Kanban for Inventory Management

After completing this training, the learner will be able to: Understand how to use Kanban to manage inventory and inventory replenishment Know what is needed to begin a Kanban program in their department Objectives

Kanban is the Japanese word for signal Kanban is the Japanese word for signal. The Kanban system is a method for managing inventory. What is Kanban?

Kanban is a just-in-time pull system where items are replenished at the rate they are consumed. It is low-tech and highly visual. In Lean , a pull system is where the steps in a process flow smoothly and everything is ready for the next step at the right time. What is Kanban?

Why Kanban? Prevents carrying excessive inventory Prevents stockouts/emergency stock orders Forces stock rotation to reduce inventory expiration Requires less effort to manage inventory Creates standardization

Let’s compare the Kanban method of inventory management to the traditional Par level method in a short exercise. Have someone explain how par level is currently done in their department first? See Kanban Simulation Instructions Kanban vs. Par Level

Did you see differences between the two methods Did you see differences between the two methods? Which method appeared to have the most benefits? See Post-Simulation Discussion questions in the instructions for help in debriefing the exercise Kanban vs. Par Level

Kanban = signal The signal in this system is a Kanban card. Kanban cards should be labeled with: item name, number to restock, when to restock, and the location of more When establishing numbers, weigh the cost of maintaining a lot of inventory vs. the cost of running out at a critical time Replenishment may not need to be done by skilled employees Planning ahead prevents interruptions in work (and stress) Stockouts should trigger a root cause investigation Kanban = signal

Sample Kanban Cards Stocking individual items vs. bins List Name Location of both storage & usage Ordering Info When to restock Number to restock Sample Kanban Cards

Replenishment signals should be labeled with: item name, number to restock, when to restock, and the location of more 2-bin system = 2 bins of each item, when one empties, move to specified restock area & second bin is available The 2nd bin should be turned so it isn’t used until the 1st bin is emptied (either on the bottom or behind #1) Most locations use a combination of cards & bins, dependent on item size/container Kanban System

Lab Storeroom To be ordered On Order Note the Kanban cards placed between boxes of supplies. If you reorder when you get down to 2 boxes, the card is placed between the 2nd & 3rd boxes. When you take the 3rd box & expose the card, you place the card in the pocket. Kanban cards placed in “To be ordered” pocket by staff removing stock Pockets should be right by stock, or you risk cards getting lost Moved to “Ordered” pocket by staff doing the ordering Frees up skilled workers to do their work Standardized times to order based upon usage Stockouts should be investigated for root cause Lab Storeroom

2-Bin System For smaller/loose items Two identical bins, only one is accessible, when it is emptied, you place it in a designated spot & second bin is used Kanban card is inside (like taped to the bottom) 2-Bin System

2-Bin System Empty bins are placed on top of shelf Kanban cards are placed in pocket Empty bin on top of shelf is the signal to restock 2-Bin System

2-Bin vs. Kanban Card 2-Bin System Kanban Card System More error-proof (small cards can be lost or moved out of place) Kanban Card System Uses less space Costs less to implement Most locations use a hybrid of both to handle different types of stock Training is important either way Not to use from 2nd bin until 1st is emptied, not to empty 1st bin into 2nd Watch out for card, how to use it 2-Bin vs. Kanban Card

Data needed to start using a Kanban system: Number/type of items in inventory Consumption rate – how many are used in a day/week/etc. Replenishment Timeframe – how long does it take to get more stock This information needs to be collected before you start setting up a Kanban system Data needed to start using a Kanban system:

Data is entered into an Excel template, which is then used to generate Kanban cards and bin labels. The Lean Educator has this Excel file and can demo how to use it at individual department meetings.

Information Found in Riverside Storeroom Supply Catalog Most general supplies are here you may have specialty supplies whose information is kept in your department Rivernet – applications – storeroom supply catalog (http://rhwbcm03/StoreroomSupCat/) You can get a report on your department’s supply usage from Materials Management Information Found in Riverside Storeroom Supply Catalog

Restock Math As an example for the 2-bin system Therefore, something you use 10 a day and has a 2 day supplier lead time = (10 x 2) x (1 + 0.50) = 30 per bin Most of our departments get supplies once a week, so they often want to have 1 ½ - 2 weeks’ supply on hand at any given time Restock Math

When implementing Kanban, use 5S to help organize stock. A full lesson on 5S Workplace Organization is available.

5S Workplace Organization Sort = dispose of unneeded/expired stock Straighten = organize by use, things that are used most often should be at waist or eye-level Shine = light cleaning Standardize = choose the best layout and label workspace Sustain = audit to ensure organization is being maintained 5S Workplace Organization

Use the PDCA cycle to adjust your system as use begins. Have an available clipboard/notepad for staff feedback on what’s not working Be willing to make adjustments with team approval Some locations don’t laminate their Kanban cards until they’ve used the system for a while and had time to adjust numbers as needed If there are any stockouts, investigate the cause and adjust levels appropriately

Gather Information – Item Name, Ordering Details, Usage Data Create Kanban Cards, Determine Where to Use Bins vs. Cards 5S and Organize the Location Audit and Adjust We will be setting up individual meetings with any interested department You set the time frame based upon your department’s resources Kanban Roll-Out Plan

If you have any questions or would like to learn more about Lean at Riverside, feel free to contact me: Sara Meyer Lean Educator smeyer@rhc.net (815)935-7256 x6392 Any questions?