Chapter 9

1. 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 • 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 • 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 variesgreatly, 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 • E-mails, phone call, fax, carrier pigeon • Scanned bar code labels – electronic kanban • Variations of the above etc., etc,. etc

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

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

17. The Supermarket The Customer consumes The Supplier replaces Kanban Examples Computer and bar codes 2731 8540122

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 estimatehttp://www.resourcesystemsconsulting.com/blog/kanban-calculation/

22. D x (1 + SF) x KCT K= C Kanban Sizing Formula for calculating number of units per kanbancontainer: 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

23. Kanban Sizing Example 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 (1 + .10) x 10 Round Up 2 units per Container = 1.83 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. D x (1 + SF) x KCT C = K Number of Kanban Containers Formula for calculating number of kanbans(signal = full container): 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 + 1 C = 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 kanbancontainers are required for Part W?

29. No. of Kanban Containers Solution • 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 Round Up 100 x (1 + .10) 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.