2.20.2013

The Best Candidates for a Kanban System?

I had the pleasure of speaking with Steve Cimorelli this month. He recently published a second edition of his book Kanban for the Supply Chain: Fundamental Practices for Manufacturing Management, and I had a lively discussion with him about materials requirements planning (MRP) versus kanban pull techniques and the importance of synchronization.

One general question I asked him was: "Which component parts or products are the best candidates for a kanban system?" Here is his answer:

Kanban works best when applied to parts with stable and repeatable demand. An effective way to quantify stability is to determine the mean (average) and standard deviation of daily or weekly demand for all parts under consideration, then calculate a “coefficient of variability” or CoV (CoV = Standard Deviation / Mean) for each part. Parts with a small CoV have more stable demand patterns than those with large CoV values. Another useful criteria is frequency of usage because frequently used parts tend to be more stable than infrequently used parts. Creating a scatter diagram of these two values on a simple Excel chart, can help you visualize where to "draw the line" on CoV and frequency rules. Finally, ABC class codes, which allow parts to be categorized according to both cost and demand, can add additional perspective to the equation. Many companies find it useful to set CoV, frequency, or other criteria differently by ABC code because A-items have a much higher impact on inventory investment than do B-items or C-items.

What do you think of Steve's advice? What type of parts or products have worked best for you in a kanban replenishment system?

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