Can Right Sized Inventory Optimize Kanban Systems?
Yes! RSI can optimize Kanban Systems!
What does Kanban mean?
Kanban directly translates to signboard. It was popularized by Toyota and more directly translates as a signal. At RSI we interpret that as a signal to order! This means there is a trigger to replenish a certain amount at a given lead time.
How do you calculate safety stock from a Kanban system?
Your safety stock and cycle stock are triggered when the first Kanban card is turned in. Then the quantity remaining in ALL the bins make up your two levels of cycle stock and safety stock. RSI then simulates the random supply and demand to provide the leanest possible output while still maintaining delivery at the desired service level. Cycle stock is the amount of your average daily usage (ADU)/ average demand. Your safety stock is the amount of stock remaining AFTER the cycle stock.
We take the cycle stock and safety stock levels and translate into the optimal number of Kanban bins and the correct quantity to meet your service level.
For example, a 6 bin System of 50, would have 250 (6-1=5, 5*50=250) units that make up the cycle stock and safetystock.
How?
We test different quantities of Kanban bins and quantities to determine the most optimal number of bins and quantity in each bin the same way we do with reorder point,min/max, and MRP safety stock. We use the fitted historical demand and supplier lead time to simulate various demand and supply profiles to ensure you have the lowest amount of safety stock and still meet your desired service level.
What changes?
We test the size of the Kanban cards and the number of cards. For example, a 3-card system of 78 units per card will typically function with less inventory average on hand than a 9-card system of 26 units per card however, this can also be influenced by other relevant parameters like Lead Time, Probability of Cancellation, and Fixed Reorder Interval.
Why do organizations use Kanban planning?
Kanban planning typically uses a visual Kanban board to display the location of the inventory at any given time. This physical board can make the supply chain visible at a glance to outsiders Next, the “pull” trigger of a Kanban board makes sure that material is only ordered when it is absolutely needed to. It can slow down ordering based on the trend automatically without any input from any outside systems, since the card won’t be turned in. This means that for products that have a drastic decrease in demand, the material won’t be over ordered. Lastly, material is controlled by the physical movement of the card, meaning that if systems aren’t calculated or ordered correctly, you have a failsafe in place. RSI is a great addition to Kanban planning and can bolt on to an ERP system to help you unlock even more of the advantages of Kanban planning.
