9. It is important to validate that the KANBAN loop prescribed
converges with management's inventory turns objectives. In our
example, there will typically be an average inventory of 6 KANBANs
for each item.
During the work center's monthly operation, 212 hours of production,
53,000 parts will be produced (212*250 items per hour), the
equivalent of some 241 KANBANs. These represent 20 different items
each with about 6 KANBANs in average inventory, totaling 120 skids.
This includes rolling stock as well as safety stock. Dividing 120
into 241 yields two turns per month, or 24 per annum. If this is not
the magical number you are looking for, modify any one of the
constraint or demand factors used in the calculation to change this
result For instance, adjusting net capacity slightly, or reducing
setup times even just a bit typically has a big impact on inventory
turns. More capacity can also be assigned to the work center.
Alternative work centers can also be assigned to some of the items.
Demand can also be managed. We usually find that the inventory turn
possibilities offered by this approach surprise many managers. They
never realized simply optimizing stocks with the real constraints
could do so much.
Let's discuss the EOQ once again. Recall that we mentioned that
the EOQ should only be calculated using variable costs, and that
these vary according to the time horizon considered. Management
policy about inventory turns should be related to the costs over a
three to twelve month medium term horizon, over which time at least
the labor component is variable. The KANBAN calculation should focus
on immediate to short term; which assumes labor is fixed, and thus
setups are available at no extra cost if the capacity is available.
If the inventory turns predicted by the KANBAN calculation exceeds
the EOQ-based turns projected for the medium term horizon, this
implies there is too much capacity on the shop floor. The contrary
is also true. This is probably the only way to validate short term
capacity, because it is the only approach that integrates mix,
capacity, process variability and demand constraints to deliver an
integrated and optimized game plan. This breakthrough approach
actively compensates for the weaknesses of MRP, the traditional
KANBAN, and the Theory of Constraints by integrating them all
Implementing the Loops
10. As they say, the proof of the pudding is in the eating. Aside
from when the KANBAN loops are being implemented the first time,
the above calculation will be made regularly to allow the operators
on the shop floor to modify, or at least anticipate the need to
modify, existing KANBAN loops.
In the implementation phase, ensure each skid in process or in
inventory contains the number of parts indicated by the KANBAN, and
stick a KANBAN on each. Post remaining KANBANs on the KANBAN
planning board at the respective supplier work centers. If there
are not enough KANBANs to go around, this indicates surplus
inventory which will have to be slimmed down; do not add more
These new loops provide the production personnel with information
about forecasted volumes that they may not already perceive on the
shop floor. Shipping may not have started pulling the mix forecasted
(Shipping actually triggers production in the pull environment by
shipping skids and returning the consumed KANBANs to the last
operation, and so on).
By complementing the foresight wrought into our calculated
KANBANs with the operational know-how of the shop floor personnel,
we will obtain the best of both worlds and allow the operators to
react proactively to changes in the product mix and volumes. This
proactive ability is typically absent from traditional production
departments as well as in shops who have implemented KANBANs without
incorporating the integrative and predictive aspects of the 7th
Thus, based on the experience of the operators, these new suggested
KANBAN loops can be implemented progressively by adding or removing
KANBANs from the existing loops as the new mix manifests itself.
Notice that in saying this, we have redefined the nature of the
partnership which should exist between the planning department and
For example, if the current KANBAN loop for a given
customer-supplier relationship for a specific part is comprised of
13 KANBANs and the new calculated loop suggests 15, as soon as the
operator feels the need to add new KANBANs (because the new mix is
manifesting pull signals in that sense), his judgment will be
vindicated by the projection. If, on the other hand, the operator
perceives the need to diminish the number of KANBANs, the fact that
the new loop recommends an increase instead will allow the operator
to realize the signals he is getting are contrary and that he should
investigate a little further; possibly the dip he is seeing is due
to a direct or an indirect customer temporary down time. We will
have given the operator guidelines providing a global appraisal of
his upcoming mix, not just a snap shot on one part's situation.
The operator can also provide feedback about the parameters used
in the loop calculations, especially when he considers the suggested
loops consistently too large or too small. These refinements will
allow us to provide him with more sensitive and viable information.
Whereas the planner becomes an information liaison with the
operator to provide him with the big picture, the role of the
operator is to refine the loops with his experience and more
detailed visibility. In the next section, we will see how the
operator can do this so as to minimize stocks and maximize
efficiency while meeting the customer's needs head on. This is his
new measurement of productivity.
To Be Continued
For balance of this article, click on the below link:
Lean Manufacturing Articles and go to Series 01