Integral Logistics Management — Operations Management and Supply Chain Management Within and Across Companies

6.5.2 Kanban versus Order Point Technique: Common Effects

Intended learning outcomes: Explain the development of the physical buffer inventories on several production structure levels when production is rhythmic.

The implementation of the JIT concept also entails advantages to the order point technique (see Section 11.3). Indeed, short setup times result in smaller batch sizes, shorter lead times, and thus a lower order point. Smaller batch sizes lead to more frequent repetition of the same orders (which will increasingly overlap). Defining work contents of approximately the same length per production structure level improves the flow of goods.

Figure shows the physical inventories on several production structure levels.

Fig.        Development of the buffers when production is rhythmic.

The symbol Delta t stands for the necessary reaction time between reaching the order point (or, in Kanban, registering that a container is empty) and withdrawing compo­nents from the next lower production structure level. With the lean / just-in-time concept, Delta t is as small as possible, due to direct communication between supplier and user operation. TP is the wait time of the item in the buffer or intermediate store. With just-in-time production, the buffer is located directly at the workstation, or user operation. TP is thus time in storage.

Order release according to consumption is common to both techniques. Storage time functions as a time buffer. If usage is smaller than forecasted over a longer period, the production or procurement cycle will be triggered less often. In the Kanban technique, fewer and fewer containers will be sent back and forth. But inventory in the buffer increases. From this, the same effect results as with the order point technique. In the reverse case, if usage is greater than predicted over a longer period, safety stock in the buffer would ensure delivery capability. Thus, the percentage of stock for safety stock in the formula in Figure and the number of Kanban cards must then be increased.

So much for the common effects of both techniques. Now let’s look at the differences.

Continuation in next subsection (6.5.2b).

Course section 6.5: Subsections and their intended learning outcomes