# Kanban Practice Problems & Calculations

Instructor: Saranya Ramachandran

Saranya has a Bachelors in Science focused on Electronics and Telecommunication and a Masters in Business Administration. She has 8 years of Project Management Experience and is PMP Certified.

Kanban is a Japanese word. When loosely translated, it means visual sign or card. It is a system often used in software project management. This article explains how to calculate the number of kanban cards using a specialized formula.

## Why Was Kanban developed?

Kanban was initially created by Toyota to efficiently produce cars. The car company came up with the just in time manufacturing approach, where cars are produced on demand. This is quite contrary to the popular push methods where car manufacturers produce cars and hope to sell them. The Kanban approach was developed to support the just in time methodology as a simple means to reduce the amount of work in progress and idle inventory.

The Kanban method considers upstream process and downstream process. The upstream process comprises of activities and parts that the downstream process uses. Hence, in the just in time inventory system, the downstream processes orders parts from the upstream process based on the demand.

## How Should Kanban Formulas Be Used?

One of the main goals of the just in time system is to improve efficiency and decrease wasteful activities. Inventory is ordered only when needed, and kanban cards are used to signal that inventory needs to be replenished. As a result, inventory costs go down and waste is reduced.

There are many formulas that project managers typically use which can be used as an estimate for the number of kanban cards. Typically more kanban cards are required at the beginning of the project than at the later stages, as unwanted activities are eliminated and processes are improved. Kanban formulas must be used as an estimate rather than a definite number.

## Kanban Card Factors

Before creating a formula, there are some important terms that need to be understood.

• Customer Takt - This loosely translates into demand within a time slot. In order to calculate this, find out the total working hours during a time period and the customer order. In 2 weeks, for example, there are 5 days per week and 2 shifts with 6 hours each which amounts to 2*5*2*6 =120 hours. If the customer order 12000 parts, then customer takt = 12000/120 = 100 parts per hour.
• Regular time of replenishment system - This is the time it typically takes to replenish the stock. For example, imagine that when a part leaves the factory, an order is put in for replacement. It takes about 2 weeks for the new part to arrive at the factory. Then, the replenishment time is calculated as 2 weeks.
• Fluctuations replenishment system - This considers short-term unexpected occurrences, such as system being down or a breakdown. For example, this involves anticipating how many kanbans are needed to cover a 3-hour system breakdown. However, there is a risk in this that the person anticipating such occurrence could go overboard in being safe. It is up to the decision maker to take up additional kanbans up to the level it is tolerable.
• Customer changes - How will you accommodate if customers order more or less than they normally do? Two factors need to be considered here. One is if the customer orders in bulk, additional kanbans must be added (Example if one kanban represents about 10 parts and the customer order 100 parts, then 9 kanbans would need to be added). The customer demand that we anticipated above using customer takt could turn out to be inaccurate. The key here is anticipating what the demand changes will be. If the customer order of 12000 parts changes to 15000 parts, how many additional parts would need to be ordered in order to make the demand? The replenishment time needs to be considered. If the customer orders less, say 10000 parts, then there would be an excess of parts available. These fluctuations need to be considered when calculating the kanban number.
• Buffer/ safety margin - The calculations above consider most uncertainties. However, there are some instances when the margin becomes too thin, and the staff on the shop floor worry about unexpected messes in the factory. In order to encourage confidence amongst the staff, an additional buffer/ safety margin in the form of a few additional kanbans is added.

## Formulas and Sample Problems

One common formula for estimating the number of kanbans needed for maximum efficiency is below:

• Kanban number = Demand per unit time * Lead Time (1+Buffer factor)/ Container capacity

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