Using a Kanban system to manage your inventory of low-cost production components can be a great way to improve lean manufacturing efforts, and the two-bin method is one of the most common variations of this supply chain management strategy. A solid Kanban strategy has the ability to reduce stock-outs and production downtime as well as improve lead times and overall operations. The two-bin Kanban system relies on visual cues to raise the alert when inventory of certain parts like fasteners and class C components are running low so you can order replenishment to avoid production delays.
How does it work?
Essentially, factory workers have two containers of inventory from which they can pull for builds, working through one and then the other. The quantity in the bins is determined by the lead time to replenish and the consistency of usage. An empty bin is the trigger to reorder. This continual process is designed to minimize any stock-out, which could affect production, as replenishment is normally a fixed amount.
While the concept behind this inventory management technique is fairly straightforward, there is a lot of technical nuance that goes in to making the system work. For instance, Mark Rosenthal, an industrial engineer and author of the blog, The Lean Thinker, pointed out that in order for a two-bin system to function smoothly, the time it takes to use all the parts in a container needs to exceed the order and delivery schedule. Otherwise, you run the risk of using all the parts in the second bin before replenishments for the first even arrive.
Won't this result in excess inventory?
As you're making your way through the second bin, the idea is that the first will be refilled and ready for use before you reach the end of your current inventory. So long as the scheduling has been handled well, you will have more inventory than you need for a build, but you also won't have to worry about running out. With a two-bin system, you're never going to have too large of a surplus, since you're generally working in smaller quantities.
What factors go into Kanban planning?
To ensure your two-bin system is efficient, you will need to consider a few different aspects of inventory and production. Oracle outlined a commonly used calculation to determine the best setup for the system to function, based on using one Kanban card per bin. The formula takes into account the number of Kanban cards (C), the size of the Kanban (S), the lead times to replenish the inventory (L) and the daily demand for the particular part (D). The size of the Kanban is equal to the amount of parts you'd order to replenish it. So if a bin holds 100 parts, the Kanban size would be 100. The formula Oracle offered to establish a working two-bin system is roughly that when you multiply the number of Kanban cards, minus one, with the size of the Kanban, it should equal the lead time multiplied by the daily demand for the part, or (C-1) * S = L * D.
Of course, this is the most basic approach, as factors, such as fluctuating demand, lot quantities, minimum orders and other variables can all impact the exact order requirements to keep the Kanban running smoothly. You may not have to worry about all the particulars of keeping your two-bin system in order if you partner with a supplier to establish a vendor managed inventory (VMI) program, as the supplier would be able to keep an eye on the Kanban strategy and ensure your inventory is set up correctly and replenished as needed.