Special Kanban Cards – Part 1/3

This is part 1 of a 3-part series on special kanban cards.

Some situations require special kanban cards. A few examples of these are spike cards, transfer cards and serialized kanban cards. These can be deployed as needed, but they also may never be needed at all. Your inventory management could vary.

Spike Cards
Sometimes, a kanban solution works perfectly fine, but your facility suddenly experiences an unusual surge in demand for one reason or another. When that happens, it can be tempting to immediately begin resizing your kanban solutions. However, unless you expect the demand increase to continue indefinitely, you should avoid resizing. Instead, it’s often better to deploy spike cards as a means to temporarily increase inventory levels.

    • Spike Card Scenarios
      • Past-Due Demand: The most likely reason you may choose to use spike cards is to rush fulfillment of past-due orders. While properly designed kanban solutions should ensure that you meet all customer demands on time, that only assumes there are no unplanned accidents. For example, your kanban solution will not account for an equipment breakdown or a severe weather event that suddenly brings production to a halt.

        Imagine that your customer demand is 500 pieces a day, but faulty equipment causes you to unexpectedly cease production for 10 workdays. By the end of those 10 workdays, your facility is going to be past due by 5,000 pieces.
        While your line wasn’t producing, planned inventory was only sitting and waiting to be used. While, there is enough inventory to keep from slipping further behind, there’s not enough inventory available to ever make up the deficit. You must increase inventory.

        The regular rate of production won’t satisfy past-due demand, so you’ll need to increase either your hourly, daily, or weekly production rate. Assume your facility commits to make up lost production over the span of 4 weeks, by working 2 additional hours per workday and working Saturdays.
        Knowing your timeframe, you must figure out how much extra inventory you will need. Your facility needs to produce 5,000 extra pieces over the next four weeks, or 1,250 extra pieces per week.

        Remember that Kanban Order Quantities (KOQs) are defined with suppliers, lead time and packaging requirements in mind, so it’s best to avoid tinkering with your kanban order quantities, which can cause extra work and confusion, and as a result, cause even further delays. So, if your KOQ is 500 pieces, each of your spike cards should also be for 500 pieces.

        Deploying three spike cards the first week, you’ll receive an additional 1,500 pieces, consume 1,250 of them and have 250 remaining at the end of the week. Using only 2 spike cards the second week, you’ll receive 1,000 additional pieces to add to week one’s remaining 50. At the end of week 2, no pieces will remain. Using three spike cards in week three will result in 50 remaining pieces. Finally, using two spike cards in the fourth and final week will leave no extra pieces remaining.

        Keep in mind that you must adjust order quantities in the correct ratios. If your finished product requires one strap and four fasteners, then 1,000 extra finished items require 1,000 extra straps but 4,000 extra fasteners.

        Many managers questions why a site shouldn’t just continue to receive the same inventory on the same schedule that it would had the equipment had not broken down since you can comfortably predict that the parts will be needed eventually. This approach certainly is possible, but there’s a few things you must consider.

        First, you’ll need to be disciplined enough to scan your regular kanban cards at the same rate they would have been scanned had production not stopped. Secondly, artificially triggering replenishment orders can suddenly result is serious storage problems. Also, depending on the reason for the shutdown, your supplier may also be unable to fulfill orders.

        Ultimately, artificial triggering cards is as much or more work than simply deploying spike cards once operations are up and running. Additionally, artificially triggering cards can cause confusion in your facility.

      • Demand Increase (Short-Term): Another situation that spike cards can address is an increase in a customer’s demand that you know is only for a limited time won’t be recurring. The limited time frame is important because a permanent increase in demand dictates that kanban order quantities should be resized.
        An example of a temporary demand increase would be that your customer has an event that requires more product, such as filling a new warehouse due to an expanse in business. The initial stocking up of the warehouse would require a sharp increase in supply, which would likely be followed by a steady, but less drastic, increase in demand. The steady increase would probably require resizing, but that sharp increase would best be solved by simply adding spike cards.
      • Capacity Management (Pre-Build): Similar to a temporary spike in demand due to a one-time event is pre-building to proactively manage future capacity constraints. Perhaps there is not currently a spike in demand, but you know that there will be soon. Perhaps you know that when it happens, it will be so big that your current production capacity might be maxed out. For example, demand will be 120 units a day, but your maximum daily output is only 100. In preparation, you can form a reserve inventory during a lower demand period. This will essentially be your backup supply to avoid stocking out when demand eventually exceeds capacity.
        To stock up this emergency fund, you can enlist the help of spike cards. Understand, that if this future event is something that will happen in the normal course of business, the cards are not actually defined as spike cards. The cards that help you stockpile a reserve can be called reserve cards, capacity management cards, or even pre-build cards. Whatever you call them, their name should reflect their purpose, and they should have a distinct appearance from your regular kanban cards so that they can be quickly and easily identified in cycle.

So far we’ve learned about using spike cards to handle increases in demand. Spike cards are a powerful tool when used right. However, always remember that while spike cards can be useful in a variety of scenarios, be careful to never use spike cards simply as a crutch when resizing KOQs is really what is needed. In part 2 of this series we take a closer look at the Spike Card Process.

2020-03-10T00:50:02-04:00April 22nd, 2019|Categories: Inventory Management, Lead Time Reduction, Lean Manufacturing, Supply Chain|

About the Author:

Aaron is the Marketing Director at Falcon Fastening Solutions, Inc. He is focused on sharing Falcon's unique approach to fastening and class C production component supply chain solutions with equipment manufacturers.

Fasteners and Class C Component Supply

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