Learn How Much Inventory You Need for Your Kanban
How This Kanban Calculator Works
When you use this Kanban Calculator, you'll determine the total inventory required to satisfy your demand.
By filling out the above calculator, you'll learn how many kanban cards you'll need based on the container size.
The first question is "How many parts do you use per week?", Enter the amount of parts your company consumes.
The second question asks "What is the lead time from the suppliers? (in weeks)", Enter the the amount of time in weeks it takes to receive materials.
The third question asks about how many total locations do you store your materials. We'll take this number to help determine how many parts are needed.
The final question is "How many parts can fit per container or bin?", Simply, how much parts we can store in a given location.
Based on your answers, the Kanban Calculator will provide you with the total number of inventory required and how many kanban cards we will need.
The Kanban Calculator is a handy tool developed by Taichi Ohno of Toyota with the sole purpose of calculating lean manufacturing.
The formula is as follows:
Total Required Inventory (TRI) = Part Usage per Week * Lead-time of the supplier of the part (in weeks) * Number of locations for stock
Below is a discussion of the formula.
The creation of this method borrowed the concept from the stocking of a grocery store perspective. Usually, customers purchase the goods on display at the shelf. It goes on until there is none left on the shelf. An employee then gets some more from the stock in the store. When the one in the store has also been used up and has reached the reorder point, the employee notifies the supplier for more goods.
The Kanban calculator works the same way, where the final assembly point or the storage room for finished cars is the display shelf. As the stock gets depleted due to customer orders, a prompt is made to start more production. At the same time, when the raw material or parts of the car are running low, an order is immediately made to the eternal parts supplier.
Based on how complicated the manufacturing process is several locations for the Kanban cards may exist. For example, a factory can collect bolts of similar sizes in one pool from where it can make an order to the supplier in case of depletion. A sophisticated sub-assembly’s card may issue production orders to various areas within the industry.
Irrespective of how elaborate the number of processing stages in the factory fulfills Kanban requests internally, every step is considered a ‘shelf’ waiting for the green light from the ‘customer’ or the downstream flow of production.
Initially, Kanban calculator used actual cards like those in the stores. The cards contained information on the identity of an item to be stocked on the shelf, the quantity for reordering, recipient of the order and any other information relevant to the individual placing the order. However, the current Electronic Kanban is a computer system that initiates the orders when the inventory is exhausted. It performs the same way except for the advantages like the ease of execution, ease of exchange, employee orientation, and reliability.
Based on the demand track record of an item and the lead time required, the Kanban calculator will not wait for the stock to deplete completely. For instance, a client may make an order when the stock quantity has dropped to ten. The viable approach is to place the Kanban card where it will notice the stock drop to ten. The implementation can, however, be more feasible when you use the following algorithm:
Set the last pool to hold ten items; order when it goes down to zero
Set a secondary pool to contain other ten items; replenish it upon dropping to zero, also.
Therefore, when the last pool request for the remaining ten items from the secondary reservoir, the secondary pool makes an order to the supplier to bring in more items.
The Requirements for a Successful Kanban System
The Kanban system requires a stable and relatively level demand for finished goods, which should range between ten to twenty percent. The shelf life of the products is also a factor worth considering.
In a supermarket, for example, the Kanban system would work well with the staple or frequently bought products like groceries, bread or pasta. These items will be consumed quickly and replenished accordingly. However, the seasonal goods like valentine’s chocolates, Easter eggs, and Christmas fruitcakes will not need replacing immediately. Therefore, shelf space is preserved for the next seasonal product.
On the other hand, the demand for a frozen turkey, for instance, may remain stable throughout the year despite peaking at Christmas or Thanksgiving. It may not be easy to manipulate the production when rearing poultry; however, refrigeration and warehousing are easy processes in the supply chain.
If the inventory goes down to fulfill the demand, or the manufacturing process slackens than the usual rate, then the customers will receive delays from the system. That kind of business risk is manageable through cost reduction regarding carrying little inventory than before the introduction of Kanban system.
Companies with diversified product lines may have a varying balanced or imbalanced demand of goods. Take for instance lawn mowers and snow blowers which apply in different seasons. This scenario shows a natural balance where when one is in stock, the other isn't depending on the season. Kanban system wouldn’t keep both at the same time.
A problem arises when a company’s goods rise and fall in demand at the same time, resulting in conflicts. An example is a corporation manufacturing lawn mowing logistics and warm weather products.
The Six Practices of Toyota
These policies were invented by Toyota to facilitate the functionality of Kanban calculator:
• Defective products should never go downstream to the next process
• Each process orders just the needed item from the upstream process
• Each process must produce just the desired quantity requested by the process downstream
• Maintain a level production rate
• Kanban should be employed to fine-tune the production rate
• Work to eye a stable production rate
Lean manufacturing avoids having inventory, which is a waste of cash, storage space and the motion to store or retrieve items.
Does Kanban go well with Lean Manufacturing or Production Leveling?
In a case where customers always purchase in economic order quantities with flexible deadlines, reliable suppliers and minimal production time, a lean factory may achieve a stable production hence no need to use Kanban. However, if the customers buy goods in variable quantities leading to orders piling up, then there is need to resort to production leveling. The positive side of that being a sustainable pace of production reducing defects that could have occurred in the crash program. To beat the customer deadlines, you need to keep an inventory of the finished goods for the peak demand. It is what will call for the Kanban system.
The Kanban system needs a relatively stable and demand that is well-understood. The capabilities of the manufacturing process also have to be analyzed carefully. When well executed, the Kanban calculator or system will help save costs by minimizing inventory, warehousing, and deferring of production until you attain demand.