Recently, someone commented about kanban’s use as a scheduler, and wondered if someone knew a compatible mechanism for controlling incoming and WIP inventory. This confusion may be caused by statements like “What to produce at any work station in the plant should be determined by what is needed at downstream work stations or by customer requirements.”
Here the workstation is seen as responding to customer demand. The demand is usually in the form of downstream inventory or orders on hand for make-to-order operations. So a workstation tries to maintain a reasonable level of inventory to support the downstream customer.
The beauty of kanban is that a simple card can be used to represent a unit of inventory. The card is either attached to the inventory it represents, or else returned to the supplier of that item, where it indicates a less than full inventory status. Once enough cards of a particular item are returned – referred to using terms like the economic lot size or EOQ – then the station is allowed to make that item. Scheduling is entirely based on inventory control!
BTW, where lead times determine that a sizable buffer exists between workstations, there will be three elements which determine the size of that buffer. They are
1) the minimum size of order which can economically be produced by the supplier workstation (the EOQ)
2) the amount of inventory likely to be consumed from the time that the supplier station gets the license to produce (as described above) to the time that the replenishment order arrives in the buffer – also known as Demand During Lead Time (DDLT), and
3) safety stock to protect the downstream operation from statistical variation in the DDLT.
These are the identical three elements used in scheduling by MRP based planning systems. From a cash flow perspective, all three elements depend only upon changeover time – how rapidly the station moves between products to be able to make anything. That is why we focus so heavily on reducing setup (changeover) time, as it allows a lean company to be more responsive with less inventory on hand.
The one assumption in all of this is relatively uniform demand (the DDLT term captures most of this assumption). If you don’t have uniform or at least predictable demand, then you’ll need to look at ways to modify the standard kanban. My preference is to create temporary cards called One Time Kanbans. These are used to produce one time, so that then the container holding the card is emptied, the card is thrown away, or stored for future use, rather than returned to the supplier workstation.