Lean Tools for process improvement

 

Kanban System

aka Kanban Inventory System, Kanban Calculator, Reorder Point Calculator, Safety Stock Calculator

What is kanban?

value stream mapping kanban symbols

Learn more about
these kanban symbols
used for
value stream mapping

A kanban is any signaling device
that gives authorization and minimal instructions for either:

  1. for a supplying process to know what to produce, or...
  2. for a material handler to know what items to replenish

Types of kanban systems

Most commonly, a physical paper card is physically placed in a container of parts.

When stored items are actually used, the kanban card gets freed,
and returned to a kanban stand where kanban requests are fulfilled,
usually in First In First Out (FIFO) sequence.

Although cards of the most popular form of kanban, there are many diverse types of kanban systems.

You can learn about pull systems, lean supermarkets, and several popular kanban systems
in our online training for value stream mapping symbols.

Benefits of a kanban system

Why use kanban?

Pull
  1. To enable lean pull systems

    to produce only exactly what a customer needs exactly when needed

  2. To enable lean flow

    which is the overarching #1 priority for a lean transformation

  3. To identify opportunities to improve efficiency

    using visual systems to make both flow and problems visible

    and especially when you scientifically lower the water level
    to expose the next layer of rocks and alligators

Kanban Calculation

One of the most confusing and difficult parts of setting up any kanban system

Cartoon - math confusion

is to calculate the correct number of kanbans to maximize both:

  1. Customer satisfaction

    (few or no stock outs)

  2. Inventory turns

    (few non-productive piles of slow moving stuff)

Kanban Calculation is essentially...

the popular Reorder Point Formula rounded to container size

If it was that easy, you wouldn't need this training, would you?

But read on...

because like every one of your 150+ Systems2win templates,
this one is full of features to help you avoid common pitfalls

In this case... common pitfalls of kanban calculation.


Bookmark = how

How to use your

Kanban Calculator template

Find and open your template

Excel Ribbon bar > Systems2win menu

Find and open your
Kanban Calculator template

(KanbanCalculator.xlsx)

in the same way that you find and open
your other 150+ Systems2win templates.

If you don't yet own a license,
you can download your free trial now.

Save your working document

following the usual document storage and naming conventions established by your leaders

Open a Blank Sheet

Systems2win menu > Open a Blank Sheet

When you're ready to start doing your own real work...

click the button to 'Open a Blank Sheet'

Excel Ribbon bar > Systems2win tab > Open a Blank Sheet

This blank sheet is where you will do your real work

(not on the Sample sheet)

Rename your new sheet.

If English is not your preferred language

Switch to your language, just like every Systems2win Excel template.

Bookmark = types

Now your team is ready to get started...

Enter your Header Data

Tip: Simply hide any header rows that you don't want to usel.

kanban calculator headers

Process Name

Enter the process name and/or number.

Kanban Type

Use the dropdown list to choose
from the list of kanban types.

Like every Systems2win template,
wherever you see a dropdown list,
you know that you can edit the list choices on the DV sheet.

The 3 most common types of kanbans are:

  1. Production
  2. Material
  3. Supplier

And you can (optionally) define an unlimited number of user-defined types of kanbans.

Notice that as soon as you choose a value from your dropdown list,

Kanban calculation DV sheet

several other fields auto-populate —
based on your choice of Kanban Type...

using the default values that you (or your leaders) entered in the table in the DV sheet.

And, yes, just like all of your other Systems2win templates,
the personalizations that your leaders edit in your master template will be automatically found and transferred to your new master template each time that you upgrade in the future.

Learn more about how to personalize your Excel templates.

Revision Number

You can also (optionally) use the 'RevLog' sheet to keep a history of revisions.

And notice that the Revision Log sheet has an extra column for 'Reasons for Misses'

so that you can (optionally) track stockouts and emergency kanbans,
so that you can continuously improve your kanban calculations
when situations arise in the future that have similar conditions for lead time, demand, buffer, and safety.

Release Date

When does this Revision take effect?

Tip: To change date format - Right-click > Format Cells > Number tab

Date of Expiration or Next Review

When is this Revision scheduled to be reviewed for changes?

Or... when did this Revision expire?

Notice that the background color of this cell turns red if this date is older than today.

One of the most common reasons that kanban systems fail
is because there is no system in place to periodically review changes
to Lead Time, Demand, Buffer, and Safety margins.

This color coded system helps minimize that common reason for kanban system failure.

dreaming of home

But we don't want to
'just make do
with the tools we've got'

Author

The only person (or team) authorized to edit this document.

Learn more about the role of a Document Author.

Approvals

Names and/or titles, and initials.

User-Defined

Like all of your Systems2win templates,
you can optionally unhide the row to add a User-Defined heading

and you can copy that row for unlimited user-defined headings.

Learn more about how to optionally personalize your Systems2win templates.

Comments — Revision

Comments to explain conditions that require temporary changes to Lead Time, Demand, Buffer, or Safety.

When you make an entry in your Revision Log, you will usually either copy these comments, or abbreviate them in the 'Description' column of the RevLog sheet.

Comments — Source Data

There is a second text box for comments regarding your source data

Tip: You can increase the height of the text box by increasing row height.

Link Icons

Links to Source Data

In the Links column, you should usually use Link Icons
to provide hyperlinks to all (or at least most) of your source data documents

so that your users can quickly drill down to see the details of any source data.

See our online training for suggested document storage and naming convetions to avoid broken hyperlinks between related documents.

Bookmark = normal

Normal Data?

One of the most common mistakes of kanban calculation

is to use use the Average value for data that does not fit a Normal curve.

If your source data does not fit a Normal curve,
then you should use Median, rather an Average. (or perhaps some other value)

The consequences of making this common mistake are sometimes quite dire:

normal curve
  • Stockouts
  • Missed deadlines
  • Costs of expediting and schedule disruption
  • Unhappy customers
  • Maybe even your job (if you keep repeating this same common mistake)

To provide a systematic way to avoid this common mistake,

your Systems2win template has two extra fields
for both Lead Time and Demand:

  1. Is your source data normal?

    After using a histogram to analyze your source data,
    use the dropdown list to choose TRUE or FALSE

  2. Data type

    Use the dropdown list to choose Average, Median, or Other

If your source data is not normal, and you are using the Average,

warning: average when data not normal

then to alert you
that you are about to make a (potentially costly) error,
the background color of the cell will turn red.

Note: If you have multiple sources of data for Lead Time and/or Demand,
then you should apply this same logic to all data sources.
This feature will serve as a gentle reminder not to overlook this important consideration for all sources of data.

Enter your Units of Measure

There are 4 cells that have a pink background, and a double border.

Enter your Units of Measure in each of these pink double border cells

and notice how many other cells auto-populate with those same units of measure.

Lead Time Unit of Measure

kanban calculation units of measure

Use the dropdown list to choose Minutes, Hours, Shifts, Days, or Weeks

(or any other units of measure that you define in the list on the DV sheet)

Demand Unit of Measure

What is being delivered to your customer?

Examples: In Lean Office, the Demand UOM might be 'Reports' or 'Orders'.
In Lean Healthcare, it might be 'Patients' or 'Prescriptions' or 'Lab Tests'.

Kanban Container

Usually 'Container' or 'Each', but could be anything.

Examples: In Lean Office, the 'kanban container' might be a 'Folder'.

Whenever 'Quantity per Kanban' =1,
then 'Kanban Container' is usually identical to the 'Demand Unit of Measure'.
So in Lean Healthcare, the 'kanban container' might be the 'Patient' themselves.

Kanban Unit of Measure

Usually 'Kanban Cards' or 'Empty Containers', but could be anything.

Learn about other less popular types of kanbans,
such as triangles, golf balls, electronic signals,
and anything that might serve as a signal to produce or move.

Bookmark = LT

Enter Lead Time

Your Kanban Calculator template allows unlimited rows for unlimited types of Lead Time.

When you selected Kanban Type (in the header fields),

the labels for the first two Types of Lead Time auto-populated in the blue cells

(based on the values that you defined in the table on the DV sheet for each of your user-defined types of kanbans)

If you want to itemize more than two types of lead time,

then you can copy the third row, for an unlimited number of rows.

types of leaad time

table on DV sheet

Or... if you want to plug in only a single number for Lead Time,

then you can hide the first two rows (that have the blue cells)

Common types of lead time

  Ideas for each of the 3 most popular types of kanbans

Material Kanban

Requisition Cycle

How long does it take to request a material kanban?

Fulfillment Cycle

How long does it take to fulfill the request?

Production Kanban

Production Process Time

Processing Time, including downtime & other factors of OEE

Production Kanban Cycle

How long it takes a kanban card to complete a cycle

Supplier Kanban

Order Cycle

How long does it take to place the order to your supplier?

Supplier Delivery Cycle

How long does it take the supplier to deliver the order?

You might also use unlimited additional rows to optionally split into
Shipping to Supplier, Supplier Production, Supplier Delivery,
or any other 'Types of Lead Time' that you find useful.

'Total Lead Time' is the sum of all of the rows for your different Types of Lead Time.

Like every Systems2win template, you usually don't want to edit blue cells that contain pre-defined formulas.

Bookmark = demand

Enter Demand

Your Kanban Calculator template

kanban calculation - demand

allows unlimited rows for unlimited Sources of Demand.

If you have only one or two Sources of Demand,

then you can hide unused rows.

If you have more than three Sources of Demand,

then you can copy an unlimited number of rows.

Bookmark = buffer

Enter Buffer and Safety

Demand Variation Buffer

kanban calculation - buffe and safety

Usually, you simply enter your desired % to buffer against variations in demand.

And then it automatically calculates
the number of Units per Day

(or whatever units of measure you entered)

Process Variation Safety

Usually, you simply enter your desired % to buffer against variations in your process.

(Process variations might be downtime, quality problems, or any factors of OEE.)

And then it automatically calculates the number of Units per Day (or your chosen units of measure)

Process Variation Safety % is multiplied by (Demand qty + Demand Variation Buffer qty)

In other words... your Safety margin needs to also cover the extras that you make to Buffer against variations in demand.

Notice in the illustration how the same 5.0% results in a different number of Units.

Suggested Percents

As soon as you entered 'Kanban Type' (in the header fields),

the small grey numbers near the edge of the print area
auto-populated to show the 'usual' percentages of Buffer and Safety for your chosen Type of Kanban.

kanban calculator DV sheet

In the table on the DV sheet,
you can optionally enter your own user-defined
typical buffer and safety percentages
for each of your (optional) user-defined Types of Kanbans

and those percentages show up in your kanban calculator
as small grey suggestions

that you can include in your considerations
when you enter your Buffer and Safety percentages,
or you can ignore.

Custom calculations

Usually, you simply enter your desired % for Buffer and Safety, and then it calculates Units.

There are 3 ways, however, that you can calculate Buffer and Safety differently:

  1. Use a formula to calculate %

    Rather than entering a number for your desired %...
    instead enter a formula...

    kanban calculation - buffe and safety

    Tip: Optionally click the red Anchor Link Icon
    to go to the Custom Formula Zone,

    where you can write your own custom formulas using everything you know about familiar Microsoft Excel.

  2. Override

    Rather than entering a % in the field above the blue cell...

    in the white cell just to the left of the blue cell,
    you can enter your desired number of Units per Day.

    (or whatever units of measure you chose)

  3. Use a formula to calculate Override

    Rather than entering a number in the override cell (just to the left of the blue cell)...
    you can instead enter a formula.

Using these options for custom calculations,

you can calculate Buffer and Safety using any formula that makes sense for your unique process.

Bookmark = container

Clarify Order Quantities

Quantity per Kanban

Quantity per Kanban usually matches your Container size.

And remember that it is not uncommon for 'Container Size' to be 'Each'

Quantity per Order

What is the minimum (or unsual) order quantity?

'Order' might be a purchase order or a production work order (of any sort)

'Quantity per Order' should usually be a multiple of 'Quantity per Kanban'.

For example, if 'Quantity per Kanban' = 24

then 'Quantity per Order' might be 24, 48, 72, 96...

Kanbans Released (when?)

kanban calculation quantities

In a classic kanban card system,
the card is attached to the container,
and is released to be returned to the kanban holder as soon as that container begins to be used.

If a kanban card (or empty container, or other signal)
is not released to return to the kanban holder until the container is empty, then 1 additional kanban is needed.

Use the dropdown list to choose either:

0 - Release kanban at the begining of each container

1 - Release kanban at the end of each container

Bookmark = calculations

Get your answers

The questions that a kanban calculator is designed to answer

are answered in the blue formula fields in the bottom section.

Number of Kanbans — Total

Number of Kanbans = ((Demand + Buffer + Safety) * Lead Time) / Quantity per Kanban

rounded up to the next 'Quantity per Kanban'

The small grey number near the edge of the form
also shows you the same number without rounding.

Red Yellow Green Zones

The next section can be hidden if not relevant, but is often helpful.

It calculates the number of cards that should be in each of the zones:

kanban calculations
  1. Green — above the reorder point
  2. Yellow — below the reorder point
  3. Red — below the safety margin

Although you could issue kanbans that have distinctive coloring,

it is more common for each kanban to be identical,
and then use some form of kanban board
to store the kanbans in zones marked with those colors.

(Buffer + Safety) * Lead Time

This is the quantity on hand that is beyond the quantity needed to fulfill expected demand

to safeguard for demand variation (buffer) and process variation (safety).

Maximum Quantity on Hand

Max Qty on Hand = Quantity per Kanban * Total # of Kanbans

At any moment, there should never be more than this maximum amount of inventory.

Maximum Time on Hand

Max Time on Hand = Maximum Quantity On Hand / Total Demand

This should be your worst case for your Inventory Turnover Ratio


This kanban calculator comes with
many other useful Lean Tools for Standard Work

 

 

priced low enough to empower every team member


Kanban System Pitfalls

that are minimized by your Kanban Calculator template

face-in-hands Stress

Why are we paying our people to re-invent tools that can be purchased so easily?

  1. Lack of a system to periodically review changes
  2. Lack of a formal approval system
  3. Lack of visibility to source data
  4. Using Average values for non-normal data
  5. Inconsistent Units of Measure
  6. Failure to consider different types of Lead Time
  7. Failure to consider multiple sources of Demand
  8. Failure to account for both Buffer and Safety margins
  9. Failure to consider when the Kanban is released
  10. Using the same calcuations for different types of kanbans
  11. Lack of a system to learn from past experience
  12. Reliance on tribal knowledge

Kanban Cards

People ask us, "Why don't you have a template for a kanban card?"

And the answer is: "Because they are too diverse."

Do a quick internet search,

and you will find hundreds of examples of kanban cards...

each different.

It is so easy to design your own kanban cards

Anything that conveys the minimal information needed to move or produce will work great.

It is not at all easy to program your own kanban calculator

It is so much easier to simply use (and perhaps personalize) this one.

Kanban Methodology

The kanban methodology is pretty simple.

Each kanban has the minimal instructions to produce or move.

When a container gets used, the kanban card gets returned to the kanban collector bin (or board).

Always take the kanban from the top of the pile (in FIFO sequence).

If your kanban system has any exceptions to the usual FIFO sequence,
those exceptions should be very rare, and very clearly documented,
or your workers will quickly find ways to routinely cheat and sabotage your system.

If there are no kanbans in the bin — don't make anything.

Your supervisor should have trained you to know what to work on when there is no customer demand.

Temporary and Emergency Kanbans

There are 2 special types of kanbans that deserve special mention:

Temporary Kanban

For prototypes, rework, lost cards, etc.

Of course, you will want clearly documented rules for who is authorized to issue Temporary and Emergency Kanbans, and under what conditions. Perhaps using your Flowchart template to create a Decision Logic Tree.

Emergency Kanban

To keep production moving if there is so much customer demand
that you overshoot your calculated ideal inventory levels.

Tip: Be sure to make notes in the 'Reasons for Misses' column of your 'RevLog' sheet
so that you can systematically learn from past experiences,
to continuously improve your systems for continuous improvement.


When NOT to use a Kanban System

  1. When your product has poor quality
  2. When a process is too complex, or spans too many sub-processes
  3. When demand is too low

But don't give up too easily. There are thousands of examples of how people found creative ways to greatly improve flow in thousands of unique environments that are very low volume and high mix.

When to use a Kanban System

Whenever you can.

The benefits of a kanban system are so great

that you should use kanban systems whenever you can.

You will be well rewarded if your teams are able to conceive, test, and continuously improve

your own inventions of many different types of kanban systems for:

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