Chapter 9Inventory Kanbans

Automating the Replenishment Cycle

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A consumption based trigger to start a specific amount of product. The consumption point is always down-stream from the producing point.

An inventory strategy used to insure that production keeps a consistent amount of parts available for use in production.

What is a Kanban?

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A Japanese word that means signboard or signal

Are signals developed to automate the inventory replenishment cycle for items used repetitively in a facility

Communicates to the supplier the need for additional material

Integral in a “pull” manufacturing system Introduced by Taiichi Ohno to the TPS after

seeing the American supermarkets in the early 1950’s

Kanban

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An empty container designed to hold a standard quantity of material or parts

The container is sent back to the supplier from the customer when empty

If returnable containers are not used, a kanban can be as simple as a laminated card

Typical Kanban Signal

Supermarket pull

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The signal will contain information such as:◦ Part number◦ Description◦ Replenishment quantity◦ Replenishment time◦ Customer (drop off location)◦ Routing number◦ Where used

Kanban Signal

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are:◦ communication devices from the point of use to

the previous operation.◦ signals to either internal or external suppliers to

supply the next operation. purchase orders to your suppliers. work orders for your manufacturing area.

◦ Used to control the flow of all products.◦ Visual communication tools.◦ Paperwork eliminators.◦ Inventory management reducers.

Kanbans

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Create inventory management as part of the process

Reinforce the need for “quality at the source”

Empower the work cell to manage its suppliers and inventory networks

Kanbans

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Are not appropriate for:◦ Single piece or lot production◦ Safety stock◦ Systems which push inventory carrying

requirements and the associated carrying costs back to the supplier

◦ Long range planning tools when changes in part number or quantity are expected.

For non-repetitive or when new products are expected, traditional production planners are needed.

Kanbans

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Eliminate◦ Over-production*◦ The need for a stockroom◦ The need to reissue purchase orders◦ Large variations in customer demand seen from

upstream processes Reduce:

◦ The data management task for production planning◦ Work orders◦ Inventory*◦ Parts expediting◦ Part shortages◦ Material handling

Kanbans Reduce Waste

*Kanbans create a desired level of inventory, which may be a reduced level from the current state

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Rule #1: Do not attempt to kanban a part number without the complete involvement of all the members of the value adding chain, including your suppliers.

Rule #2: Quality at the source. Do not send defective parts to your customers. Defects must be corrected immediately! Defective parts will cause your customer’s line to shut down!

Kanban Rules

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Setup Reduction◦ Long lead times reduce the power of kanbans and

creates long replenishment cycles, increasing the amount of in-process inventory

TPM◦ Machine downtime reduces the power of kanbans and

creates long replenishment cycles, increasing the amount of in-process inventory

Level production demand◦ Replenishment time is part of the equation, if it varies

greatly, then replenishment will be off by that amount Certified suppliers and certified product

Kanban Prerequisites

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Rule #3: Kanbans require reliable equipment for support. Implement kanbans internally in areas where TPM is in place.

Rule #4: Focus kanbans on products and part numbers with stable delivery requirements and short setup and lead times. Concentrate setup reduction and raw material lead time reduction efforts on the parts which have wide variations in customer requirements.

Kanban Rules

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Kanban CategoriesProduction kanban “One-per-customer” kanban Used when supplying process can

produce as little as one container Part of one piece flow

Signal kanban “One-per-batch” kanban Signals when a reorder point is reached

and another batch needs to be produced Used when supplying process

changeovers are required

Withdrawal kanban “Shopping list” kanban Instructs the material handler to get and

transfer parts

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Cards attached to portable containers Light signal Exchange of containers Supplier replaceable cards on boxes designed to

hold a standard quantity Empty space - a painted spot or border on the floor

around the standardized container Purchase orders Color coded striped golf balls E-mails, phone call, fax, carrier pigeon Scanned bar code labels – electronic kanban Variations of the above

etc., etc,. etc

Types of Kanban Pull Signals

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Kanban Examples

Light signal

To request a new delivery

Kanban card

KANBAN

Full bin usage as the trigger

Kanban spaceMin/max indicators

Container Exchange

The empty container signals a need for replenishment

Kanban Examples

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2731 8540122

Computer and bar codes

The Customer consumes

The Supplier replaces

The Supermarket

Kanban Examples

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Rule #5: Suppliers should deliver all material directly to their customer (point of use). For suppliers who are not certified, and therefore require incoming material inspection, the point of use area should eventually be taught to perform this inspection or the supplier should be replaced with a certified supplier.

Rule #6: Use the parts only as required, and return the kanban to your supplier immediately. Deliver the empty container directly if your supplier is within your facility. If your supplier is external, an area in the plant should be designated for empty kanban container pickup by your supplier. A system must be developed so that all external suppliers pick up their containers promptly.

Kanban Rules

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Rule #7: Do not produce more parts than you have kanbans for, and produce the parts in the order the kanbans were received.

Rule #8: All internal and external suppliers must have, or should be helped to develop, setup reduction programs. The true power of kanbans can be unleashed only when setup times do not influence manufacturing capacity and, therefore, lead time.

Kanban Rules

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Step #1: Pick the part number(s)◦ Should be frequently produced part numbers◦ Should have fairly level demand rates◦ Get everyone involved with the “why” of kanbans◦ Get everyone involved with the “how” of kanbans

Kanban Development

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Step #2: Calculate the quantity to be kanbaned

Generic equationKanban quantity = (A) * (B) * (C) * (D)Where (A) is weekly park usageWhere (B) is supplier lead time in weeksWhere (C) number of locationsWhere (D) is smoothing factor

Kanban Development

Kanban equations vary – it is just an estimate http://www.resourcesystemsconsulting.com/blog/kanban-calculation/

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Formula for calculating number of units per kanban container:

D = Average daily demand of the productSF = Safety factor (typically 10%)KCT = Kanban Cycle Time* (replenishment time once a signal has been received)

*KCT should be in expressed in daysC = Number of Kanban containers

D x (1 + SF) x KCTC

K=

Kanban Sizing

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Consider a part with the following to determinethe number of units per Kanban container:

Average daily demand = 2 unitsSafety factor = 10 %Kanban cycle time= 10 daysKanban containers = 12

2 x (1 + .10) x 10

12= 1.83 2 units per

Container

Round Up

Kanban Sizing Example

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Step #3: Pick the type of signal and container which holds a standard quantity.◦ The container should be sized for quantity as an

aid to visual identification.

Kanban Development

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Step #4: Calculate the number of containers.◦ The container should be sized for quantity and as

an aid to visual identification.

◦ Generic equation

Kanban Development

Kanban Quanitity# of containers:

# of pieces held per containers

Formula for calculating number ofkanbans (signal = full container):

D = Average daily demand of the productSF = Safety factor (typically 10%)KCT = Kanban Cycle Time* (replenishment time once signal has

been received) *KCT should be expressed in days, consider hours per shift, assume 24 hrs/day unless otherwise statedK = Kanban size (number of units per container)

D x (1 + SF) x KCTK

C =

Number of Kanban Containers

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Formula for calculating number ofkanbans (signal = empty container):

D = Average daily demand of the productSF = Safety factor (typically 10%)KCT = Kanban Cycle Time* (replenishment time once signal has

been received) *KCT should be expressed in days, consider hours per shift, assume 24 hrs/day unless otherwise statedK = Kanban size (number of units per container)

D x (1 + SF) x KCTK

C = + 1

Number of Kanban Containers

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Three products are built on a mixed model flow line. Product Xhas a total demand of 50 per day. Product Y has a total demandof 40 per day. Product Z has a demand of 10 per day. Each product uses one component part W at the same supermarket location. When Part W reaches its reorder point (empty container), the Kanban cycle time is 15 hours. The supply process runs 24 hours per day. Part W is replenished in a container of 10 pieces. Safety factor equals 10%.

How many kanban containers are required for Part W?

Consider a part with the following information to determine the number of Kanban containers required:

No. of Kanban Containers Example

Average daily demand = 50 + 40 + 10 = 100 pieces

Safety factor = 10% Kanban cycle time= 15 hours / 24 hours per

day = .625 days Kanban container size= 10 pieces Kanban signal = empty container

100 x (1 + .10) x .625

10+ 1 = 7.875 8 Kanban

Containers

Round Up

No. of Kanban Containers Solution

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Keep in mind that the suggested container size and quantity are a starting point for setting up kanbans

Always consider◦ Material cost◦ Lead time◦ Floor space limitations◦ Package size/ qty (i.e. order qty from suppliers)◦ Replenishment reliability◦ Practical experience

Considerations

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Represents a special case of kanban Lot size/quantity is one

Benefits Minimizes waste in the process Defects affect only one component thus creating

highest possible quality Minimizes inventory and space requirements Keeps pace with customer demand Efficiently utilizes labor in a balanced process Best possible throughput in a balanced process

One Piece Flow

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Kanbans tie related processes together as if they were connected by an invisible conveyor. Kanbans:◦ Improve communication◦ Make inventory and its management visible◦ Improve customer satisfaction◦ Reduce inventories◦ Reduce waste

Summary

Rule #9: Kanbans are not cast in cement – some experimentation is required. Be prepared to make adjustments initially as sales levels change, or as other improvement activities reduce the required number of containers or kanban cards.