Applying Kanban at a Small HVAC Company

27 July 2016

This blog post is a continuation of our series on the application of Lean Construction methods in a small HVAC Company. The goal of this post is to show how a small company applied Kanban to manage their work processes. We will look at Kanban from three perspectives: 1) managing inventory, 2) managing customer inquiries, and 3) managing RFIs.

What is Kanban?

Kanban (看板) is a Japanese word that is made up of two characters¹. The first character (看) means “visual” and the second character (板) means “board”. The concept of Kanban was made popular by the Just-In-Time production system at Toyota and the Kanban cards serve as a means to control the production system. A Kanban system can do several things including: 1) limit the amount of work in process (WIPs) between workstations, 2) serve as a visual cue to start and stop production, 3) enable a pull-based production rather than a push-based one, and 4) prevent overproduction.

With our basic understanding of Kanban, we will now look at three examples of the application of this concept in construction. Although theory can separate from the technology that we use, I will be showing the case study data with our implementation using Trello.

Kanban for Managing Inventory

As a residential HVAC company, the D Air Conditioning Company undertakes fairly simple projects; however, the amount of projects that goes through the production system and fast turnaround time of the projects creates a set of challenges that a Kanban system helps resolve. One of the biggest challenges prior to implementing a Kanban system was making sure that the warehouse was sufficiently stocked with the supplies and equipment needed for the job. Having too much supplies is wasteful and ties up extra cash. Not having enough material can lead to a delay. In the past, missing items were often purchased at the local hardware store. This remedy; however, would add 1 to 2 additional hours of non-value added time to project and the price of these items were often 40% higher than our wholesale prices.

To resolve this issue, we developed a “pull-based” system for inventory management using a visual Kanban system. The store has between 50 to 100 different items so the system has to be efficient, quick, and transparent. Items in the warehouse are stored in a way their physical presence or lack thereof gives the staff a signal of when to reorder the item. In figure 1, you will see the small consumable items stacked next to each other. The amount of items place in the warehouse is based on the rate that we use the items and the lead-time of getting the items from a supplier.

Figure 1. Visual Kanban of Inventory

As a general rule of thumb, we replenish the stock of materials when it reaches below 50% of the capacity that we allocate for it in storage. For example, In figure 2 you can see two boxes for air filters. The boxes are opened on the side to reveal the level of inventory. When one box is completely empty, this gives the store staff a signal to re-order the filters.

Figure 2. Air Filters as Kanban

According to Sun Tzu, a majority of the battle is already won prior to starting the battle². In construction, whether we succeed or not can be seen prior to even starting the work on-site. A large part of the battle is making sure that the right materials are on-site for the workers at the right time.

Kanban for Managing Customer Inquiries

The D Air Conditioning Company has three retail locations in Orange County. In order to make sure that all the offices are on the same page, the company uses a Kanban system for customer inquiries, estimates, and warranty. When customer has a request that needs to be process (i.e., in-home estimate), the staff writes the customer’s information and the inquiry on a Kanban card. As the issue is resolved, the card is moves to the “finish board”. The cloud-based technology ensures that everyone has access to the same information.

Figure 3. Kanban System for Customer Inquiries

The Kanban board helps the three offices visually see a list of work items that needs to be process. The board ensures that all customer inquiries are answered once, by the appropriate person, and in a timely manner. The process reduces the waste of communicating the work that needs to be done and makes the work transparent.

Kanban for Managing RFIs

Following the same process as mentioned above, the company also uses a Kanban board to manage RFIs and submittals on their commercial projects. RFIs and submittal are tasks that needs to be completed in a timely manner in order to prevent any project delay. Using the Kanban, the staff is able to offload their thinking to a todo list and focus on executing one item at a time³. The Kanban board allows the staff to prioritize their work and not forget any tasks. The company has been able to document the average turnaround time of their RFIs and set targets for reducing it.

Conclusion

The Kanban system allows the company to: 1) keep the right amount of stock in the warehouse, 2) keep track of customer inquiries so that they can be answer correctly and quickly, 3) reduce the communication overhead of the organization by making the work processes transparent, 4) eliminate unnecessary meetings, 5) have clear visibility into the state of the operation, 6) measure how long it takes to complete a task, and 7) develop a level of stability to the production system that enables standardization and learning.

From a production perspective, there is really only 3 things that we do: 1) building and designing the production system, 2) keeping the production system running, and 3) improving the production system. A stable system allows us to devote more time towards improving the system. Many of the properties of Kanban help us achieve this goal.

In addition to the cases presented in this blog, a Kanban system can be use for managing: change orders, punch list, quality control, material management, training, onboarding, etc. I highly encourage other organizations to use a Kanban system to visually manage their work processes.