The following presentation is not my original work, rather it’s a collection of knowledge acquired from many sources. The intent is to demonstrate and present my learnings in the subject matter. Please feel free to comment and critique as you see fit.
Containers: 1 st Building Block of Kanban
A container is any holder of parts, sub-assemblies, finished parts, etc.
Each container must hold a specific and consistent amount of “stuff”
Variability in what’s in the container adds variability to the control methods.
Knowing the container has a specific amount, we can predict when it will empty and need to be replenished.
Customer Behavior Empties Containers
Simplest predictor of customer behavior is the Daily Average (DA).
For containers, the customer is the process that uses the material out of the container, not the end-use customer.
Predicting how long it will take to empty the container depends on the consistency of both the amount in the container and how it will be emptied.
One open container rule: Deplete inventory in one container only
Period: Used to calculate daily averages. For best representation of usage, period should be long enough to represent the expected demand (1 quarter or more).
Stable demand expected: Equal weight between forecast and past usage
Changing demand (up or down): Weighed more toward forecast than past usage
DA (Daily Average): Average daily usage of the part. Simple DA works if variation in the part usage does not vary more than 30% over the period the kanbans are calculated (usually in days, but can be in hours for internal, high speed replenishment to point of use).
Container Quantity: based on:
Minimum lot size that can move through the system (“true lean”= 1)
Maximum quantity that can fit in the container without damage
DTE (Days to Empty): How many days it takes to empty one container.
Lead Time Definitions
MLT (Manufacturing Lead Time): Time it takes from the generation of the kanban signal to the appearance of the filled container at the consumer’s location, or in the supermarket. This includes:
Wait time for the signal to be picked up and transported to the supplier
Wait time until it appears on the work board
Wait time on the work board
Queue times within the process
Sum of Operation Cycle Times in the process
Delivery time to the consumer
Lead Time Definitions
SVLT (Supplier Vendor Lead Time): Time for the supplier to deliver replenishment, or how long products take if they leave the flow cell for outside processing (i.e. water wash in our cell). This includes:
Time to deliver signal or part
Time signal or part waits
Time sign or part is transformed
Delivery time to the consumer
Wait time at the consumer before part is available to use.
Basic Kanban Formula
The term (DTE + MLT) is an expression of time. DTE, in days, adds one container to ensure inventory exists during replenishment.
K is the number of cards, rounded up to the next integer. In many cases, this rounding adds a buffer.
If the raw K value’s fraction is very low, lower the number of parts in a container to minimize inventory levels in one container. This may increase the number of cards by one.
If the rounded K number is high:
Review DA and lead times
Increase the number of parts in a container, without sacrificing quality and without an excessive inventory inflation at the point of use
Expanded Kanban formula
Added a component to address the time it takes a supplier to replenish material.
Expanded formula, restating MLT and SVLT into a sum of lead times:
Inventory Components: Cycle Stock
Cycle Stock: The standard inventory defined by the kanban calculation to cover demand while the replenishment cycle is in progress. This is the amount to cover normal demand. Key drivers are lead time to replenish and average demand.
Variation Buffer Stock
Variation Buffer Stock: Amount of additional inventory to cover customer-induced variations. Key drivers are demand volatility and forecast or planning errors.
Safety Stock: Amount of inventory required to cover internal losses. Drivers are quality issues and unplanned downtime.
Lean strives to minimize, working toward eliminating Safety Stock.
Addressing Variation in Kanban
For variation greater than 30%:
Statistical modeling of demand:
Add in standard deviation(s) to buffer for variation
1s for 68% of daily demand met, 2s for 95% of daily demand met
Peak demand (HAD) when spikes are the rule rather than the exception, or for non-normal demand distribution patterns:
For the period, find the highest day demand for each week.
use the highest demand day in past usage for HAD
average the highest day for each week of the period
One time spike demand should not be included in the HAD, but a pattern of spikes should be
Formula with Variation Buffers
Expanded formula, using standard deviation buffers:
ns = s is standard deviation, n is 1 or 2. Use 1s for 68% coverage or 2s for 95% coverage, depending on risk
Expanded formula, using HAD (Highest Average Day)
Safety Stock Added to the Expanded Formula
SS = safety stock as a quantity of parts to use as a buffer. It is not impacted by lead times, so it becomes it’s own term.
A variation using “x” number of days buffer (DB) would look like
Impact of MLT Changes on Cycle Stock: MLT is Faster
Kanban triggers based on use would trigger correctly, but inventory level would not decrease to the level planned.
When replenishment comes, it adds to a higher level, inflating inventory.
Adjusting for Speed Improvement
If MLT is reduced, the inventory levels and the trigger points should change to the new equilibrium
Impact of MLT Changes on Cycle Stock: MLT Takes Longer
If MLT takes longer than planned, the replenishment is delayed enough that the cycle stock is consumed and inventory is coming from the buffers.
Continued performance at the longer cycle time can result in a stock out.
Keeping the Kanban System Working
Kanban Maintenance: Review of the factors that impact the kanban. Recalculate when any of these factors change. Periodic review should also be done to ensure inventory matches demand:
DA & Variation Buffers
Kanban Audit: Review of the signals in place to make sure the correct amount of signals are in place
Important: Keeping the signals visible is an important part of the audit process (need to have fixed locations cards can be found at).
Kanban Formulae Simple With std deviation for variation With HAD for variation With Safety Stock Qty With Safety Stock by Days