Question

In: Operations Management

A company is trying to reduce inventory by installing a kanban system for compressors on one...

A company is trying to reduce inventory by installing a kanban system for compressors on one of its assembly lines. The setup cost = $10, Annual holding cost per compressor is $100, Daily production is 200 compressors, Annual usage is 20000, The lead time is 3 days, safety stock is 12 day’s production of compressors. Determine the size of the kanban and the number of kanbans (containers) needed.

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Expert Solution

setup cost (S)= $10,

Annual holding cost per compressor (H) is $100

Annual usage (D)= 20000

Daily production =200

Lead time = 3 days

Safety stock = 12 days of production = 12*200 =2400

Size of kanban =?

No. of Kanban containers =?

Size of Kanban =

= 64.25

Rouding to integer Q = 64

Size of Kanban = 64

No. of Kanban containers =

=46.87

No. of Kanban containers = 47 (rouding to next integer to allow some slack)

One observation is that due to high level of safety stock, number of containers showing high quantity.

Answers:

Size of kanban =64

No. of Kanban containers =47

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