Page 339 - Orlicky's Material Requirements Planning

318 PART 3 Managing with the MRP System

FIGURE 19-1

Kanji characters
for a kanban
system.
(Courtesy of
Toshiyuki Okai.)

fax or e-mail message that authorizes movement of material. The supplier then quickly
refills the container and sends it back to the line directly to the point of use. This replen-
ishment can happen many times a day to bring parts to the production area as needed.
The primary factors for a kanban system are lead time, item cost, and consumption rate.
In addition, user variables include the desired frequency to receive the material and the
desired level of certainty that a particular item will be on the shelf at any given time.
Kanban is really very similar to the order-point system that had been in use for many
years prior to the development of MRP. The important thing to remember when sizing a
kanban is to consider the potential demand and supply variability for the part and the
total cost to the enterprise.
The order-point system sends out a signal for parts when the inventory has fallen to
the level defined as the order point. The expected lead time to replenish parts should be
equal to the inventory of parts left. If the lead time were two weeks, then the order point
would be set at approximately two weeks’ worth of parts. The delivery is expected to
arrive just as the parts run out. The main difference between kanban and order point is
the time elapsed between signal and replenishment. The order-point signal may take
days or weeks to replenish. The kanban typically is replenished within minutes or hours.
The kanban process works extremely well when the volume and variety stay constant
over a period of time. Provided that the future looks like the immediate past, a supplier,
either internal or external, experiences stable demand.
The approach works well when the demand for the parts is relatively stable. This
stable demand provides a predictable run-out for the inventory. The kanban average
inventory is significantly less than that of the order-point system because the replenish-
ment lead time is also significantly less. Kanbans typically can be replenished several
times in the same day. The small amount of inventory stored in the kanban also translates
to relatively stable demand to the supplier.
Given the very quick replenishment, the demand to the supplier in a kanban envi-
ronment looks stable. This is very different from the spikes in demand found in an order-
point process. See Chapter 4 for a more complete discussion of order point.
The scheduling task for the kanban supplier is relatively easy, provided that no con-
figuration changes or wide variability in volume occurs. Theoretically, this may look very
good, but the real world is rarely so easy to manage. Variability and volatility are increas-
ing at an increasing rate. The risk in using kanban only, without MRP to plan materials,
is what happens when a change in configuration or quantity is required. Since the kan-
ban is sent to the internal or external supplier only minutes or hours ahead of require-
ment, the supplier may be unable to respond in time, and the whole line can be disrupt-