Supplier Kanban for Japanese Customers: MRP vs. Kanban

You have just won a parts contract with a Japanese customer, often an automaker or one of its Tier 1 suppliers. Along with the commercial terms, you may receive three things: a monthly forecast called naiji (内示, "advance notice"), a set of kanban cards or their electronic equivalent, and a delivery code such as 1-4-2 printed on each card. Your own ERP system, meanwhile, probably plans with MRP (material requirements planning).

This guide explains how those pieces fit together from the supplier's side. It covers how MRP and kanban differ, how supplier kanban and delivery cycle codes work, how naiji differs from a firm order (kakutei, 確定), and how to run MRP behind kanban at your own plant. It ends with a list of questions to ask your Japanese customer and a sample email you can adapt.

Contents

1. MRP vs. Kanban at a Glance
2. How Kanban Reaches a Supplier
3. Naiji (Forecast) vs. Kakutei (Firm Order)
4. How Many Kanban Cards Are in the Loop
5. Running MRP Behind Kanban at Your Plant
6. Push vs. Pull: Why the Labels Differ
7. What to Check on Your Own Side First
8. Questions to Ask Your Japanese Customer
9. Where This Guide Does Not Apply
10. FAQ
11. Sources

MRP vs. Kanban at a Glance

The core difference is what triggers an order. MRP calculates required quantities and order timing in advance from a production plan. Kanban replenishes only what the next process has actually used, and the signal is a card (or an electronic message) that comes back when parts are consumed. Which approach fits better depends on conditions such as product variety, demand swings, and lead times.

Figure 1: MRP vs. Kanban

The biggest difference is the trigger: a plan, or the quantity actually used.

MRP (material requirements planning)

Kanban

Basic idea

Calculate quantities and timing from the future production plan and order ahead

The upstream process replenishes only what the downstream process has withdrawn

Trigger

Master production schedule (MPS) and the purchase or work orders it generates

A kanban card removed at the downstream process

Data used

MPS, bill of materials (BOM), on-hand stock and open orders, lead times

Part number and quantity on the card, the withdrawal cycle

Inventory

Hold what the plan says is needed, timed to when it is needed

Number of cards × quantity per container sets the cap on inventory between processes

Strong when

Many product variants, deep BOMs, long procurement lead times

The same parts are used repeatedly and volume is leveled

Depends on

Accurate master data (BOM, stock, lead times)

Leveled production and stable changeovers and quality

Weak when

Plans change often or actual lead times drift from the planned values

Demand swings sharply, or items are used only rarely

Compiled by the MONOSCOPE editorial team from JIS Z 8141, Toyota Motor Corporation materials, and Karmarkar (1986). In practice, the two are often combined.

In other words, MRP assumes you can plan accurately, while kanban assumes the daily flow is stable. At companies that follow TPS, the two work together: plans set the monthly volume and kanban sets the actual daily quantity. That combination is what a supplier has to work with, so the rest of this guide follows it. For the background on the Toyota Production System (TPS), just-in-time, and leveling, see Kaizen in Japanese Companies: How Improvement Actually Runs.

How Kanban Reaches a Supplier

Japan's industrial standard on production management terms, JIS Z 8141, defines the kanban system as a way to issue production or transport instructions with work instruction cards called kanban, as part of a pull system in which the downstream process withdraws parts from the upstream one. Toyota describes just-in-time as making and moving only what is needed, when it is needed, in the amount needed.

Kanban started inside Toyota's own plants. According to Toyota's 75-year company history, Toyota introduced a "supermarket method" in 1954, in which the downstream process went to collect parts from the upstream process, which then replenished what was taken. Cards and boards showing the item name, part number, and quantity were added later, and this became the kanban system. Toyota adopted kanban at all its plants in 1963 and, by 1965, extended it to parts withdrawals from its suppliers. So kanban has long linked companies with their suppliers, not just processes inside one plant.

Withdrawal Kanban and Production Kanban

JIS Z 8141 divides kanban into two main types:

• Withdrawal kanban (hikitori kanban, 引取りかんばん): tells the downstream process when and how much to pick up from the upstream process. One card is attached to each box or pallet of parts.
• Production kanban (seisan shiji kanban, 生産指示かんばん): tells the upstream process to make what was withdrawn. Toyota's history also describes a signal kanban (shikake kanban, 仕掛けかんばん) for lot-based processes such as forging and pressing, where one machine makes many part types. It shows the lot size and the reorder point.

As a supplier, you usually see the withdrawal side. A study of production control at a company that uses TPS (Kumazawa, 2018) explains that the customer sends its suppliers monthly and daily required quantities in advance as naiji, while the actual delivery quantity is specified by the withdrawal kanban removed at the customer's line. In Japanese, kanban used with outside suppliers are sometimes called supplier kanban (gaichu kanban, 外注かんばん). How you generate production instructions inside your own plant is a separate decision, covered later in this guide.

Figure 2: How the Kanban Loop Works

Parts flow from upstream to downstream. Kanban cards flow the other way.

Downstream process (e.g., the customer's assembly line)When a box of parts is opened, its withdrawal kanban is removed

The removed withdrawal kanban goes back upstream

Upstream store of finished parts (your shipping area)Boxes are picked to match the cards. The production kanban on each box is removed and sent to production

The removed production kanban is the signal to produce

Upstream productionMake only what was withdrawn, in card order

Refill the storeAttach a production kanban to each finished box

RepeatOnly what was used is replaced, which prevents overproduction

Simplified from Toyota's 75-year history and JIS Z 8141. Real operations add rules for card collection and issue cycles and supplier-specific formats. Labels in parentheses show one way the loop maps to a customer and a supplier.

Many customers now send the same signal electronically. Toyota developed an e-kanban system that transmits parts orders to suppliers over a network, and Toyota's North American operations have used an automated kanban tool that signals suppliers to replenish. Paper or electronic, the logic is the same: what was consumed is what you ship next.

Where you sit in the supply chain also matters: a Tier 1 supplier delivering to an automaker and a Tier 2 or Tier 3 supplier delivering to another supplier receive their kanban and naiji from different customers, each with its own rules. For how those tiers and keiretsu relationships work, see Japanese Automotive Supply Chain: Tiers, Keiretsu, Pricing.

Delivery Cycle Codes Such as 1-4-2

Supplier kanban often show a three-number code for the delivery cycle. A Toyota patent (US 5,278,750) explains the code "1-4-2" this way: there are four truck deliveries per day, and the parts for a given delivery are ordered by cards collected two deliveries earlier. So the three numbers read as days – deliveries in that period – lag in deliveries.

Figure 3: Reading the Delivery Code 1-4-2 (Fictional Example)

Cards collected on one delivery are filled two deliveries later.

1DaysThe cycle covers 1 day

4Deliveries4 truck deliveries in that day, e.g., at fixed time slots

2LagCards picked up on delivery 1 are filled on delivery 3; cards from delivery 2 on delivery 4

Reading based on Toyota patent US 5,278,750. Times and quantities are for illustration only. Customers can define or label the code differently, so confirm the meaning in their supplier manual.

The code tells you how many times a day you deliver and how much time you have between receiving a card and shipping against it. Supplier delivery frequency varies by part. Ward's Auto reported deliveries to Toyota plants at intervals as short as one hour for air conditioners and heaters and as long as one day for parts such as wipers, seat belts, and trim. The cycle also affects how many cards are in circulation: more lag means more cards, and therefore more parts in the loop.

Naiji (Forecast) vs. Kakutei (Firm Order)

Kanban gives the daily quantity, but you cannot buy raw material or plan staffing from cards that arrive hours before shipment. That is what the naiji is for. Mitsubishi Electric describes naiji as provisional quantity information that a manufacturer gives its suppliers, a forecast of orders several months ahead. A kakutei (確定) is the formal order, and its due date is fixed at the same time. The same source notes that quantities can move by close to 20% between naiji and the firm order, so suppliers need operations that can absorb the change.

Kumazawa (2018) describes the layers at a company that uses TPS. Monthly sales and production plans are built from the customer's naiji. For kanban-delivered products, the plan sets a daily production level, and the number of production and withdrawal kanban is increased or decreased to match that month's daily volume. Suppliers receive the monthly and daily required quantities as naiji, and the actual delivery quantity comes from the removed withdrawal kanban.

Figure 4: Planning Layers Between a Japanese Customer and Its Supplier (Example)

The longer the horizon, the more MRP drives decisions. The shorter it is, the more kanban takes over.

Months ahead: set the volume with plansThe customer builds a master production schedule from forecasts and expected orders. You use the naiji in MRP to order long-lead materials and check capacity

Reviewed monthly

Monthly: set the daily rate and the card countThe monthly plan is leveled into a daily rate and sent to suppliers as naiji. The number of kanban is adjusted to the daily volume

Driven by actual use

Daily: match the actual quantity with kanbanParts between processes and from suppliers are replenished by the cards removed. Build sequence follows the leveled plan

Generalized by the MONOSCOPE editorial team from Kumazawa (2018) and Karmarkar (1986). Horizons and roles vary by company.

For a supplier, the practical meaning is simple: plan on the naiji, ship on the kanban. Use the forecast to buy material and book capacity, and treat the cards as the instruction for what goes on the truck. Who bears the cost when the firm quantity differs from the naiji is a commercial question. Check your contract or supply agreement, and ask the customer if it is not written down.

How Many Kanban Cards Are in the Loop

The number of cards sets the amount of inventory between the customer and you. A 1977 paper by Toyota engineers (Sugimori et al.) gives this formula for the number of kanban:

Figure 5: Number of Kanban (Sugimori et al., 1977)

Demand, lead time, and container size set how many cards circulate.

Number of kanban y = D × (Tw + Tp) × (1 + α) ÷ a

D: demand per unit of timeUse leveled demand

Tw: waiting time of kanbanTime from when a card is removed until production starts on it

Tp: processing timeTime to make and replenish the parts

a: container capacityNo more than 10% of daily demand

α: safety factor (policy variable)Allowance for disturbances, no more than 10%

Worked example (fictional)D = 400 pcs/day, Tw + Tp = 0.5 day, α = 0.1, a = 20 pcs: 400 × 0.5 × 1.1 ÷ 20 = 11 cards

Formula and variable conditions from Sugimori et al. (1977). The example numbers are for illustration only. Some textbooks add the order cycle or safety stock period to the formula.

In the example, 11 cards × 20 parts = 220 parts is the maximum that can circulate in this loop. The paper explains that when demand D rises, the intended response is to keep the number of cards y largely unchanged and shorten the lead time (Tw + Tp) instead. For a supplier, this means two things. The card count follows the daily rate, so check it whenever the monthly naiji changes. And the inventory in the loop is tied to lead time, so shortening your lead time is the main way to run the loop with less stock.

All of this assumes leveled production (heijunka, 平準化). JIS Z 8141 states that leveling the volume at final assembly is important for just-in-time, and Sugimori et al. describe dividing the monthly volume for each vehicle specification by the number of working days, then mixing vehicles with different specifications within the day. If the customer's final assembly swings widely from day to day, upstream suppliers have to carry stock and staff for the peak days. Kanban without leveling pushes the burden onto suppliers.

Running MRP Behind Kanban at Your Plant

JIS Z 8141 defines MRP as a production management system that determines the required quantities and timing of materials, based on the MPS, the BOM, production plan information, and inventory information. Its three inputs are the master production schedule (MPS), which sets how many end items to make in each period; the BOM, which shows which parts are needed per product and at which level; and inventory data, meaning stock on hand plus open orders. Because engineering and manufacturing BOMs often differ, MRP needs a BOM that matches how the product is actually built. JIS also separates independent-demand items (finished products and service parts, whose demand comes from orders or forecasts) from dependent-demand items (parts and materials, whose demand is calculated from the finished products).

A simple fictional example shows the calculation. The plan calls for 100 units of product A in week 5, and each unit uses two of part B, so the gross requirement for B is 200. With 50 in stock and 30 on open order, the net requirement is 200 − 50 − 30 = 120. If procurement lead time is two weeks, MRP plans an order for 120 in week 3. In practice, the calculation also includes rules such as order lot sizes. Real plants do this for thousands of parts across many BOM levels at once, which is why MRP spread with computers.

Even for a kanban customer, MRP is the natural tool for items that cannot be replenished after they are used, such as imported parts or custom materials that take months to arrive, and for capacity planning. Karmarkar (1986) proposed exactly this kind of hybrid, MRP at the plant level and kanban at the cell level, to combine MRP's use of advance demand information with kanban's fast response. He also noted a weakness of MRP: it treats lead time as a fixed value, although real lead time changes with congestion and lot size.

Deciding Which Items Run on Kanban

You do not have to use the same replenishment method for every item. The table below lists the conditions that point toward each one. It was compiled by the MONOSCOPE editorial team from JIS Z 8141, Toyota materials, and Karmarkar (1986), and is a guide, not a rule.

Factor	MRP fits when	Kanban fits when
Variety and volume	Many variants, low volume per variant	Few part numbers, the same parts used repeatedly in volume
Demand swings	Large swings; you want to plan ahead from orders or forecasts	Small daily swings, or swings absorbed by leveling
Lead time	Long procurement or production lead time; you must order ahead	Short replenishment lead time; frequent small cycles are possible
BOM depth	Deep BOM; common parts shared across many products	Simple relationship between items and quantities across processes
Leveling	Final assembly mix and volume are hard to level	Final assembly mix and volume can be leveled
Supplier relationship	Many suppliers, ordering by purchase order	Nearby suppliers with agreed, fixed delivery cycles
Make-to-order vs. repetitive	Engineer-to-order or one-off specifications	Repetitive make-to-stock or repeat-order volume production

Karmarkar (1986) notes that combining MRP and kanban suits repetitive batch manufacturing with parts fabrication, subassembly, and assembly, and does not suit job-shop, make-to-order production. JIS Z 8141 notes that one-off and small-lot production often uses order-number control (seiban kanri, 製番管理), which groups instructions by a production number for each order. Kumazawa (2018) also shows that a TPS company calculates parts requirements from the monthly product plan to order materials, which is the MRP logic running outside the kanban loop.

Demand swings deserve a closer look. Kanban follows past consumption: what was used yesterday is replaced today. Kumazawa (2018) notes that when withdrawals vary beyond the range that kanban can absorb with small adjustments, the upstream process either builds excess inventory or cannot deliver the quantity requested. MRP can build future orders and forecasts into the plan, so it is easier to prepare for large or seasonal changes.

Two fictional companies show how the factors work together. An industrial equipment maker whose specifications change with each order, with thousands of parts, deep BOMs, and many long-lead imported items, would rely mainly on MRP and use kanban only for common screws and general-purpose parts. An automotive parts maker with a few dozen part numbers, a monthly naiji, and daily withdrawals from its customer would run replenishment between processes and to the customer on kanban, and use plans for raw materials and monthly staffing and capacity.

Common Pitfalls When You Combine Them

• Double ordering. The same part gets ordered by an MRP purchase order and replenished by kanban. Flag each item in your master data as either "planned" or "kanban" so the system and your planners treat it one way only.
• Card counts not updated. When the daily rate changes and the card count stays the same, you end up with either too much stock or shortages. Build a monthly step that turns the new naiji into card counts, on your side and in your own internal loops.
• Planned lead times that do not match reality. If the lead times in your MRP are far from actual, long-lead material arrives too late to support the kanban loop.
• Scheduling treated as part of MRP or kanban. Day-to-day sequencing and machine loading are separate scheduling tasks. Neither MRP nor kanban by itself sorts out finite capacity.

Related: Production Control in Japan: Scheduling, Shipping, Who to Ask

Push vs. Pull: Why the Labels Differ

MRP is usually called "push" and kanban "pull," but sources draw the line on different axes. JIS Z 8141 defines push as producing to a predetermined schedule and pull as producing only to replace what the downstream process has withdrawn. The APICS Dictionary (ASCM) makes a similar split for production, according to secondary sources that quote it. For distribution, it splits by who decides on replenishment: the plant or central warehouse (push) or each local warehouse (pull). Hopp and Spearman (2004) define pull as a system with an explicit limit on work-in-process inventory, and push as one without it; in their view, the benefit comes from the cap rather than from "pulling."

By that last definition, the difference is clear: kanban caps the inventory through the number of cards, while MRP releases orders to the plan and has no cap of its own. MRP does take in orders and updated forecasts, so it is not blind to real demand. Karmarkar (1986) observed that it looks similar to just-in-time for that reason but does not behave that way in practice. Seeing the difference as "Is there a built-in inventory cap?" makes it easier to design a combined system.

What to Check on Your Own Side First

• BOM and inventory records match physical stock and how the product is actually built (MRP results are only as good as the master data)
• Planned lead times in your system are close to actual lead times
• Items are listed separately as daily-use, rarely used, and long-lead
• Each item is flagged as planned or kanban in your master data
• Someone owns the monthly update of card counts, and the timing is fixed

Questions to Ask Your Japanese Customer

Supplier manuals and rules differ by customer, so confirm these points before your first kanban delivery. Ask for the supplier manual, if there is one, and check the answers against it.

• What does the delivery code on the card mean, and what are the delivery time slots for each day?
• Are the cards paper, electronic, or both? How will we receive them, and how fast after removal?
• What is the delivery window, and what happens if a truck is early or late?
• What are the container type, quantity per container, and labeling rules? Are containers returnable?
• How far ahead is the naiji issued, how often is it updated, and what is the firm period?
• How is the difference between naiji and the firm quantity handled commercially?
• When and how will the number of cards change, and who notifies us?
• What should we do if a card is lost or damaged, or if the card count and physical stock do not match?
• What is the procedure if we cannot ship the full quantity on a delivery?
• Which working-day calendar applies, including the customer's holidays and shutdown periods?

Sample Email: Confirming Kanban Delivery Rules Before Start of Production

Subject: Kanban delivery rules for part no. [XXXXX] – questions before start of production

Dear Mr./Ms. [Name],

Thank you for the kanban cards and the naiji for [month]. Before our first delivery, we would like to confirm a few points:

1. The delivery code [1-4-2] on the card: please confirm the delivery times for each day and the lag between card pickup and delivery.
2. Delivery window: how early or late may our truck arrive?
3. Container and label: please confirm the container type, quantity per container, and label format.
4. Naiji: how many months does it cover, and which period is firm?
5. Card count: when will you update the number of cards if the daily volume changes?
6. Exceptions: whom should we contact if a card is lost or we cannot ship the full quantity?

If you have a supplier manual, we would appreciate a copy. Thank you for your help.

Best regards,
[Your name]

Short, numbered questions are easier for your contact to answer one by one, or to forward to the right department.

Where This Guide Does Not Apply

• Kanban rules, delivery codes, naiji horizons, and commercial terms are set by each customer. The Toyota sources here describe one system; other Japanese companies adapt it.
• Outside automotive and similar repetitive industries, Japanese customers may order by purchase order only. Engineer-to-order equipment is usually controlled by order number, not kanban.
• Liability for forecast changes, obsolete stock, and missed deliveries is a contract matter. This guide does not replace your supply agreement.
• The worked examples in this guide are fictional and for illustration only.

FAQ

What Is the Difference Between MRP and Kanban?

MRP plans orders in advance from a production plan, the BOM, and inventory data. Kanban replenishes only what the next process has used, with a card or electronic signal as the trigger. Companies that follow TPS typically use both: plans set the monthly volume, and kanban sets the daily quantity.

What Is Naiji in Japanese Manufacturing?

Naiji (内示) is provisional quantity information, a forecast of orders several months ahead that a customer gives its suppliers. It is not a formal order. The firm order is called kakutei (確定), and quantities can change between the two.

What Does a Kanban Code Like 1-4-2 Mean?

In the usage described in a Toyota patent, 1-4-2 means four deliveries per day, with parts for each delivery ordered by cards collected two deliveries earlier. Customers can define codes differently, so confirm the meaning in their supplier manual.

Should a Supplier Use MRP or Kanban?

Usually both. Use the customer's naiji in MRP to order long-lead material and plan capacity, and ship to the kanban. Decide item by item which method controls replenishment, and record it in your master data to avoid ordering the same part twice.

Sources

• Definitions of MRP, MPS, JIT, leveled production, kanban, push/pull systems, and order-number control: JIS Z 8141:2022, "Glossary of terms used in production management," viewable at the Japanese Industrial Standards Committee (JISC) (Japanese)
• Just-in-time and the pull principle: Toyota Motor Corporation, "Toyota Production System"
• Kanban adoption at all plants (1963), extension to suppliers (1965), kanban types, and leveling: Toyota Motor Corporation, 75-year history: supermarket method, development of TPS, TPS explained (Japanese)
• Kanban formula and leveling: Sugimori, Y., Kusunoki, K., Cho, F., and Uchikawa, S. (1977), "Toyota production system and Kanban system," International Journal of Production Research, 15(6)
• Naiji, monthly planning, and kanban operation: Kumazawa, M. (2018), "Basics of production control in the Toyota Production System," Yokkaichi University Journal, 30(2) (Japanese)
• Delivery code 1-4-2: Toyota Motor Corp., US Patent 5,278,750, "Production schedule making method"
• Naiji and kakutei: Mitsubishi Electric, business column on supplier forecast information (Japanese)
• Supplier delivery intervals: Ward's Auto, "Alive and Well: JIT Thrives in Its Birthplace, Japan"
• Electronic kanban: "Optimal method for changing the number of kanbans in the e-Kanban system and its applications" (abstract); InformationWeek, "Toyota Simplifies Supplier Communications"
• Pull defined by a WIP cap: Hopp, W. J. and Spearman, M. L. (2004), "To Pull or Not to Pull: What Is the Question?," Manufacturing & Service Operations Management, 6(2)
• APICS push/pull definitions: ASCM, "APICS Dictionary", via ASCM Insights, "What is push and pull distribution?"
• MRP–kanban hybrid: Karmarkar, U. S. (1986), "Integrating MRP with Kanban/Pull Systems," University of Rochester Working Paper QM8615; Karmarkar, U. S. (1989), "Getting Control of Just-in-Time," Harvard Business Review