This is part 1 of a 2-part series on determining which items to exclude from a kanban inventory replenishment program.
After you have mapped your value stream’s future state and identified where kanban is a good fit, the time has come to identify which items to exclude from kanban. Yes, kanban is a transformative lean tool for implementing pull in the value stream, but you never want to assume that kanban is always the best replenishment management method for every inventory item. Unfortunately, not every part is well suited to have its replenishment managed by kanban. By taking the time to exclude certain items from kanban, your kanban program will be exponentially more effective and resilient.
So, how does a diligent inventory manager properly determine which items to exclude from kanban?
Assess and exclude inventory items from kanban management by systematically evaluating items using the 8 steps that follow.
- Exclude Groups of Items in Flow
By definition, items that are in flow are not being stored. Therefore, items in flow do not need to be managed as inventory. Because of this, the items should be excluded from kanban and noted as such in your information system.Because so many parts could qualify for this category, it’s a very good idea to consider the way part numbers are assigned. Properly conducted, utilizing smart-part numbers, the exclusion process could be automated, saving precious time.
- Exclude Groups of Items at Specific Process Points
There are times in a sequence of processes where parts are not in flow and parts might accumulate for a short period of time. When this happens, managers are often tempted to automatically employ a kanban solution at each point where parts are waiting. Unfortunately, many of those same managers fail to recognize that most of the parts in situations like this should actually be excluded from kanban.Consider, often, the only reason that parts accumulate is that they are designed to be produced in batches, but as each batch is complete, the items advance to the next process. In this situation, the parts are not actually inventory that needs to be managed. Thus, rather than placing a kanban store between each batching process, it’s typically better to only place one kanban store immediately before the last process.A few considerations
- Smart part numbers can be designed so that a kanban calculator considers items for kanban only when they reach a specific point in your value stream. For example, an item whose part number indicates that it has been through all except the last process — and thus is in the kanban store — would be an item that is recognized by the calculator as one to include on kanban. All other part numbers for the item would indicate that they are not yet to the point of being stored for inventory and should be excluded from kanban.
- When combining push with pull, although the various work cells in a sequence don’t need to be on the same schedule, it is important that productivity is balanced across the different work cells. Otherwise, some cells will begin over or under producing.
- Plan for bottlenecks. Recognize that every series of processes contains one bottleneck process: the slowest process that sets the maximum speed for the entire sequence of processes. Always know which process is your bottleneck, and have a plan to prevent the process from drowning in kanban signals.
- Exclude Groups of Items Made within Build-to-Order Lead Time
When a production sequence’s lead time is less than or equal to the lead time between customer order and promised ship date, it isn’t necessary to hold inventory of the finished product because you can build-to-order. This eliminates the need for inventory management which means that kanban is also unnecessary.You need to identify all processes within the build-to-order sequence of processes. To do that, evaluate the sum of process lead times starting with shipping, and moving upstream until the total combined lead time for all processes is less than or equal to your promised customer lead time.Next, identify all items created by any process within the build-to-order sequence. Flag these items to be excluded from kanban. Once again, smart part numbers are a tremendous help; once you’ve identified the build-to-order processes you can rapidly identify and automatically flag all of the proper parts to exclude from kanban management.
- Exclude Groups of Items with Certain Supply Characteristics
You should consider excluding items from kanban if they have certain supply characteristics.
- Parts without a valid supply contract: Maybe you are transitioning to a new supplier, or perhaps you are renegotiating with your current supplier. In any case, it’s likely that there is no confirmed lead time, minimum order quantity (MOQ) or standard package quantity (SPQ). As a result you probably don’t yet have a confirmed kanban order quantity (KOQ). For that reason, you’ll want to exclude the affected items from kanban until a KOQ is confirmed.
- Parts that are part of Vendor Managed Inventory (VMI): Anytime a vendor manages and replenishes inventory, you don’t have to. It’s actually a smart idea to outsource these tasks whenever you can in order to reduce the time you waste on low-value, but necessary activities. Of course, outsourcing only works if you have a reliable vendor. However, whether you decide to outsource or not, if your vendor is unable or unwilling to manage inventory tasks for you, then you should strongly consider finding new vendor.
- Parts with multiple suppliers or frequent new contracts: Exclude these items from kanban because there is no set order quantity or supplier and, thus, no way to automatically replenish items. At the very least, each order would need to be reviewed by a human to be ordered through the correct means instead of scanning a kanban card.
- Parts from at-risk suppliers: If your supplier is going through significant changes, major incidents, or financial issues, you may not be able to trust that your orders will continue to be filled on time. Any parts provided by an at-risk supplier should be excluded from kanban until the issue is resolved. Alternatively, if the items are kept on kanban, you could implement a temporary manual review process for the items.
That does it for part-1 of this 2-part series on systematically excluding inventory items from your kanban program. In part-2 we walk through the remaining 4 steps of the kanban exclusion process and wrap things up with a brief discussion about planning for your non-kanban items.