Pauline Found Manufacturing, Inc., is moving to kanbans to support its telephone
ID: 366607 • Letter: P
Question
Pauline Found Manufacturing, Inc., is moving to kanbans to support its telephone switching-board assembly lines. Determine the size of the kanban for subassemblies and the number of kanbans needed.
Setup cost
$30
Annual holding cost
$110per subassembly
Daily production
30 subassemblies
Annual usage
Lead time
10 days
Safety stock
2 days' production
Kanban container size=___mainshafts(round your response to the nearest whole number)
Number of Kanbans=______kanbans (round your response to the nearest whole number)
Setup cost
$30
Annual holding cost
$110per subassembly
Daily production
30 subassemblies
Annual usage
3,000(50 weekstimes ×5 days eachtimes ×daily usage of 12subassemblies)Lead time
10 days
Safety stock
2 days' production
Explanation / Answer
Kanban Size is given by the formula
Qp =square root of 2DS / H(1-d/p)
Where D= Annual Demand
S = Setup cost
H= Annual Holding cost
d= daily usage
p= daily production
Taking these values from the above table and putting in the formula we get
Size of Kanban Container = (2x3000x30)/(110(1-12/30)) (Since daily usage of 12subassemblies)
= 180000/(110x0.6)
=180000/66
=52.22 = Approx 53
Number of Kanbans=Maximum Inventory Required/Size of Kanbans
Maximum Inventory Needed = Demand during Lead time + Safety Stock
Demand during Lead time = Daily demand x lead time = 12x10 = 120
safety stock = 2 day's production = 2x30 = 60
Maximum inventory needed = 120+60 = 180
Number of kanbans = 180/53 = 3.39 (round up to higher order) = 4