2-bin Kanban System: Calcuation & Advantages

Instructor: Olga Bugajenko

Olga is a registered PRINCE2 Practitioner and has a master's degree in project management.

In this lesson, we will review the two-bin Kanban system - a supply chain management method for stock re-ordering - and learn to calculate the optimal input volumes for smooth production flow.

2-Bin Kanban System

Kanban is a lean manufacturing approach, aimed at optimizing processes and reducing inventory levels. One of the most common supply chain management methods of achieving this goal is called 2-bin Kanban system. Kanban originated in Toyota Production System back in the 1950's, and from Japanese the words 'kan' and 'ban' translate to 'visual card'. The 2-bin Kanban system relies on visual cards as signals for replenishing the inventory.

Two bins with materials or parts necessary for the production are placed on the factory floor. A Kanban card is attached to each bin. The production team draws materials from one of the bins. Once the bin is empty, the team sends a request for more materials to the warehouse - either a Kanban card attached to the bin or the bin itself is used as a signal. Until new materials arrive, the team relies on the second bin for materials. This allows making sure that the production is never idle.

Other advantages of the two-bin Kanban system are optimized inventory volumes and reduced waste, leading to the reduction in total costs, reduced waiting time and minimized lead times.

How To Optimize The 2-Bin System

To optimize the efficiency of the 2-bin system, you will need to balance four factors:

• C = the number of Kanban cards, equal to the number of bins in use;
• S = the size of the bin (how much materials fit into it);
• L = the lead time to replenish the inventory (how long from sending a signal until the team receives new materials);
• D = the daily demand for the particular materials.

The formula for the optimal 2-bin system is (C-1)*S =L*D.

Let's optimize the Kanban system for a chocolate factory, producing chocolate bar with nuts. Every day, 100kg of nuts are used in the production, so our D equals 100. It takes the warehouse 2 days to deliver a new batch of nuts to the production floor after the order is received. So L equals 2. The factory is using 2 bins at the moment, so C equals 2. Using this information, we can now calculate, how bin should each bin be for the system to function efficiently.

(C-1)*S = L*D

(2-1)*S = 2*100

S = 200

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