LEAN Training

Training 2010
2009
LEAN

LeanInventoryManagement

(Kanban InventorySystem)

HenryHenry
FordFord
Production
ProductionSystem
System

OUR GOAL AND VISION

LEAN Training
Training 2010
2009
LEAN

KANBAN INVENTORY SYSTEM

Standardized inventories using a Pull system,
Just-in-time inventories &
Kanbans that will improve quality
while reducing total cost

2
HenryHenry
FordFord
Production
ProductionSystem
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DefinitionofKANBAN

LEAN Training
Training 2010
2009
LEAN

AKanBan card:
Kan meanscolor
Ban meanscardusedforinventory

VisualAidtoassistinventorymanagement
Highvisibilityforstockonhand
IndicatorforReOrderingofstock
(paper,gloves,surgicalequipment,etc)
3
HenryHenry
FordFord
Production
ProductionSystem
System

LEAN Training
Training 2010
2009
LEAN

BenefitsofLeanProduction

ReduceInventory
ReduceStorageSpace
ImproveQuality
LowerTotalCost
AvoidStockOuts
AvoidObsolescence

4
HenryHenry
FordFord
Production
ProductionSystem
System

LEAN Training
Training 2010
2009
LEAN

Kanban Cards

Kanban Card I
1st Generation

Kanban Card II
2nd Generation
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HenryHenry
FordFord
Production
ProductionSystem
System

LEAN Training
Training 2010
2009
LEAN

KANBANFORANYSTOCK

HenryHenry
FordFord
Production
ProductionSystem
System

LEAN Training
Training 2010
2009
LEAN

ExampleOrderStation
When an employee
PULLS inventory
with a Kanban card,
the cards are placed
at the order station
Examples Include:
Bins, Folders,
Envelopes, Cubbies,
Baskets, etc etc

Bins

Need to be in high
visibility areas
Wall Holders

HenryHenry
FordFord
Production
ProductionSystem
System

LEAN Training
Training 2010
2009
LEAN

HenryHenry
FordFord
Production
ProductionSystem
System

ExampleReOrderingStation

LEAN Training
Training 2010
2009
LEAN

Once item is ordered, the card

is placed in the Ordered Kanban
Station
Card remain there until order
arrives, unless backordered
Once the stock arrives, stock is
rotated and Kanban Cards are
placed at the re-order point
Re-order Station is at a different
location than the Order Station
9
HenryHenry
FordFord
Production
ProductionSystem
System

Kanban Example

LEAN Training
Training 2010
2009
LEAN

Racksarealphabeticalandshelvesarenumbered
It`s important to
only PULL
when you
remove that
product

Kanban
cards

10
HenryHenry
FordFord
Production
ProductionSystem
System

StandardizedWorkCell
withKanban OrderingBins

LEAN Training
Training 2010
2009
LEAN

Kanban cardin
orderingbin

11
HenryHenry
FordFord
Production
ProductionSystem
System

Savings:HospitalLab

LEAN Training
Training 2010
2009
LEAN

One Coagulation Analyzer Reagents

InventoryFactors:
Excessinventory
Obsolescence
Calibration
QualityControl
Accidental
Notsoaccidentalloss
TotalCost:$65,000+onExcessInventory
12
HenryHenry
FordFord
Production
ProductionSystem
System

LEAN Training
Training 2010
2009
LEAN

Savings:HospitalLab
LogisticalFactors
Costtoorder
Storage
Transportation
TransportationFees
$1000spentoncabsmonthly
TotalCost:$12,000/year
13
HenryHenry
FordFord
Production
ProductionSystem
System

LEAN Training
Training 2010
2009
LEAN

Savings:HospitalLab
Staff:
$25/hour+benefits $75,000/year
1%Losttimetoinventoryhandling
$750/year
34Individualshandlinginventory
$3000/year
Yearlylosstoinventoryhandling:
65000+12000+3000=$80,000
HenryHenry
FordFord
Production
ProductionSystem
System

ValueCreationWithLean
MultipleAspects
LEAN Training
Training 2010
2009
LEAN

Improved Quality
Increased Efficiency
Savings Reduced Total Cost
Continuous flow No stock-outs
Avoid Obsolescence
Reduced Storage Space and Equipment
Reduced Motion moving Inventory to work area
15
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FordFord
Production
ProductionSystem
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ValueCreation Savings
Two Types of Savings:

LEAN Training
Training 2010
2009
LEAN

One Time Savings

Frees up capital with reduced inventory

Perpetual Savings
Saves the expenses to maintain inventory

16
HenryHenry
FordFord
Production
ProductionSystem
System

LEAN Training
Training 2010
2009
LEAN

USA Today
Sept. 10, 2009

When a CEO
discovers Lean,
watch out!

17
HenryHenry
FordFord
Production
ProductionSystem
System

LEAN Training
Training 2010
2009
LEAN

InventoryManagement
Calculations
1. How much to order? - Order Quantity
2. How much stock is required for variations? - Safety Stock
3. When to order? Re-Order Point (ROP) or Kanban Position

HenryHenry
FordFord
Production
ProductionSystem
System

Inventory Management
Implementation Process
Takestockofallinventory(Organizeitemsbyvendor,by

LEAN Training
Training 2010
2009
LEAN

departmentandbyinstruments)
Calculateaveragedailymaterialusage(Demand)
Calculateaveragedeliverytimesforallitems(Supply)
Performinventorycalculations(SpreadsheetProvided)
Trainatleasttwopeopleineachlocationtoperform
orderingfunction

HenryHenry
FordFord
Production
ProductionSystem
System

LEAN Training
Training 2010
2009
LEAN

Inventory Model Excel Spreadsheet

On Your Request

HenryHenry
FordFord
Production
ProductionSystem
System

InventoryCalculationsforLargeSizeGloves

LEAN Training
Training 2010
2009
LEAN

Data:
AverageDemand(D)=1box/day
BestCaseDeliverytime=6days
WorseCaseDeliveryTime=8days
Averagedeliverytime(T)=(6+8)/2=7days
CalculatingOrderQuantity:
MinimumOrderQuantity=(DxT)=(1boxperday)x(7days)=7boxes
Duetothemanualorderinginthecomputer,HFHSdecidedtoorderevery2
weeks.
Actualorderquantity=1boxperdayx14days=14boxes

HenryHenry
FordFord
Production
ProductionSystem
System

InventoryCalculationsforLargeSizeGloves

LEAN Training
Training 2010
2009
LEAN

CalculatingSafetyStock(SS):
SafetyStock(SS)=Materialtoprotectfordemandandsupply
fluctuations(7days)=1boxperdayx7days=7boxes
ReOrderPoint(ROP)andKanban CardPosition:
Kanban CardPosition=MaterialforAverageDeliverytime+Safety
Stock=7boxes+7boxes=14boxes

HenryHenry
FordFord
Production
ProductionSystem
System

Inventory

Max
Stock

ReorderingExample

LEAN Training
Training 2010
2009
LEAN

Kanban Card
Position

Reorder
Pt
Cont.

Safety
Stock

Zero
Stock
Order
Delivered

ReorderLeadTime
(PerformanceCycle)
Time
ReorderPt.
OrderSubmitted

Order
Delivered
HenryHenry
FordFord
Production
ProductionSystem
System

Inventory Simulation for Large Size Gloves

Average Demand = 1 Box / Day
Delivery Cycle = 7days
Safety Stock = 7 boxes
Order Qty = 14 Boxes
Reorder Point (Kanban Position ) = 14
boxes

Inventory
Replenishment
Inventory
Replenishment

Kanban Card!

Inventory Count
(Boxes)

LEAN Training
Training 2010
2009
LEAN

2
1

2
1

2
0

2
0

1
9

1
8

1
7

1
6

1
5

1
4

1
3

1
2

1
1

1
0

1
9

1
8

1
7

1
6

1
5

1
4

1
4

1
3

1
2

1
1

1
0

Week1

Week2

Time (Days)

2
0

Safety
Stock

Week3

Week4
HenryHenry
FordFord
Production
ProductionSystem
System

Inventory Simulation for Large Size Gloves

Inventory
Replenishment
Inventory
Replenishment

Kanban Card!

Inventory Count
(Boxes)

LEAN Training
Training 2010
2009
LEAN

2
1

2
1

2
0

2
0

1
9

1
8

1
7

1
6

1
5

1
4

1
3

1
2

1
1

1
0

1
9

1
8

1
7

1
6

1
5

1
4

1
4

1
3

1
2

1
1

1
0

Week1

Week2

Time (Days)

2
0

Safety
Stock

Week3

Week4
HenryHenry
FordFord
Production
ProductionSystem
System

Inventory Reduction With Lean - Large Size Gloves

Inventory Count (Boxes)

LEAN Training
Training 2010
2009
LEAN

Max. Inventory Before Lean

Implementation (60 boxes)

Max. Inventory After Lean

Implementation (28 boxes)

Waste - All Yellow Area

2
1

2
1

2
0

1
9

1
8

1
7

1
6

1
5

1
4

1
3

1
2

1
1

1
0

2
0

1
9

1
8

1
7

1
6

1
5

1
4

1
4

1
3

1
2

1
1

1
0

2
0

Safety Stock

Time (Days)

HenryHenry
FordFord
Production
ProductionSystem
System

LEAN Training
Training 2010
2009
LEAN

TipsforInventoryManagementPlanning

Higherdeliveryvariation=>Increasessafetystock

Higherdemandfluctuations=>Increasessafetystock

Orderingmoreoften=>IncreasesOrderingCost

Orderingtoomuchmaterial=>Increaseinventorymaintenancecost

OrderingFrequency=>Dependsuponthetechnologythatisbeingused
forordering

OrderQuantity=>Mayaffecteconomiesofscale(EOS)
HenryHenry
FordFord
Production
ProductionSystem
System

LEAN Training
Training 2010
2009
LEAN

TakeHomeLessons
Kanban involvesallemployees
Kanban isasystemthatcontinuously
suppliesproducts
Youhavewhatyouneed,whereyou
needit,whenyouneedit
Havesufficientmaterialatpointsofuse
Teamsandindividualsareencouragedto
CONTINUOUSLYIMPROVE
Supporteachother
28
HenryHenry
FordFord
Production
ProductionSystem
System

LEAN Training
Training 2010
2009
LEAN

QuestionsorComments?
If youre interested in this inventory management approach
Visit the lab and E-mail us for the spreadsheet

HenryHenry
FordFord
Production
ProductionSystem
System