assigned to the supply area. One storage location can be assigned to several supply areas. However, one supply area cannot be assigned to several storage locations. If a material is produced or processed in several supply areas with the same storage location, the system displays the total stock quantity at all the assigned supply sources in the stock overview of this storage location.

A supply area can be defined in customizing or can be part of the master data management.

The master data department can create the supply area by using transaction PK05 or by following menu path Logistics > Production > KANBAN > Production Supply Areas > Maintain.

Specify the plant code you need to link to the supply area and then specify the appropriate details (Storage Location, Responsible, and Unloading Point), as shown in Figure 2.

Figure 2

Define the supply area

Storage Location Views

As a prerequisite for the creation of the control cycle, the material must be created in the storage location that is assigned to the supply area. This ensures that:

• The system posts the stock movements to the correct storage location.
• The system also uses this information to determine whether Kanban is carried out with or without material requirements planning (MRP).

To create the storage location views for a material, use transaction MM01 or follow menu path Logistics > Production > Master Data > Material Master > Material > Create (General) > immediately. Figures 3 and 4 show the details of the fields that can be maintained for storage location views 1 and 2, respectively.

Figure 3

Storage location view 1

Figure 4

Storage location view 2

Contract

The purchasing department can create a contract with your vendor for the goods that the production department needs to consume during the Kanban processes by using transaction ME31K or following menu path Logistics > Materials Management > Purchasing > Outline Agreement > Contract > Create. The screen shown in Figure 5 shows the main details that you enter in the previous screens by executing transaction code ME31K. The main details are the vendor number, material code, quantity, and price.

Figure 5

Quantity contract main details

Control Cycle

The control cycle is the most important master data used for the Kanban process.

It defines the relationship between the demand and the supply source. The control cycle contains the following control data for Kanban production:

• Kanban circulation, that is, the number of Kanbans and the Kanban quantity

• The basic data required for automatic Kanban calculation, if necessary

• Replenishment strategy

• Printing Kanban

• The delivery address

• The process control (for example, the indicator for a separate goods receipt, the status sequence key, or the indicator for the logic for triggering replenishment for one-card Kanban). With this method, replenishment is always triggered when the Kanban from which material is currently being withdrawn is approximately half-empty.

Use

You can maintain control cycles for classic Kanban. These control cycles are also used for Kanban with quantity signals or for one-card or event-driven Kanban. In this procedure, a Kanban is created only when required; for example, it is triggered by a certain event. This means it is based on actual material consumption.

The production department can create the control cycle using the transaction PK01 (there is no menu path available for this transaction in ECC 6.0). In Figure 6, you can see the selection screen of the control cycle.

Figure 6

The entry screen to define the control cycle

After entering the Material, Plant, and Supply Area for which you need to define the control cycle, press Enter. The system allows you to choose the replenishment strategy you need to pick up (Figure 7). In my example, I choose external procurement as the replenishment strategy by selecting the Ext. Proc. radio button. After you select your replenishment strategy, press Enter, and in the pop-up screen that appears select the row in which the replenishment strategy that you chose appears. Click the Kanban calc. tab.  

Figure 7

Define the replenishment strategy for the control cycle

Now specify the external procurement element as shown in Figure 8. In my example the external procurement element is the value 0001, which represents a purchase order. This means that in case of demand, the system creates purchase orders to communicate the production requirements to the suppliers.

Figure 8

External procurement details for the control cycle

Specify the Kanban calculation parameters that you want to use and press the Kanban calc. tab. The system provides you with the details, as shown in Figure 9.

Figure 9

Kanban calculation parameters for the control cycle

Now define the Kanban calculation details. In my example, I used the value 1 as the calculation type, which means that the system calculates the number of Kanbans necessary to fulfill the production requirements. In the Calculation profile field, you can enter a number for the data to use for the automatic calculation of the Kanban circulation. The calculation profile is used if the replenishment lead time is less than one day.

The Calculation profile is defined in customizing and contains the following values that are used to automatically calculate the Kanban’s circulation:

• Calculation type

• Safety factor

• Constant

• Smoothing type

• Factory calendar
• Grouping
• Shift sequence

The control cycle calculation is based on the formula shown in Figure 10.

Figure 10

The formula to calculate the number of containers

Transactional Processes

In this section, I show you how to use the Kanban board to create purchase orders and goods receipts. 

Create a Purchase Order

To use the Kanban board, use transaction PK13N or follow menu path Logistics > Production > KANBAN > Control > Kanban Board > Demand Source View. The system shows the selection screen (Figure 11).

Figure 11

The Kanban board (selection screen)

Enter the appropriate selection parameters in the previous screen, usually Plant and Supply Area, and run the program by pressing Enter. The system shows the details in Figure 12.

Figure 12

The Kanban board (requirements generation)

To generate the appropriate requirements, select the location you need to replenish and click the option To Empty in Figure 12. The system provides the message shown in Figure 13.

Figure 13

The Kanban board (the system’s successfully processed Kanban message)

Display the Purchase Order

To display the purchase orders (POs) created from the previous step, the purchasing department can use transaction ME2L or follow menu path Logistics > Materials Management > Purchasing > Purchase Order > List Displays > By Vendor. In Figure 14, you can see the main selection fields available in the selection screen of this report.

Figure 14

The purchase order list (selection screen)

After specifying the appropriate selection values, run the report by pressing function key F8 or clicking the execute icon in Figure 14. The system provides the list of purchase orders generated via the Kanban board, as shown in Figure 15.

Figure 15

A list of purchase orders created via the Kanban board

Post a Goods Receipt

To generate the appropriate goods receipts, select the location you need to fill and then click the To Full option in Figure 16.

Figure 16

The Kanban board (requirements generation)

To set the containers as full and post the goods receipts, select the location you need to update and then click the option To Full as shown in Figure 16. The system provides the message shown in Figure 17.

Figure 17

The Kanban board (goods receipt posting)

To display the status of each location, you can just double-click it. In my example, I double-clicked the first container and obtained the details shown in Figure 18.

Figure 18

The Kanban board (Kanban information)

Print the Kanban Card

The Kanban card identifies the material, how much of it is required, and where it is to be delivered. To generate the printing of the Kanban card for the received materials, execute transaction code PK17 or follow menu path Logistics > Production > KANBAN > Control Cycle > Print Kanban. After specifying the appropriate criteria to search for Kanbans to be printed out and running the report, the system provides the details (Figure 19). You print the Kanbans to communicate the needs for production to the supplier.

Figure 19

Kanban printing (selection screen)

If you click the Yes button in Figure 19, the system provides the Kanban card, as shown in Figure 20.

Figure 20

Kanban printing (Kanban card)

Control Cycle and Kanban Evaluations

To monitor the control cycle and the Kanban status, use transaction code PK13N or follow menu path Logistics > Production > KANBAN > Evaluations > Control Cycles/Kanbans. The system shows the selection screen (Figure 21).

Figure 21

The control cycle and Kanban evaluation (selection screen)

After specifying the appropriate selection values, run the report by pressing F8 or clicking the execute icon highlighted in Figure 21. The system provides the list of purchase orders generated via the Kanban board, as shown in Figure 22.

Figure 22

The control cycle and Kanban evaluation (output screen)

Logistic Information System for Kanban Activities

Note that the Kanban board (reached via transaction codes PK13N or PK12N) only offers you an overview of the Kanbans at a certain point in time. The standard analysis in Logistics Information System (LIS) provides you with tools for creating evaluations of Kanban circulation for a specified interval. To access LIS functionalities, use transaction code MCQ or follow menu path Logistics > Production > KANBAN > Evaluations > Information System. The system shows the selection screen in Figure 23. LIS is a standard report that uses info types to deliver information to evaluate the Kanban activities.

Figure 23

Kanban analysis (selection screen)

After having specified the appropriate selection values, run the report by pressing F8 or clicking the execute icon highlighted in the previous screen. The system provides the details of the Kanban analysis, as shown in Figure 24. In my example, the system reported the total of actual quantity, the total target quantity, and the Kanban quantity details.

Figure 24

Kanban analysis (output in graphical 3D view)

Relevant Main Customizing Steps

In this section I discuss the main customizing steps for activating the Kanban processes in your system from both a production and a procurement point of view.

Define a Number Range for the Control Cycle

You define the internal number range for the control cycle using customizing transaction code OM14 or by following menu path Tools > Customizing > IMG > Execute Project > SAP Reference IMG > Production > KANBAN > Define Number Range for Control Cycle. In the screen that appears, enter values for the first three columns (Figure 25).

Figure 25

The internal number range of the control cycle

Define a Number Range for the Kanban ID Number

You define the internal number range for the Kanban ID number using customizing transaction codes OM14 or OM18, or by following menu path Tools > Customizing > IMG > Execute Project > SAP Reference IMG > Production > KANBAN > Define Number Range for Kanban ID Number. In the screen that appears define an internal number range (Figure 26).

Figure 26

The internal number range of the Kanban ID

Define MRP Controllers

You can use MRP Controllers to define a person in charge of the supply area. To define the MRP controllers, use customizing transaction code OMD0 or follow menu path Tools > Customizing > IMG > Execute Project > SAP Reference IMG > Production > Material Requirements Planning > Master Data > Define MRP Controllers. In the screen that appears enter the data as specified (Figure 27). Click the save icon to save your data.

Figure 27

Define MRP controllers (detailed view)

Define a Kanban Storage Location

The storage locations can be defined in customizing using transaction code OX09 or by following menu path Tools > Customizing > IMG > Execute Project > SAP Reference IMG > Enterprise Structure > Definition > Materials Management > Maintain storage location (Figure 28). In the screen shown in Figure 28, you can see that the storage location used for Kanban PL04 has been linked to the Plant code 1200 and that it has specified address details.

Figure 28

Define the Kanban storage location

Define the Storage Location as Non-MRP Relevant

In Kanbans without MRP, you must exclude the storage locations used for Kanbans from the planning run. Otherwise, you are not able to define the control cycle using these storage locations.

To do so, use customizing transaction code OMIR or follow menu path Tools > Customizing > IMG > Execute Project > SAP Reference IMG > Enterprise Structure > Definition > Production > Material Requirements Planning > Planning > Define Storage Location MRP per Plant. Specify the value 1 as the MRP indicator for the storage locations that should be relevant for the Kanban processes, as shown in Figure 29.

Figure 29

Exclude the storage location from the MRP run

Define the Kanban Calculation Profile

To define the calculation profile used by the control cycle to automatically calculate the number of Kanbans necessary, use customizing transaction code OM19 or follow menu path Tools > Customizing > IMG > Execute Project > SAP Reference IMG > Production > KANBAN > Automatic Kanban Calculation and Scheduling > Define Calculation Profile. Then enter the appropriate values. In my example, I chose the values shown in Figure 30.

Figure 30

Define the Kanban calculation profile

Define the Kanban Strategy

The Kanban strategy can be defined for the following business cases:

• In-house production
• External procurement
• Stock transfer

In my example, I provide details about the external procurement strategy. To create a replenishment strategy for external procurement, use transaction code OM12 or follow customizing menu path Tools > Customizing > IMG > Execute Project > SAP Reference IMG > Production > Kanban. Select the entry you need to edit and then enter the appropriate details, as shown in Figure 31.

Figure 31

Replenishment strategy for external procurement

In my example, the strategies are set up using the following data:

• The control type specifies that the external procurement is carried out by the purchase order

• The order type indicates that the Kanban will create a standard purchase order type, which, depending upon other factors, determines which fields must be maintained to consider the document completed.

• The movement type field determines the movement type used to post the automatic goods receipt for materials with reference to the purchase order.

• The signal locking time reduces the risk of faulty input, particularly via the barcode scanner. In my example, I specified that the signal not take anything into account again within 120 minutes.

• The activate alerts indicator activates the alerts for Kanban in the alert monitor.
• The form defines the content and the layout of the Kanban card.

Kanban Alerts

The Kanban alerts are used to react efficiently in case of a critical situation. In the standard system, alerts are defined in case an error occurs for the following events:

• Status change of a Kanban
• The maximum number of Kanban that may be empty is exceeded
• A replenishment element is deleted
• A replenishment element is delayed (monitored via transaction code PKAL)

To use this functionality, you have to perform the following customizing activities:

• Activate the Activate Alerts flag (the check box shown in Figure 31), using transaction code OM12
• Define the central alert server as a Remote Function Call (RFC) destination by using transaction codes SM59 and SALRT1
• Activate the alert inbox using transaction code SICF. Follow menu path Default_host > sap > bc > bsp > sap > alert inbox. Click the activate icon in the context menu.

In the standard system, the category Kanban is supplied for the alerts. You can check the standard alert settings to see if they meet your needs. If they don’t, you can create a custom alert category.  You can check the standard alert settings by executing transaction code ALRTCATDEF, as shown in Figure 32.

Figure 32

The Kanban alert category (list of fields verified during the process)

You can also define a custom alert category using Business Add-In (BAdI) BADI_KANBAN_MODIFY_ALERTS.

Gaetano Altavilla

Dr. Gaetano Altavilla is a senior SAP practice manager. His focus is on pre-sales, delivery of SAP application solutions for large international corporations, and SAP knowledge management in Europe, the Middle East, and Africa (EMEA).

In his 18 years of SAP application experience working for many multinational companies, such as Procter & Gamble and Hewlett-Packard, he has covered a wide range of ERP logistic areas, focusing on the MM, WM, SD, LES, PP, PP-PI, PLM (QM, PM, PS) modules, as welll as CRM (TFM), SRM (EBP), SCM (SAP APO), and MES (ME) components.

Dr. Altavilla holds a degree with first-class honors in mathematics from the University of Naples and is certified in many SAP modules: SAP Logistics Bootcamp, SAP MM, SD, LE (SHP/WM/LE), PP, PLM (PM, QM, PS), SRM, CRM, SCM (APO), SCM (TM), FI, CO, and Solution Manager. He also has experience in ABAP/4 and application link enabling (ALE) and IDocs. He has participated in numerous industry conferences, such as the SAP Skills Conference in Walldorf at SAP SE.

You may contact the author at Gaetano_altavilla@hotmail.com.

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