This is part-3 of a 6-part step-by-step series on kanban deployment.
Point-of-Use (POU) Storage
It’s vital to remember that all parts not in flow are a form of waste. Storage costs money in square footage and racking, in addition to the time it takes for material handlers to cover their work routes. The POU is meant to be just that – a place to use items. It’s not meant to be and should not be designed to behave as a storage location. There should only be enough space to hold limited quantities of an item, such as a Kanban order quantity (KOQ) or up to a maximum of two days’ worth of inventory used at that specific point.
Yes, sometimes a cell may consume parts that are so large that a KOQ can’t be stored within the cell (i.e. POU). When this happens, it can be acceptable to use racks in close proximity of the work cell to hold items until needed. However, when a storage option like this is necessary, extreme care should be taken to protect the kanban process from becoming corrupted. Consider, it’s likely that order triggering will occur at the rack instead of at the cell, so there is a deviation in the original plan. Normally, it is necessary for an item to be used before the Kanban card will trigger a new order. That doesn’t exactly happen when items are being consumed within a cell but stored outside of it. If the card processing occurs at the rack instead of in the cell, however, there is still value in being able to visually see how the kanban cards match to the on-hand items – or lack thereof.
High Kanban Card Counts
A multi-card solution might make you think there should be more inventory space since there would be a greater frequency of incoming orders, but this is not the case.
Remember to apply Kanban logic to real-world abnormalities. For example, imagine that an item has an extremely high card count due to a very low Maximum Order Quantity (MOQ). The cell might consume 2.5 cards worth of items in a day with a 50-card solution and a lead time of 20 days. Many orders are being received and processed, but storage space really doesn’t have to accommodate more than a day’s worth of material, even though multiple bins might be on hand.
Here’s an example to understand why that is.
Let’s assume an item has a daily demand of 1,500 pieces, but the maximum order quantity that the internal supplier would allow is 700 pieces. Any order has a lead time of 18 days, and your safety stock goal for the item is to have three days’ worth of demand.
Following the calculations for a two-card Break-a-Bin (BaB) solution, you’d have a gargantuan KOQ!
- 1,500 x 18 day lead time = 27,000
- Safety stock for 3 days is 1,500 x 3 = 4,500
- Add those together, and you get 31,500.
- Distribute across two cards for 15,750 each.
That’s a large order! It’s quite a bit more than the maximum order quantity of 700 pieces. In these types of circumstances, you must use a multi-card approach. To calculate the number of cards you will need use the lead time demand formula.
Number of cards = ((1,500 x 15 day Lead Time) + (3 days of Safety Stock x 1,500)) / 700 = 45
It’s important to recognize that even with this huge number of cards, the cell will consume only about 2.25 cards worth of inventory per day. So, the supplier only has to manufacture that many per day to deliver. As the new supplies of items come in, the previous items are consumed. This way, you do not need to store more than a few bins at a time despite the abnormally large number of cards being processed and items being received.
Remember, timing can make or break a successful kanban program!
That does it for our review of POU storage and accommodating unusually high card counts while maintaining minimum on-hand inventory. In part 4 of this 6-part series we’ll take a quick look at the kanban deployment process of matching kanban cards to inventory.