How Does Kanban Fit into SAP S/4HANA?

In a Kanban environment, when production workers take the last part from a bin, they send a signal to other workers, who then make more of the required parts and ensure delivery to the assembly line.

This figure shows the standard Kanban flow between demand source and supply source.

Companies can integrate some of the business operations of electronic Kanban to reduce inventory and simplify material movements and production planning. Electronic Kanban uses the SAP S/4HANA system’s Kanban monitor, which completely maps with the actual and real-life Kanban processes.

Note: In the early days of introducing Kanban to streamline replenishment in manufacturing processes, all business processes were manual or relied on the supply source visually and physically seeing the kanban cards at the demand source.

Then, with the advent and extensive introduction and integration of technologies such as scanners and barcode readers for data capture and data transmission to business application systems such as SAP S/4HANA to trigger replenishment, manual Kanban eventually transformed into electronic Kanban. For the sake of simplicity, we’ll be referring to electronic Kanban simply as Kanban.

Kanban aims to give personnel significant control over the production process and reduce the manual tasks they must perform. This self-management process and the fact that production personnel create replenishment elements close to when they’re actually consumed leads to inventory reduction while also shortening lead times. Kanban triggers replenishment only when there is a material requirement and not before, thus providing material to the production process only and exactly when required.

Materials ready for use remain near the work center in small material buffers so that planners don’t have to plan for material staging. Instead, consumed materials are replenished immediately. Another advantage of Kanban is that the transmission of replenishment data is well automated. Scanning the barcode on a kanban card is enough to transmit the data required to initiate replenishment and to post the goods receipt upon receiving material. The Kanban signal for delivery of a material can be triggered by a demand source sending a card to a supply source. This card contains details about the required material, its quantity, and its delivery location. It’s also common practice to refer to a material-carrying container as a kanban.

The following are some advantages of Kanban:

• Replenishment elements integrate with the SAP S/4HANA system.
• It improves monitoring of kanbans in circulation via a Kanban board and access to additional evaluations.
• It integrates with printing and transmission functions.
• It can forecast from material requirements planning (MRP) or long-term planning.
• It integrates with cost accounting.
• It integrates with capacity requirements planning.
• It integrates with engineering change management. 

Note: Because Kanban integrates with PP and MM, we recommend that you maintain close coordination between the SAP consultants for the company or project. Only then will your company be able to realize the true benefits of integrating Kanban into its business processes.

Now, let’s quickly discuss why some companies hesitate to implement Kanban in production, procurement, or the stock transfer processes. The problem some organizations have with implementing Kanban lies not in the production method but in meeting the prerequisites necessary for Kanban. To use Kanban effectively, a number of conditions must be met:

• The supply source must be able to deliver the material quickly and in small lots. Setup times should be short, and the availability of components and capacity to process them should be ensured.
• The parts controlled using Kanban should be consumed relatively uniformly over the replenishment time. If a material is used in large quantities sometimes but in smaller quantities at other times, then having a large number of containers is necessary to ensure material availability. There will then be relatively high levels of stock during periods when the material is used less.
• The material should not be produced in advance, as this would lead to unnecessary materials being procured and stored.

The Push-Pull Principle

In traditional production and MRP, the system calculates the production quantities and dates at the product level, based on customer requirements or PIRs. The system determines the required quantities and materials staging dates in the BOM explosion, which means that the system reads every component of the BOM to determine the quantities of components required on specific dates. The system calculates lot sizes by referring to the lot-sizing procedure. Lots are generally completed at each manufacturing level before becoming available at the next manufacturing level.

Component staging dates, determined by MRP, are used to schedule the production of parts, while order dates are used to schedule the purchasing of parts. At the time of scheduling, the exact time and date when the material will be needed for the next manufacturing level is often not known. The material is pushed through production on the basis of the times calculated.

This is the push principle. This procedure can result in queue times before the start of production, which are generally addressed by increasing lead times or using a float after production (as an order buffer). This often leads to the use of increased safety stocks to achieve constant service levels.

With Kanban, instead of materials being pushed through production by higher-level planning, materials are called out (or pulled) from the supply source by production at the manufacturing level only when needed. This is the pull principle. When a container is empty, the production personnel send a Kanban signal; that is, the demand source calls out the required material to the supply source using a card called a kanban.

The figure below demonstrates the push-pull principle for materials. The upper half illustrates the push, and the lower half illustrates the pull (Kanban).

This table summarizes Kanban’s key characteristics when integrated into production processes for discrete and repetitive manufacturing.

Kanban Replenishment Strategies

Kanban replenishment can be controlled with three different replenishment strategies. A replenishment strategy defines which replenishment method a company will use to produce or procure the container quantity—that is, the replenishment element (e.g., a production order, a purchase order, a reservation) that the system will create when the kanban is set to EMPTY. Let’s take a look at all three replenishment strategies.

With in-house production, replenishment can be organized using planned orders (repetitive manufacturing), production orders (discrete manufacturing), manual Kanban, or container control/MRP (a mix of Kanban and MRP). With replenishment using container control/MRP, replenishment elements are created not in Kanban but in MRP. Setting the container status to FULL or EMPTY then simply controls the material flow. The person responsible for production is mentioned in the supply source, and this individual is responsible for the area of production that delivers materials to other production areas.

In external procurement, replenishment can be organized using purchase orders, delivery schedules, stock transport orders, stock transport scheduling agreements, source lists, or container control/MRP. The supply source can be a vendor or a supplying plant. If deliveries refer to a specific quantity or a value contract, then this information is maintained in the control cycle. With plant-to-plant relationships, a delivering plant is entered instead of a vendor.

With stock transfer, replenishment can be organized by using stock transfer reservations, direct transfer posting, or container control/MRP. With stock transfer, the supply source is a delivering storage location. A storage location must be assigned to every Business benefits Process optimization and shortening of the process chain. Lean manufacturing. Simplification of the planning process, more employee responsibility, and reduction of the administrative effort in production supply area, and the system posts all the goods movements in inventory management from or to a supply area using this storage location. At the time of material staging at a supply area, the system posts the corresponding goods receipt to the assigned storage location. At the time of material withdrawal from a supply area, the system posts the corresponding goods issue from the assigned storage location. A supply area or groups of supply areas can be assigned to a single storage location, but multiple storage locations cannot be assigned to a single supply area. From the demand source point of view, the responsible person is in charge of organizing material replenishment at the supply area. The responsible person can be a group representative, a materials controller, a team leader, or an MRP controller.

It makes sense to procure or withdraw some bulk materials against cost centers as these are low-cost, high-use consumable materials.

The system represents all Kanban operations, such as material receipts and material consumption, by status changes. If a kanban is empty, the employee in production sets the status of the kanban to EMPTY. This Kanban status also automatically triggers replenishment; that is, the supply source receives the signal from the demand source to refill the kanban. When the replenished kanban returns to the demand source, the employee at the demand source sets the kanban to the FULL status. These two statuses are generally sufficient to control the material flow in Kanban production control and are usually the only two used. The progress of production in Kanban is controlled by setting the kanban to the appropriate status. Other Kanban statuses are also available. The general Kanban practice is to have two barcodes: one with the serial number and the empty code and another with the serial number and the full code. When the production person scans the appropriate barcode, the system performs the empty or full transaction.

This table compares Kanban without MRP to Kanban with MRP to help a planner decide which option to choose.

And this table provides a comparison to help a planner decide between using MRP and Kanban to replenish some materials.

Editor’s note: This post has been adapted from a section of the book Production Planning with SAP S/4HANA by Jawad Akhtar. Jawad is an SAP logistics and supply chain management expert with a focus on business sales and delivery. He earned his chemical engineering degree from the Missouri University of Science and Technology in the United States. He has more than 20 years of professional experience, 16 of which have been spent working with SAP systems. He has experience working on several large-scale, end-to-end SAP implementation project lifecycles, including rollouts. He works with SAP clients to help them identify the root causes of business issues and address those issues with the appropriate SAP products and change management strategies. He now focuses on next-generation SAP products such as SAP S/4HANA, SAP Integrated Business Planning, SAP Ariba, and SAP Customer Experience.

This post was originally published 12/2025.