## Calculating Kanban Signal Points

written by: Russ Katzman • edited by: Ginny Edwards • updated: 11/26/2010

Central to the efficient movement of a production flow is the process of calculating kanban signal points. Kanbans are designed to be the "traffic cop" of your process to ensure that the correct amount of materials and product flow through a process to meet production limits.

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### Kanban Overview

Kanbans are widely considered the most recognizable and widely-known term in lean manufacturing. In truth, kanbans cannot stand alone, no more than a single leg can hold a table. They are, however, a critical piece of the larger manufacturing theory and are a specific method of regulating the flow of some parts in cellular shop-floor environments.

In a nutshell, kanbans are functional reactions to the 'pull' signals created by customer orders. In turn, kanbans are the signals to upstream suppliers to begin to flow materials into the manufacturing stream. Kanbans help to ensure that each step in a process moves along at the same relative pace and that there are so significant delays in the process caused by too much or too little material in the manufacturing flow. To learn more about pull signals and "JIT" manufacturing, you may want to begin by reviewing these two articles: Kanban Explained as Applied to JIT and Principles of JIT.

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### Generalities of Kanban Use

1. Kanbans are meant to be a signal for replacement only, and therefore the material or component represented on the card is only produced when a kanban is issued. Remember, this signal may be for a finished good, raw material, or somewhere in between.

2. Components or products should only be manufactured in the quantity specified by the kanban. For example, if a kanban requires that 5 widgets are generated, a worker should NOT create 6 just because he/she has time or materials to do so. The worker would wait for the next kanban signal in order to perform additional operations. (However, keep in mind that this is intended for quality components only. The kanban requires 5 components that would pass inspection, and the worker should perform sufficient action to produce such results.)

3. If a worker or machine serves multiple purposes, the production order should be defined by the kanban order.

4. The number of kanbans can be changed over time, with the intent to gradually reduce the number to its optimal level, as defined by the process.

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### Calculating Number of Kanbans

The number of kanbans in the system will go a long way to calculating kanban signal points, as determined by process demand. There are numerous ways to calculate the number of kanbans necessary for a given process. While you are welcome to use the method with which you are comfortable, I have seen the following calculation work in an environment that is working toward quality improvement.

Number of Kanbans = ((PD * LT) + (Z * SD))/KQ

PD: The is the average demand per period in which you are measuring. For instance, if you measure demand on a daily basis, this should be the quantity of widgets typically used in a day.

LT: LT stands for the lead time, or replenishment time, necessary to replace the PD. Keep in mind, this should stay on the same time scale as the PD. For instance, if your lead time is a week to replace the PD, this number should be 7, not 1.

Z: This is the Z factor, typically 1.645 for a 95% quality compliance. Rather than try to explain the theory of the Z factor here, refer to the following for a quick overview,

SD: This is the standard deviation of the process. As you probably know, it is a measure of how consistently a process produces the same result. In kanban terms, a higher standard deviation would require more substantial re-work, and may increase kanban size.

KQ: KQ is for Kanban quantity, in terms of the batch size in which the product is to be produced.

Photo Credit: ahmet guler/freedigitalphotos.net

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