How to implement Kanban and supermarket system for Inventory optimisation (Case study)



How to implement Kanban and supermarket system for Inventory optimisation (Case study)


  • ABC company is a home interior products manufacturing company located in Bangalore
  • Company produces for around 40 clients) in a month
  • Types of furniture manufactured are wardrobes, kitchen cabinets, TV cabinets etc.
  • Study was done to streamline material procurement, storage, issue procedure & inventory management
  • Number of vendors – Raw material ~ 25, Hardware~10
  • Lead time – imports ~ 4 weeks, local ~ 1 week
  • Total inventory was around Rs. 60 lakhs

Major operations are:

Head office
  • Client interaction & Design
  • Approval from client
  • BOQ (Bill of qty preparation)
  • Material Purchase
  • Preparation of CAD drawing

Factory
  • Receiving, storage & issue  of material
  • Production
  • Quality checking
  • Packing
  • Dispatch


Study was done to standardise/simplify material procurement, storage & issue system


 Before implementation of Kanban system:


  • Main three types of raw materials are used – Boards, Laminates & Edge banding (around 250 types)
  • Laminates were stored in bundeled form as it come which was occupying lot of space & also very difficult to retrieve.
  • Boards were store horzontally – which was leading high retreival time
  • Edge banding – not stores colourwise/withwise leading to high retrieval time and also using mimatch colour many time.  For reordering, it was difficult to know the stock of different materials available
  • Without getting 100% material for client, there used be pressure to take it for production and many times there used to be two batch production for the same client leading to lot of confusion in the shopfloor in locting items & they used to miss many items
  • In hardware store, there were three types of material, Common items (classified from used in more than 5 clients in a month), unique items for clients & non moving & slow moving items
  • Non moving items accumulated, because of purchase of items without proper planning
  • Total inventory was around INR 20 lakhs, out of which around INR 10 lakh was non moving
  • All items were mixed up in storage and no clear identification.  Only when items are required to dispatch during installations, they used to find out some items have not yet received & there used to be delay in installation
  • Once items become non moving, it is very difficult to use it.  Only if few items are left out, it cannot be used for other clients as client requirement qty & available qty may not match & difficult to use it.
  • Also these items are stored in factory & designers sit in office in a different location, very difficult to coordinate with designers to use these items & there is no compelling on them to use these items
  • Hardware & accessories are ordered once a month

Inventory classification is done through Kanban analysis:


Sample Analysis For Feb 2018



Based on logic of items used for number of customers & taking items used for more than 5 customers as common items, it was found that 60% of unique material & 40% are common materials

Based on analysis of the items, it was decided to group items in to three categories & arrange accordingly:


  • Common items where Kanban can be implemented
  • Unique items which can be kept clientwise when received
  • Extra/non moving items which are leftover either from extra ordering or MOQ restrictions
  • Extra racks were procured and items are arranged accordingly.

Kanban is a Lean tool to

               – optimise inventory
               – prevent stock out situation
               – visual control for ordering
Above sample calculation for Hardware & Accessories shows it is possible to reduce inventory & easy procurement process for Common items

Hardware & accessories arrangement in stores :


Hardware & Accessories will be arranged in to three groups :
  1. Common items (around 50) will be arranged in to two bin Kanban system with each bin qty 15 days.
  2. Unique items will be arranged customer wise
  3. Leftover items (from MOQ ordering)

Material ordering :


  1. For common items, Two bin Kanban system is introduced. Each bin will have Kanban card & when items are over in one bin, Kanban card is placed in “For Ordering” box.  Order to be done for these items weekly twice/weekly once.  These items are not ordered along with other BOQ items.  This method will optimise inventory, ease of ordering & visual system.
  2. Presently all items ordered once a month.  In the new system, common items are ordered separately through card triggering mechanism.  Weekly bucket ordering system to be implemented.  For the ordered closed during the week, next week beginning order to be placed where production will be taken after 2 weeks.  Lead time for procurement taken as two weeks.
There are certain items because of MOQ, more than actual required for the customer order will be purchased.  The left out items to be kept separate so that they can be visually identified & while ordering items during next week for other customers, stock of these items to be seen & available items should not be ordered.

Kitting system is introduced:


Earlier, many times for the same client production used to be taken in two batches because of non availability of 100% material.  Kitting system was introduced and it was decided that production will be taken only when 100% material is available.

Benefits:

  • Inventory was reduced from Rs.60 lakhs to Rs.40 lakhs  (33% reduction)
  • Retrieval time reduced drastically due to new arrangement
  • Future generation of non moving items reduced because of new system


Testimonial from customer:


“We  were very much happy to associate with Seven Steps for the implementation of Lean Project at our Factory.
The dedicated efforts by you and your team are very commendable and down to earth.
My Shop floor teams are well trained by you on 5S, Kaizen, Kanban, Error Free Delivery, Kitting,etc which helped us in improve On Time Delivery,Reduce Lead time,100% Fulfillment and tracking of inventory at different stages.”
Seven Steps Business Transformation Systems is a Bangalore based consulting company for manufacturing, services, retail, logistics, construction, Education, hospital, hospitality.  Kanban system implementation is done as a combination of other tools and methodogies such as 5S, Value Stream Mapping, Cellular Manufacturing, Total Productive Maintenance, Six Sigma etc., Through their group vertical – Seven Steps academy (www.7stepsacademy.com), various training programmes are also offered for both onsite and public programmes.
Some of the flagship training programmes conducted at Seven Steps Academy of Excellence are:

Six Sigma Yellow Belt
Skill development programme – Campus to Corporate – Precision Engineering
Lean Experimental Learning Programme

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