1. Inventory Kanbans Automating the Replenishment Cycle
Chapter 9
Inventory Kanbans
Automating the Replenishment Cycle

2. What is a Kanban?
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.

3. Kanban 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

4. Typical Kanban Signal
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
Supermarket pull

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

6. Kanbans
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.

7. Kanbans 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

8. Kanbans 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.

9. Kanbans Reduce Waste Eliminate Reduce: 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 create a desired level of inventory, which may be a reduced level from the current state

10. Kanban Rules
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!

11. Kanban Prerequisites Setup Reduction TPM Level production demand
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

12. Kanban Rules
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.

13. Kanban Categories Production 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

14. Types of Kanban Pull Signals
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
s, phone call, fax, carrier pigeon
Scanned bar code labels – electronic kanban
Variations of the above
etc., etc,. etc

15. Full bin usage as the trigger
Kanban Examples
To request a new
delivery
Kanban card
KANBAN
Light signal
Full bin usage as the trigger

16. Kanban Examples Container Exchange Kanban space Min/max indicators
The empty container signals
a need for replenishment
Kanban space
Min/max indicators

17. Kanban Examples The Supermarket Computer and bar codes
The Customer consumes
The Supplier replaces
The Supermarket
Computer and bar
codes

18. Kanban Rules
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.

19. Kanban Rules
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.

20. Kanban Development 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

21. Kanban Development Step #2: Calculate the quantity to be kanbaned
Generic equation
Kanban quantity = (A) * (B) * (C) * (D)
Where (A) is weekly park usage
Where (B) is supplier lead time in weeks
Where (C) number of locations
Where (D) is smoothing factor
Kanban equations vary – it is just an estimate

22. Kanban Sizing
Formula for calculating number of units per kanban container:
D x (1 + SF) x KCT C K=
D = Average daily demand of the product
SF = Safety factor (typically 10%)
KCT = Kanban Cycle Time* (replenishment time once a signal has been received) *KCT should be in expressed in days
C = Number of Kanban containers
Update and simplify to one slide.
Put calculations on web.

23. Kanban Sizing Example = 1.83 2 units per Container 2 x (1 + .10) x 10
Consider a part with the following to determine
the number of units per Kanban container:
Average daily demand = 2 units
Safety factor = 10 %
Kanban cycle time= 10 days
Kanban containers = 12
2 x ( ) x 10
Round Up
= 1.83
2 units per
Container 12

24. Kanban Development
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.

25. Kanban Development Step #4: Calculate the number of containers.
The container should be sized for quantity and as an aid to visual identification.
Generic equation

26. Number of Kanban Containers
Formula for calculating number of
kanbans (signal = full container):
D x (1 + SF) x KCT K
C =
D = Average daily demand of the product
SF = 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 stated
K = Kanban size (number of units per container)

27. Number of Kanban Containers
Formula for calculating number of
kanbans (signal = empty container):
D x (1 + SF) x KCT
C =
+ 1 K
D = Average daily demand of the product
SF = 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 stated
K = Kanban size (number of units per container)

28. No. of Kanban Containers Example
Consider a part with the following information to determine the number of Kanban containers required:
Three products are built on a mixed model flow line. Product X
has a total demand of 50 per day. Product Y has a total demand
of 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?

29. No. of Kanban Containers Solution
Average daily demand = = pieces
Safety factor = 10%
Kanban cycle time= 15 hours / 24 hours per day = .625 days
Kanban container size= 10 pieces
Kanban signal = empty container
Round Up
100 x ( ) x .625
8 Kanban
Containers
+ 1 = 7.875 10

30. Considerations
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

31. One Piece Flow 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

32. Summary
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
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.