Question

Lou’s Bakery has established that JIT should be used for chocolate chips due to the high probability of the kitchen heat melting the chips. The average demand is 180 cups of chocolate chips per week. The average setup and processing time is ½ day. Each container holds exactly 2 cups. The current safety stock factor is 5 percent. The baker operates 6 days per week. How many Kanbans are required for the bakery? What is the maximum authorized inventory? If the average setup and processing time is reduced to 3/8ths of a day due to better training and retention of experienced employees, what are the answers to (1) and (2)?

Answer 1

Average daily demand = 180 cups / 6 days per week = 30 / day

Lead time of the process

= average set up and processing time

= ½ day

Therefore , average demand during lead time = 15 cups

The amount of inventory to be maintained in Kanban containers has to be at least average demand during lead time i.e. 15 cups

Capacity of each Kanban container = 2 cups

Therefore number of Kanban containers required without safety stock = 15/2 =7.5

Safety stock required @ 5%of above number of Kanban containers required = 0.375

Therefore , number of Kanban containers required with safety stock = 7.5 + 0.375 = 7.875 Cups ( 8 rounded to nearest whole number )

Maximum authorized inventory = Cups / containerx number of Kanban containers = 2 x 8 = 16

NUMBER OF KANBANS REQUIRED FOR THE BAKERY = 8

MAXIMUM AUTHROZIED INVENTORY = 16 CUPS

When average processing and set up time is reduced to 3/8^th of a day , lead time becomes 3/8^th of a day

Therefore, average demand during lead time = 30 /day x 3/8^th of a day = 11.25

Least amount of inventory to be maintained in form of Kanban containers = 11.25 cups

Capacity of each Kanban container = 2 cups

Therefore , number of Kanban containers required without safety stock = 11.25/2 = 5.625

Safety stock required @5% of above number of containers required = 0.281

Therefore , number of Kanban containers required with safety stock = 5.625 + 0.281 = 5.906 ( 6 rounded to nearest whole number )

Maximum authorized inventory = Cups/ container x Number of Kanban containers required = 2 x 6 = 12 cups

NUMBER OF KANBANS REQUIRED FOR THE BAKERY = 6

MAXIMUM AUTHORIZED INVENTORY = 12