[2] Taiichi Ohno, an industrial engineer at Toyota, developed kanban to improve manufacturing efficiency.

Limits on the number of items waiting at supply points are established and then reduced as inefficiencies are identified and removed.

[5] One of the main benefits of kanban is to establish an upper limit to work in process (commonly referred as "WIP") inventory to avoid overcapacity.

In the late 1940s, Toyota started studying supermarkets with the idea of applying shelf-stocking techniques to the factory floor.

Furthermore, the supermarket stocks only what it expects to sell in a given time, and customers take only what they need, because future supply is assured.

This situation is exactly what a kanban system accomplishes, in that it is used as a demand signal that immediately travels through the supply chain.

Where the supply response is not quick enough to meet actual demand fluctuations, thereby causing potential lost sales, a stock building may be deemed more appropriate and is achieved by placing more kanban in the system.

When stock of a particular component is depleted by the quantity assigned on kanban card, a "kanban trigger" is created (which may be manual or automatic), a purchase order is released with predefined quantity for the supplier defined on the card, and the supplier is expected to dispatch material within a specified lead-time.

Thus, the process never runs out of product—and could be described as a closed loop, in that it provides the exact amount required, with only one spare bin so there is never oversupply.

Data pulled from e-kanban systems can be used to optimize inventory levels by better tracking supplier lead and replenishment times.

[23] E-kanban is a signaling system that uses a mix of technology to trigger the movement of materials within a manufacturing or production facility.

A typical electronic kanban system marks inventory with barcodes, which workers scan at various stages of the manufacturing process to signal usage.

Electronic kanban often uses the Internet as a method of routing messages to external suppliers[24] and as a means to allow a real-time view of inventory, via a portal, throughout the supply chain.

Organizations like the Ford Motor Company[25] and Bombardier Aerospace have used electronic kanban systems to improve processes.