The system provides two features for recalculating kanban quantities: Kanban calculations and kanban simulations. Kanban calculations use formulas and assume a single average daily demand. Kanban simulations allow you to test iteratively, or simulate, these calculations against an actual demand profile in which variations from the average are likely. If the simulation results in a stockout, meaning inventory is insufficient to meet demand, the system increases the number or quantity of kanbans and runs the simulation again.
When performing a calculation, you must choose a calculation type of either No of Kanbans or Qty per Kanban. With No of Kanbans the size of the container, or kanban, is fixed and the number of kanbans is variable. With Qty per Kanban the number is fixed and the size is variable as in a two-bin inventory system. You can add safety stock to the calculation, expressed either in units, in days, or as a percentage.
There are two types of calculations: Basic and Constant Cycle. The basic formula is simpler and assumes that replenishment is triggered when the last unit is taken from a kanban. The formula has two variations, depending on whether No of Kanbans or Qty per Kanban is the variable for which you are solving:
No of Kanbans = [(Daily Demand * Replenish LT) + Safety Stock + Lot Size] / Qty per Kanban
Qty per Kanban = (Daily Demand * Replenish LT) + Safety Stock + Lot Size / No of Kanbans
Example: If daily demand is a hundred units, replenishment lead time (Replenish LT) is two days, safety stock is twenty units, lot size is fifty units and quantity per Kanban is ten, then the number of kanbans is twenty-seven, calculated as follows:
No of Kanbans = [(100 units/day * 2 days) + 20 units + 50 units]/ 10 units = 27
If you are working with large lot sizes, you should use the Constant Cycle formula instead of the basic formula. The main idea behind the constant cycle formula is that, if the lot size is larger than the total demand during the replenishment lead time, then demand should not affect the calculation of number of kanbans or quantity per kanban. The formula uses the following logic:
If:
Lot Size = (Daily Demand * Replenish LT) + Safety Stock
Then:
No of Kanbans = (Safety Stock + Lot Size) / Qty per Kanban
Otherwise:
No of Kanbans = [(Daily Demand * Replenish LT) + Safety Stock] / Qty per Kanban
Example: If daily demand is a hundred units, replenishment lead time (Replenish LT) is two days, safety stock is thirty units, lot size is three hundred and fifty units and quantity per kanban is ten, then the number of kanbans is twenty-seven, calculated as follows:
No of Kanbans = (30 units + 350 units) / 10 units = 38 units
Although the preceding example illustrates how to use the constant cycle formula to calculate number of kanbans, you can vary the formula to solve for quantity per kanban.
The constant cycle formula favors a first-unit, or two-bin, replenishment approach. Under this approach the system triggers replenishment when the first unit - or, if specified, the first unit below the reorder point - is taken from a kanban.
Kanban simulation is a technique used to estimate when a stockout will occur and to suggest the changes in quantities that will be needed to avoid a stockout. Using a simulation, you can test calculations against an actual demand profile retrieved from Master Scheduling, MRP, or Production Schedule.
Note that a simulation is only an estimate of actual conditions. It cannot be used to predict stockouts with absolute accuracy.
To run a simulation, you must first specify Starting Supply, Initial Kanban Quantities, Number of Iterations, and Percent Increase. The simulation then steps through each day's demand, netting the demand against the onhand inventory value and triggering Kanbans for replenishment according to the specified lead time.
If a stockout occurs at any point during the simulation, the system automatically adds Kanbans or increases the Kanban size according to the stock increase value. The system repeats this process until the simulation finishes without a stockout or reaches the maximum number of iterations, whichever comes first.
The rules for replenishment triggering vary according to settings defined for the circuit:
If the formula type is Basic, the system triggers replenishment when the last unit in a kanban is issued.
If the formula type is Constant Cycle, the system triggers replenishment when the first unit in a kanban is issued.
If the lot size is specified on the circuit, replenishment is always in full lot sizes. With the Basic formula type, the system triggers replenishment when the last unit of a full lot size of kanbans is issued. With the Constant Cycle formula type, replenishment takes place when the first unit of a full lot size is issued.
The reorder point, if specified, triggers replenishment when inventory reaches a certain level. With the Basic formula type, replenishment takes place the first time the last unit of a Kanban is issued below the reorder point. With the Constant Cycle formula type, replenishment takes place the first time the first unit in a kanban is issued below the reorder point.
You can control the values used in the kanban simulation by making the appropriate selection for the Initial Kanban Quantities option. If you select Recalculate, the system will perform a kanban calculation before starting the simulation. If you select Use Values from Circuit, the system will use the current values for Qty per Kanban and No of Kanbans that were saved with the kanban circuit.
The system triggers replenishment at the lead time of the part, e.g., if replenishment is triggered on the first day and the lead time is two days, the item is supplied on the third day.
You must specify lead times in full days. Simulations do not allow fractional lead times as do kanban calculations.
The following two examples illustrate how the selection of formula type affects the calculation:
Example: Basic Formula
Calc Type: No of Kanbans Formula Type: Basic Qty per Kanban: 5 Avg. Demand: 20 units per day Safety Stock: 15 units Lead Time: 1 day Stock Increase: 5% Starting Supply: Full Kanbans Iteration 1: 4 Kanbans, 5 per kanban, 20 starting onhand
Day Demand Qty Net Onhand Supply Qty Supply Kanbans Stockout? 1 18 2 0 2 21 -4 15 3 **Stockout** 3 19 -3 20 4 **Stockout** 4 22 -5 20 4 **Stockout** 5 20 -5 20 4
Iteration 2: 5 Kanbans, 5 per kanban, 25 starting onhand
Day Demand Qty Net Onhand Supply Qty Supply Kanbans Stockout? 1 18 7 0 2 21 1 15 3 3 19 2 20 4 4 22 0 20 4 5 20 5 25 5
Result: Solution reached on the second iteration.
Example: Constant Cycle Formula
Calc Type: No of Kanbans Formula Type: Constant Qty per Kanban: 5 Avg. Demand: 20 units per day Safety Stock: 10 units Lead Time: 1 day Lot Size: 25 units Stock Increase: 5% Starting Supply: Full Kanbans
Iteration 1: 3 kanbans, 5 per kanban, 15 starting onhand
Day Demand Qty Net Onhand Supply Qty Supply Kanbans Stockout? 1 18 -3 0 **Stockout** 2 21 1 25 5 3 19 7 25 5 4 22 10 25 5 5 20 15 25 5 Iteration 2: 4 kanbans, 5 per kanban, 20 starting onhand
Day Demand Qty Net Onhand Supply Qty Supply Kanbans Stockout? 1 18 2 0 2 21 6 25 5 3 19 12 25 5 4 22 15 25 5 5 20 20 25 5 Result: Solution reached on the second iteration.
As mentioned previously, you can control whether the system determines the initial Kanban quantities for the simulation by performing the standard Kanban calculation or using the current values from the circuit. The following example illustrates a simulation in which the standard calculation determines the initial quantities:
Example: Starting Supply, Full Kanbans
Calc Type: No of Kanbans Formula Type: Basic Qty per Kanban: 5 Avg. Demand: 20 units per day Safety Stock: 10 units Lead Time: 3 days Stock Increase: 5% Starting Supply: Full Kanbans
Iteration 1: 13 kanbans, 5 per kanban, 65 starting onhand
Day Demand Qty Net Onhand Supply Qty Supply Kanbans Stockout? 1 18 47 0 0 2 21 26 0 0 3 19 7 0 0 4 22 0 15 3 5 20 15 35 7 6 21 49 55 11 7 19 95 65 13 8 22 123 50 10 9 18 120 15 3 10 21 99 0 0 11 18 81 0 0 12 21 60 0 0
The highlighted area above shows Net Onhand and Supply Qty during the three-day lead time. Note that the starting on-hand inventory is 65 units and there is no supply response within the lead time.
Example: Snapshot within Lead Time
Starting location onhand: 60
Iteration 1: 12 kanbans, 5 per kanban, 60 starting onhand
Day Demand Qty Net Onhand Supply Qty Supply Kanbans Stockout? 1 18 42 0 0 2 21 21 0 0 3 19 2 0 0 4 22 -5 15 3 **Stockout** 5 20 10 35 7 6 21 44 55 11 7 19 75 50 10 8 22 68 15 3 9 18 50 0 0 10 21 29 0 0 11 18 21 0 0 12 21 0 10 2
Iteration 2: 13 kanbans, 5 per kanban, 65 starting onhand
Day Demand Qty Net Onhand Supply Qty Supply Kanbans Stockout? 1 18 47 0 0 2 21 26 0 0 3 19 7 0 0 4 22 0 15 3 5 20 15 35 7 6 21 49 55 11 7 19 80 50 10 8 22 73 15 3 9 18 55 0 0 10 21 34 0 0 11 18 26 0 0 12 21 5 10 2
The highlighted areas above show Net Onhand and Supply Qty during the three-day lead time for each iteration. Start with supply as location onhand, use snapshot of supply within lead time (must use electronic source such as production schedule, shop requisitions, shop orders, supplier schedule, purchase requisition, or purchase order). Starting location onhand: 0
Supply exists within lead time: Day 1, 20; Day 2, 20; Day 3, 20
Iteration 1: 12 kanbans, 5 per kanban, 60 starting onhand
Day Demand Qty Net Onhand Supply Qty Supply Kanbans Stockout? 1 18 62 20 4 2 21 61 20 4 3 19 62 20 4 4 22 40 0 0 5 20 21 0 0 6 21 -1 0 0 **Stockout** 7 19 0 20 4 8 22 18 40 8 9 18 60 60 12 10 21 79 40 8 11 18 61 0 0 12 21 40 0 0
The highlighted area above shows Net Onhand and Supply Qty during the three-day lead time. Start with snapshot of supply within lead time (must use electronic source such as production schedule, shop requisitions, shop orders, supplier schedule, purchase requisition or purchase order).