Question

1. Funfare Frozen Sdn Bhd is trying to reduce inventory of its storage by using Kanban system between its assembly lines. The operations of the enterprise are off on Friday and Sunday each week and only closed entirely two weeks in a year. The enterprise daily production is 200 units per day and the daily demand is 140 units. Once order is registered in the enterprise’s ordering system, the delivery lead time takes 2 days and the ordering cost is $10.00. The excess cartoons will be placed at warehouses with a cost of $100.00 per cartoon. As usual, the enterprise must take a risk of service level at 95%. Meantime, the safety stock is 50% of daily production.

1. What is the size of the container?

2. What is the number of Kanban?

2. Following information gathered from Darley Enterprise in 2019. The enterprise is one of the handlebar suppliers in Kuala Lumpur. The enterprise supplies the items for Harley Davidson Motorcycle in France, Indonesia, and China. Answer the following questions:

• Demand = 22,500 unit per quarter-annual
• Production = 10,000 per day
• Business Weeks        = 48
• Shipping Costs          = $1300 per order
• Holding Costs           = 4% of Shipping Costs
• Safety Stock              = 5%
• Standard Deviation    = 11 units
• Lead Time                 = 5 weeks

1. What is the size of kanban?

2. What is the number of Kanban?

Answer 1

Size of container (Economic Production Quantity ) = √ [(2*D*O) / H(1-x)]

Here, D = Annual demand

Annual demand = Daily demand x number of weeks it is open x number of days it operates in a week

As it is closed entirely two weeks in a year, so number of weeks it is open is (52 weeks in a year -2) = 50 weeks

And as it is closed on Friday and Sunday each week, so number of days it operates in a week = 7days in a week – 2 = 5days

D = Annual demand = 140 x 50 x 5 = 35000

O = Ordering cost = 10

H = Annual Holding cost = 100 [we need to find it of daily so we will multiply H with (1-x), where x = Daily usage / Daily production]

Daily usage = 140

Daily production = 200

So, Size of container (EPQ) = √ [(2*35000*10) / 100(1- 140/200)]

= √700,000 / 30

Size of container = 153 units (rounded off)

Number of Kanban = (Demand during lead time + Safety stock) / Size of kanban

Daily production = 200 units

Lead time = 2 days

Here, Demand during lead time = Lead time * Daily usage = 2*140 = 280

Safety stock = 50% of daily production = 50% of 200 = 100

So, Number of Kanban = (280+100) / 153

Number of Kanban = 2.5 (rounded off)

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