1. Kanban

2. 5 Elements of Lean Transformation
U-shaped assembly cells
Standard Work
Point of Use Inventory
Kanban
Score Card

3. Training Agenda Why are we doing this? What is Kanban?
When to use Kanban?
Kanban information
ABC Analysis
Set up and Maintenance of Kanban
Storage Areas
Replenishment Methods
Calculating Kanban Signals and Kanban Size
When to Recalculate Kanban
Purchasing Strategy
Measuring Progress
Kanban Audit Tool

4. Why are we doing this? Current process is not working Nonnegotiable
Accountability

5. What is Kanban? Defined: Kanban is a pull system.
The Japanese word Kanban, loosely translated, means card, billboard, or signboard.
Kanban is used to control overproduction, for visual control, and as a way to link processes together.
Explain that you will soon identify the difference between a pull system and a push system.
Ask the class if they have any experience with Kanban.

6. When to Use Kanban?
When processes cannot physically be linked together in a cell.
With low dollar items that the business does not want to spend a lot of resources managing.
To help control inventory of high dollar items
To facilitate lead time performance
Explain that Kanban is appropriate for certain processes but not all.
Provide an example when Kanban would and would not be appropriate.
Ask the participants if they can identify a process in their own shops that would be appropriate for a Kanban implementation.

7. Material Pulled By Customers
Kanban is Information
Information Flow
Steel Sup
Fab Area
Gotham Cell
Manage inventory at the lowest level of the bill of material (raw material or purchased component)
Ballast Sup
DCs
Show on white board the two examples
An expanded BOM for purchased parts and an expanded BOM for manufactured part.
Emphasis the lowest part of the bill that Kanban should address
Manufactured
1 – assy
2 – fab
3 – Raw --- focus here
Purchased
2 – purchased part – focus here
Customer
Material Pulled By Customers

8. Manufactured Storage Rack
2 Cards placed in pocket
Material identification on card and in box match material identification on rack
Parts stored back to back NOT side to side
Quantity in unused box matches quantity on card
Correct number of cards in loop

9. Purchased Storage Racks
2 Cards placed in pocket
Material identification on card and in box match material identification on rack
Parts stored back to back NOT side to side
Quantity in unused box matches quantity on card
Correct number of cards in loop

10. Overflow Process
Overflow ticket directs employee to use parts in Overflow area first

11. Kanban Schedule Board Traditionally found near/adjacent to cell
Used for both Purchased and Manufactured Parts
Visually shows expected arrival date for parts and late parts

12. Kanban Drop Box Place where Kanban Cards are left for Buyer/Planner
This indicates to Buyer/Planner that the parts need to be ordered

13. Kanban Card Key Dates Turn In Date Due Date Receive (Receipt) Date
Date the card was placed in Kanban Drop Box
Due Date
Date the part is expected to arrive
Receive (Receipt) Date
Date the part was received

14. Kanban is Information Functions and Rules for the Use of Kanban
Provides withdrawal or transportation information.
The subsequent process goes to the preceding process and withdraws only the amount of goods indicated by the kanban
Provides production information.
The preceding process produces goods in the exact number and order withdrawn as indicated by the kanban
Prevents overproduction, over ordering or excess transport.
Do not produce or transport goods without a kanban
Prevents ordering extra inventory
When you empty a bin, turn in Kanban card
Acts as a work order.
Always affix a kanban to goods

15. Kanban is Information Functions and Rules for the Use of Kanban
Identifies process where defects are produced
Do not allow defective goods to proceed down the line. This demands 100% perfection at every process.
Acts as a tool for inventory control and revealing problems
Strive to reduce the number of Kanban
Never destroy or lose a Kanban card
Do not print on both sides of KB card
Do not change KB card quantity
Do not use parts from multiple KB bins

16. A B C ABC Analysis Purpose of the ABC Analysis:
The business goal is to have on time delivery while minimizing inventory expense. We want to manage the most inventory dollars with our limited resources.
By closely managing A and B items (50% of the stock keeping units), we can control 95% of the inventory cost. A B C
Describe the purpose of ABC analysis. Similar to the 80/20 rule.

17. Percent of Annual Dollars
ABC Analysis 10 20 30 40 50 60 70 80 90
100 A B C
Percent of Annual Dollars
Percent of Inventory Items

18. ABC Analysis Steps A = top 80% of dollars B = next 15% of dollars
1. Multiply annual volume by unit cost to obtain annual dollar volume for each stock keeping unit (SKU).
2. Rank SKUs in descending extended dollar amount.
3. Assign A, B, or C ranking to each SKU:
A = top 80% of dollars
B = next 15% of dollars
C = bottom 5% of dollars

19. Inventory Dollar Value
ABC Analysis
Inventory Dollar Value
Inventory Category
Percentage of Items
80% A
20%
15% B
30% 5% C
50%
Criteria for Moving to Kanban
Value – be mindful of expensive parts
Physical Size – large parts may not be candidates
>4 Hits – repetitive usage
Kanban A B C
Non Standard A B C
On Hand Balance
MOVE

20. Set up and Maintenance for Kanban
Calculate Kanban quantity based on ABC Analysis
Produce Kanban cards (Utilize Bartender or other software tools)
Set up excess storage area and process for Kanban items.
Move excess out of Point of Use (POU) unless item can fit in 2 bin system
Put KB cards on containers
Move all current KB materials to POU by cell and issue KB cards and Spike cards as needed to support production
Re-label racks with part #

21. Set up and Maintenance for Kanban
Set up Kanban board in each cell and populated as relocation continues
Move cardboard items out of area to alternate storage location
Train cell personnel on Kanban and the functions of buyer/planner, water spider and cell leader
MAINTENANCE
Review shared component usages with other Focused Factories within physical building. Biggest user should support all other focused factories.
Only one cell making releases on Kanban card to Sourcing or Supplier
Conduct audits

22. Types of Storage Areas Receiving drop zone Point of Use
Organize by cell
First area where parts are delivered to facility
Point of Use
Located at cell
Used for standard parts
Replenished by POU storage racks
Discrete (DSY/Non Standard)
Organized by cell
Parts are ordered based on schedule cards
Waterspider will kit parts before storing in area
Always look for on hand inventory first
Physically go to storage racks to verify
Do not rely solely on information in Oracle
Physically move discrete parts to cell and identify as discrete parts only
Excess Storage (Overflow)
Not intended to be a long term storage area
Used for Standard and Non Standard parts
Supermarket
Area with dedicated locations
Used to locate parts that are used by many cells

23. Replenishment Methods
Kanban
2 card
Multiple card (greater than 2)
Discrete (DSY) from schedule cards

24. Kanban Calculations
2 Bin/Card Capacity – The amount you should put in each bin
(Daily Usage x Lead Time) + Safety Stock*
Safety Stock = (Daily Usage x Lead Time) x Facility determined percent
Facility determined percent may differ for A, B, and C items or it may be the same
If daily usage is 100 units, lead time is 5 days, and facility determined percent is 10%, then safety stock is (100 x 5) x .1 = 50 units
2 Bin Capacity = (100 x 5) + (100 x 5) x .1 = = 550 units per container
Number of Multi KB bin/card
Walk through the example and provide a written example on a flip chart. Ask the class to calculate another example and volunteer an answer.
(Daily Usage x Lead Time) + Safety Stock
Container Capacity
+ 1
Daily usage is 100 units, lead time is 5 days, facility determined percent is 10%, safety stock is 50 units, and Container Capacity = 100
# of Multi KB bin/card = {[(100 x 5) + ((100 x 5) x .1)]/ 100} + 1 = (550/100) + 1 = 6.5 bins/cards --- round up to 7 bins/cards

25. When should you recalculate your Kanban?
Leadtime Changes (Increases or Decreases)
Supplier Performance (Improves or Declines)
Quantity per container Changes
Standard Work Changes
Customer Demand (Part Usage) Changes
Audit Reveals Problems

26. Measuring Progress Utilize existing +QDIP Measures
Delivery – Past Due Dollars or Target Compliance
Inventory – Inventory Dollars
Describe how the participants will need to benchmark improvements by implementing the Kanban system. This slide provides some sample performance indicators that measure success.
Maybe add no downtime due to parts shortage --- see Mark Preston for examples

27. Kanban Audit Dimensions
Audit should be based on the 5 parameters listed below:
No Card - Material is there
No Material - Card is there
No Material - No Card on a KB item
Material being pulled from multiple bins
Material is not in designated location
Kanban Daily Audit

28. Purchasing Strategy
Going forward the ABL Blanket Purchase Order Strategy will be as follows:
Suppliers must deliver A and B type KB items within 1-5 days including transit time (a list of your A and B items will be provided to you)
Suppliers must hold inventory if mfg lead time is greater than 5 days
Supplier who has delivery performance that is less than acceptable, will be required to carry additional inventory to meet an acceptable delivery
performance
Each part number on A and B type items will have their own specific PO number to streamline receiving and invoicing transactions
ABL Supplier Development Group is available as a resource
SLC- If transit time > 4 days, it is supplier’s responsibility to engage a 3rd party warehouse or service to locate inventory closer to our facility.

29. Manage Key to success: the Kanban System Maintaining Kanban
Kanban is a manual process and must be managed carefully – risks of human error. If implemented and managed, Kanban can be highly successful.

30. Kanban
There’s no fairy god mother to watch over you – you must manage the process.
Tell the participants what the next steps are in the Kanban course.

31. Will a Forecast be provided?
Except for new components, forecast usage will not be provided. Upon exiting our current agreement, both a current-state and post-exit Kanban snapshot (including container quantity, number of containers, and lead time) will be provided for each component.
Going forward, it will be the supplier’s responsibility to monitor their sales history to generate usage information, and it will be up to each Focus Factory to communicate any Kanban set-ups changes to the supplier.

32. How will you communicate spike orders or demand surges related to sales promotions?
When new orders reach our Assembly Cells, they are reviewed for extraordinary material requirements (“spike orders”).
Any demand surges related to spike orders or sales promotion activities will be relayed to suppliers by the Focus Factory Buyer.

33. Who are our Focus Factory buyer contacts?
A list of Focus Factories and the Buyer(s) associated with each Focus Factory has been posted at the following link, along with other supplier-related instructional and informational documents:

34. How can I provide materials within 1 - 5 days if my transit time exceeds 3 days?
Suppliers facing this challenge should make arrangements to maintain inventory within 3 days transit of the Acuity destination facility.
Suppliers can either utilize a 3PL warehouse provider, or make arrangements with another Acuity supplier within the target distance who may be willing to manage your inventory locally.