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Saturday, October 24, 2009

Managing Spare Parts

Proven, controversial, and new approaches are part of an effective asset management program.

Proper planning and control of spare parts inventory is a critical component of an effective asset management program. If the right parts are not on hand when needed for routine maintenance or repairs, downtime is prolonged. If too many parts are on hand, the enterprise absorbs excessive costs and the overhead of carrying the inventory.

There are tried and true strategies to manage spare parts in support of effective asset management, along with some that can be considered questionable, and a variety of new and innovative practices. Advanced enterprise asset management (EAM) solutions support the proper implementation of these capabilities. Following are examples of each.

Proven strategies
Item search. It can be frustrating to a maintenance planner who is not familiar with item numbers to locate the appropriate part in a computer system. Nouns and qualifiers are a way of simplifying a search. A noun is a simple, meaningful name for the item, for example "pump." The qualifier adds more detail, such as "hydraulic." A search on this combination will bring up all hydraulic pumps in the stock item master file.

An assortment of captions and a detailed item description can provide an increasingly narrowed search that considers make, model, size, formulation, capacity, etc. If the part can be substituted with an alternate or equivalent part, that reference also should be stored in the stock record.

ABC and XYZ analyses. The generally accepted 80:20 rule illustrates that approximately 80 percent of any storeroom's volume is associated with only 20 percent of the items in inventory. It is important to pay extra attention to that critical 20 percent.

ABC and XYZ codes are commonly used to identify those parts. The codes are assigned based on value or quantity of stock movement, and each code will have an associated "upper limit." Highest value parts, for example those that cost more than $5000 each, can be assigned the ABC code of "A," and fastest moving parts can be assigned an XYZ code of "X."

Automatic replenishment. Automating the thought process related to reorders has generated proven savings. Suggested reorder functionality creates requisitions based on reorder points (ROP) and reorder quantities (ROQ) that are stored in the inventory record. Once inventory levels for a part fall below the reorder point threshold, a suggested reorder is placed for the reorder quantity, which in turn creates a requisition. This saves time and prevents the delays and errors that can occur with manual purchasing processes.

When a simple ROQ value is not enough, an economic order quantity (EOQ) algorithm can be used to calculate the right quantity of a spare part to purchase when replenishment is needed. The EOQ can consider volume discounts, the cost of placing an order, carrying costs, and other factors.

Vendor service levels. Capturing supplier service level data within the inventory record helps bring to light the most efficient, dependable, and cost-effective vendors. Preferred suppliers can be identified based on historical lead times, pricing, quality, number of short- or over-shipments, how often goods are received damaged, frequency of backorders, and other criteria. Preference can be given to these vendors in the procurement process.

Where used. A view of where a part is used, for example on which assets a certain ball bearing is installed, provides benefits to both the plant floor and storeroom. This view enables inventory personnel to understand how extensively a part is used throughout the operation, and helps the maintenance planners to determine the item number and quantity of parts installed on an asset.

Multi-stores capability. Taking where-used one step further, a multi-stores capability enables an enterprise-wide view of spare parts inventory that is stored at more than one warehouse or off site by a third party. In a multi-plant environment or when maintenance departments are distributed, visibility into inventory at the various storerooms permits monitoring of parts availability and service-level agreements across the enterprise as a whole or on an individual basis.

Controversial methods
Just-in-time (JIT) replenishment is a popular but sometimes controversial concept of storing minimal inventory in the warehouse and replenishing it only when and as needed╛just in time. Although enabling significant carrying cost savings, there are risks involved. The best replenishment formulas cannot predict an emergency breakdown, a vendor going out of business, a carrier going on strike, or a sudden shortage of raw materials. Being too conservative in stocking levels can result in the inability to repair equipment in a timely manner or to keep the production line running.

In asset management, the criticality of a part determines whether it is a candidate for JIT. A criticality code in the EAM inventory record can be used to identify these items.

Lean manufacturing is a similar concept with a broader scope. Lean manufacturing means doing more with less, cutting time to market, and eliminating unnecessary processes. This impacts maintenance and the storeroom by stressing improved efficiencies, better planning, and reduced costs╛and running an operation with far less inventory.

A comprehensive lean manufacturing program can be costly to implement, but a number of steps can be taken to support lean inventory levels. EAM inventory analysis tools, catalog management, and automatic replenishment can be used to reduce on-hand inventories, track where individual items are used, how they are used, and where they are stored, so that inventory maintained is matched to inventory needed.

New approaches
Purchasing through the Internet is an effective means of acquiring indirect items and hard-to-find, inexpensive, or short-notice spare and replacement parts. Almost all OEMs, brokers, distributors, manufacturers, and machine shops have Web ordering capabilities. Most companies are now purchasing indirect materials online, about half are purchasing direct materials online, and about a third use industry exchanges and e-marketplaces such as Pantellos and Enporion for utilities and ChemConnect for chemicals and plastics.

An e-procurement solution that is tightly integrated with a company's EAM system checks to see if the item is already in stock, automates the approval of purchase orders, and alerts the buyer to exceptions. By negotiating better prices and terms with e-sourcing, companies have been known to save 10-15 percent on direct goods and 20-25 percent on indirect goods and services, while slashing sourcing cycle times.

Mobile computing is becoming more sophisticated and is increasingly popular in the storeroom. Warehouse personnel can conduct cycle counts without halting operations by automating parts identification with bar codes. Wireless technology can capture inventory through bar codes and transmit the data in real time to the corporate network. Critical material availability is easier to track, resulting in timelier asset management.

With a wireless system, real-time information flows throughout each key process in the warehouse, including receiving, put-a-way, picking, issues/returns, and bin movement activities. For one energy company that implemented mobile asset management, errors were slashed, pick time was cut by one-third, on-time picks were improved from 64 percent to 98.89 percent, and overhead costs were reduced by 20 percent.

Key performance indicators (KPI) are increasingly popular decision support tools. For example, an EAM solution can calculate a KPI on inventory turns by dividing inventory expenditures by average inventory level. When problem areas are flagged, notification can be sent automatically to the plant and storeroom managers for escalation. Other supply chain KPIs can include vendor performance, obsolescence, items available but not used, supplier pricing, and more.

Supplier relationship management (SRM) is the newly branded concept of developing and managing long-term relationships with suppliers of specialized equipment and replacement parts. In asset-intensive industries, some suppliers enjoy a near-exclusive position because of the uniqueness of their replacement parts.

These relationships support the automatic electronic procurement of required parts, offsite storage of parts, or onsite storage with vendor ownership. SRM requires establishing the two-way visibility of parts requirements and availability, which is built into advanced EAM solutions.

Vendor-managed inventory (VMI), where suppliers own raw material inventory until needed, is a strategy that reduces inventory and administrative costs, while meeting the demand for parts and equipment. The collaborative capabilities within advanced EAM solutions support the two-way visibility and transaction flow required by this strategy.

Outsourced asset management and maintenance follows the trend of using partners for the execution of noncore businesses. In asset-intensive companies, the extensive infrastructure and deep knowledge base required to manage certain strategic assets can be beyond their capacity. Collaborative commerce (c-commerce) and Internet-enabled collaboration within enterprises now supports remote asset monitoring and proactive maintenance services. Advanced EAM solutions can support this business model by providing the ability to share the necessary real-time information within and outside the enterprise.

Clearly, effective spare parts management plays a critical role in asset maintenance, which in turn keeps the operation running. A combination of tried and true inventory and warehouse strategies, strategically aligned with new and controversial methods that are properly implemented, can result in tremendous benefits for the enterprise. MT

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Supply Chain : Supply Chain Value

Developing an effective supply chain is not easy. A company must have the right technology and the support of the best suppliers for it to work. However even once that obstacle has been overcome, another major issue may still loom ahead: finding real cost-reduction in the supply chain. Unfortunately, the unanticipated costs of running the supply chain often surprise managers and force companies to make some tough decisions. Thankfully, understanding what causes or drives these costs is half the battle.

There are actually six main causes of cost problems in supply chains. Usually a supply chain will not exhibit all of these problems but they commonly do have a combination of numerous ones since many of them are related. One of those causes is simply that the business and its partners have not clearly thought about what they are doing. Anyone who has ever put together a supply chain knows that it is a truly ambitious endeavor that is truly worth doing right. However, many companies lack sufficient direction to accomplish such a goal. Along those same lines is a second cause: confusion. When so many different elements come together, confusion is almost inevitable initially, especially if there was not enough planning, training, or communication among those elements.

Another problem deals with the way supply chain success is measured. Too many companies continue to use outdated financial yardsticks as the sole indicator of the success of a project or of the business. This approach does not work for supply chains since its main goal is not necessarily to only to improve profits but to balance supply and demand among all of the chain's elements. Using profits and revenues as the main unit of success measurement means that many partners may begin to sacrifice quality or to make other drastic changes which seem to help the bottom line but which destroy the supply chain's foundation.

A third cause of extra costs involves barriers. Those already involved with supply chains probably already understand that small changes are magnified at each level of the supply chain. A minor price cut at the distributor level may be a major problem for vendors supplying the raw materials. In order to minimize these effects, businesses must be able to overcome the barriers that exist between each separate organization involved in the supply and between the different departments operating within one's own company. Unfortunately crossing these boundaries is not always as easy as it sounds. However, dealing with these situations before they arise and choosing supply chain partners who are open to that level of collaboration can help alleviate many of these problems.

Finally, supply chains often suffer because either one or several links in the chain are unable or are resistant to change or when attempts are made to make everyone involved in the link adhere to strict guidelines. Being willing to adapt and to be flexible is one of the biggest challenges supply chain partners must face. An insistence that the status quo be the way to go will ultimately cost all parties involved a great deal and might actually destroy the supply chain.

While there are a number of ways to avoid these cost problems, they all boil down to one thing: take pre-emptive action. When a supply chain waits for a problem to arise then deals with this problem, the consequences have already occurred and the damage may not be able to be reversed. Instead, companies need to sit down with their supply chain partners and discuss issues like flexibility, barriers, metrics, and direction. By going over these concepts in advance, the companies can ensure that everyone is on the same page and that anyone who is not willing to be part of the group can get out before they get too deeply involved.

Overall supply chains can be tremendous assets to companies and their vendors, but they often come with a price. Businesses must be willing to change their attitudes, their routines, and their ideas of how things need to run. A failure to do this means that not only will the supply chain fail, but the businesses involved will likely lose a great deal of money in the process.

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Fw: [indusnmfg] How to Calculate Bend Allowance for Your Press Brake

How to Calculate Bend Allowance for Your Press Brake

Calculating the correct flat pattern layout is crucial to getting a good quality finished part from your press brake. Yet, many CAD and CNC programmers have no idea how to calculate the required values. Years ago, the real experts created cheat sheets and tacked them to the wall. They only taught the new apprentice how to apply the results shown on the cheat sheet, not how to calculate the numbers. Well, now those experts have retired and it's time for a new generation to learn the right way to do the calculate the correct flat pattern layout.

Calculating the flat pattern length from the 3D part really isn't that difficult. Although you may find several different formulas that claim to calculate the Bend Allowance (SeeBending Definitions), they usually are the same formula, only simplified by filling in the angle or a K-factor. Oh, and yes, you do need to know the K-factor to calculate the Bend Allowance.

Let's start with a simple L bracket. The picture shows that the legs of the bracket are 2" and 3". The material thickness is 0.036", the inside radius is 0.125", and the angle of bend is 90 degrees. The flat length is the total of the flat portion of both flanges plus the length through the arc of the bend area. But, do you calculate that on the inside of the material or the outside? Neither! This is where the K-factor comes into play. The K-factor is the percentage of the material thickness where there is no stretching or compressing of the material, for example, the neutral axis. For this simple L bracket, I will use a K-factor of 0.42.

The formula (See Bending Formulas) is: Bend Allowance = Angle * (PI / 180) * (Radius + K-factor * Thickness). Plugging in our numbers, we have: Bend Allowance = 90 * (PI / 180) * (0.125 + 0.42 * 0.036) = 0.2200999813105009. If you don't have a calculator handy, try the Bend Calculator.

So the flat pattern length is 2" + 3" + 0.2201 which is equal to 5.2201. So if you add up the flat length of all the flanges and add one Bend Allowance for each bend area you have the correct flat length of the part.

But look at the drawing. That is not how we normally dimension a sheet metal part. The dimensions are usually to the intersection of the flanges or the Mold Line. This means that we have to subtract two times the material thickness plus the bend radius (also known as the Setback) for each bend area. For this set of dimensions, it would be easier to calculate the Bend Compensation value. The Bend Compensation value lets you add up the length of each flange using the Mold Line dimensions and then add one Bend Compensation per bend area to the total. Don't bother with your calculator. Just go to theBend Calculator and get the answer. It is -0.1019, a negative number, which means you will subtract this amount from the total of the flange lengths, 5", to get 4.8981.

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The Benefits of Inert Lubricants

Inert lubricants are widely used in industry because they present a number of benefits which aren't present with petroleum- and chemical-based lubricants. These lubricants have special properties that make them a much better option for industrial purposes than many other greases and lubricants, allowing lubrication to be put in locations and on materials that would otherwise not be able to be effectively lubricated.

Defining Inert Lubricants

In order to understand the benefits of inert lubricants and why they're so vital to industry, it's important that you first understand exactly what inert lubricants are. An inert lubricant, also known as a PCTFE (polychlorotriflour oethylene) lubricant, is one that has been saturated with halogen in order to make it chemically inert. This means that the lubricant isn't going to react with chemicals in order to form new compounds such as dangerous gasses. The process of making the lubricants inert also renders them nonflammable, meaning that using them eliminates the danger of fire that can be associated with petroleum-based lubricants. Other features of inert lubricants include a high thermal stability, high density, and a low compression factor.

Usefulness of Inert Lubricants

As mentioned above, inert lubricants are nonflammable. This makes them ideal for use in high-heat environments where traditional lubricants could not be used because of the danger of ignition. The high thermal stability of these lubricants is very useful in these environments as well because the lubricants will continue to do their job even when less stable lubricants would have broken down or become too thin to be very useful.

Because the lubricants do not react chemically with materials they can be used on metals which are generally quite reactive in order to prevent oxidation and to provide necessary lubrication. This allows the inert lubricants to not only keep machinery working by keeping the parts lubricated but it also can greatly extend the life of chemically-sensitiv e parts by preventing unwanted chemical reactions such as rust which can greatly damage those parts and reduce their functional lifespan by years.

The low compression factor of inert lubricants can make them very useful in hydraulic systems. Because the lubricants don't compress very much when pressure is applied to them, they can provide significant resistance in hydraulic drums (which in turn gives more power to the hydraulic system as a whole without the need for a larger amount of fluid in the system.)

Inert lubricants also have a high density as compared to some other forms of lubrication, which allows them to serve as a better lubricant that is much more likely to coat the system that it is used in. Combining the high density with the high thermal stability of these lubricants lets you see how the lubricants can be effectively used in engines and other heavy machinery in order to provide adequate protection for the system without the fear of a loss of viscosity or thermal breakdown which could cause the lubricant to become too thin to use effectively.

Along similar lines, inert lubricants also have what is known as a high dielectric strength; this means that they can resist a significant amount of electricity before they start to break down (in much the same manner as they can resist heat.) This allows them to be used effectively in the lubrication of electrical systems where a short or exposure to voltage might cause other lubricating materials to break down much sooner.

Other Benefits

In addition to the benefits that are mentioned above, inert lubricants provide an alternative to some other petroleum-based lubricants. They are made from specific polymers instead of being produced directly from petroleum, meaning that they do not have the same dependence on fossil fuels that a number of other lubricants have. Because these inert lubricants aren't going to react chemically with the materials that they're used on, they can also be used more freely without having to worry about causing accidental damage to some sensitive equipment.

Aside from the reduced reliance on fossil fuels, inert lubricants also are much less likely to cause environmental damage that usually results from large fires or the release of hazardous gasses because of the inert properties that these lubricants display. This means that they can assist industry in reducing its environmental impact and having a reduced carbon footprint.

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Tuesday, October 7, 2008

Simplifying the Vendor Selection Process

Managing the vendor and product selection process at your company isn't as hard as you think, writes CIO Update guest columnist John Lakey of Acquity Group.

Contemporary companies rely on outsourcing for success in today's competitive marketplace, and selecting a vendor is now as important a process as developing new products.

Products and services are selected for cost, requirements, overall quality, stability of the supplier, time-to-market and traditional partnerships. The purchase approval process often involves more than one criteria and one opinion and requires the establishment of a broad-based team to manage the process.

Creation of a repeatable evaluation process is critical and development of a process that works for your company is not as hard as many think. It's worth the time and effort and can be broken down into a four step approach that will allow selection of the right vendor for the job.

The key to a successful cost-based evaluation is that the product or service in question is an undifferentiated offering (e.g., long distance phone service). When evaluating offerings that can be differentiated, it becomes much more difficult to find a company that offers a solution that is clearly superior along all dimensions your organization would like to consider.

In these situations, cost is joined by other evaluation areas such as: functionality, ease-of-use, company history and financials and value-added services.

A Four-Step Plan

Sophisticated product and service evaluations can be accomplished in four steps:

Evaluating Business Needs Request & Assess Offers Vendor Interviews & Proof-of-Concepts Negotiation

Step 1 - Evaluating Business Needs: This is where you ask the tough questions that drive the execution steps in the successive steps in the process:

What need you are looking to satisfy? Which evaluation categories you will use? What are your business, technical and usability requirements? How you will roll your evaluation into a scorecard?

The evaluation team should be made up of representatives from all of the key stakeholder groups. This allows for clear reporting back to stakeholders as the process proceeds and for balanced discussions.

Establish a base set of scorecard categories and a base scorecard that is the default for any evaluation. A good starting set is: business requirements, technical requirements, TCO, usability and vendor health.

By turning this starting point into a reusable template, you will give the cross-functional evaluation team more faith in the process. You can then discuss deviations from the process upfront for a given evaluation which increases the sense of transparency and is critical to generate the buy-in necessary to successfully move from evaluation and selection to implementation.

Step 2 - Request & Assess Offers: Once you understand the requirements that your evaluation team will be working with and how you will score the vendors you are evaluating, the next step is to gather the information necessary to fill in the scorecard and to create a shortlist of vendors for interviews and, where appropriate, proof-of-concept activities.

Assuming you have options, consider whether you need to send out a request for information (RFI). Do you have a solid understanding of the market? Are you dealing with a limited number of potential vendors? Are you ready to get proposals?

If the answer to these questions is "yes" then you may be able to send out a request for proposal (RFP) directly to each of the potential vendors. Often, vendors are more responsive to requests that have quantifiable requirements and dollar goals than to general requests for information.

After you get the information you need, fill in as much of the scorecard as possible. Your goal is to see if any vendor fails to meet your "must have" requirements.

Evaluate which vendors withdrew from consideration and why. Finally, work with the evaluation team to document who made the short-list and why. Document everything so that the evaluation team has clear logic to support the short-list decision.

Step 3 - Vendor Interviews & Proof-of-Concepts: Once the evaluation team has a short-list, it should move quickly to invite vendors in to engage in a set interview schedule.

All vendors will need the agenda in advance and each member of the evaluation team should try to be present for each meeting. If the evaluation involves a process or technology, consider a proof-of-concept as a piece of the vendor interview process.

There should always be a section of the evaluation scorecard that includes vendor interviews. These dog and pony shows are important because they will demonstrate the personality of the vendor and their level of commitment to your account.

Step 4 - Negotiation: After the vendor interviews end and all of the evaluation team's questions are answered, the team should pick the finalists for negotiation.

Use the scorecard to make the determination. It is generally easier to complete the scorecard with preliminary pricing allowing you to narrow the field to the clear scorecard leaders and then to revisit the scorecard as the negotiating process continues with the few remaining vendors.

Some companies like to work with the entire short-list and to get final pricing up front which is okay, but it can take longer than narrowing the list before the evaluation team hands the recommended finalists over to purchasing. Finalized pricing will give the evaluation team the last element of the scorecard.

To generate the buy-in necessary for implementation, it is important for the evaluation team to present the final scorecard to the broader stakeholder group and answer any questions about the recommended vendor that may come up.

By properly evaluating which products and services organizations can save time and money. Implementing a flexible and repeatable model for evaluations will give all stakeholder groups comfort that the evaluation was fair and complete, which will give the resulting projects the legitimacy they need to succeed.

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JUST-IN-TIME (JIT) PRODUCTION

Just-in-time (JIT) is defined in the APICS dictionary as "a philosophy of manufacturing based on planned elimination of all waste and on continuous improvement of productivity". It also has been described as an approach with the objective of producing the right part in the right place at the right time (in other words, "just in time"). Waste results from any activity that adds cost without adding value, such as the unnecessary moving of materials, the accumulation of excess inventory, or the use of faulty production methods that create products requiring subsequent rework. JIT (also known as lean production or stockless production) should improve profits and return on investment by reducing inventory levels (increasing the inventory turnover rate), reducing variability, improving product quality, reducing production and delivery lead times, and reducing other costs (such as those associated with machine setup and equipment breakdown). In a JIT system, underutilized (excess) capacity is used instead of buffer inventories to hedge against problems that may arise.

JIT applies primarily to repetitive manufacturing processes in which the same products and components are produced over and over again. The general idea is to establish flow processes (even when the facility uses a jobbing or batch process layout) by linking work centers so that there is an even, balanced flow of materials throughout the entire production process, similar to that found in an assembly line. To accomplish this, an attempt is made to reach the goals of driving all inventory buffers toward zero and achieving the ideal lot size of one unit.

The basic elements of JIT were developed by Toyota in the 1950's, and became known as the Toyota Production System (TPS).. JIT was well-established in many Japanese factories by the early 1970's. JIT began to be adopted in the U.S. in the 1980's (General Electric was an early adopter), and the JIT/lean concepts are now widely accepted and used.

Some Key Elements of JIT

1. Stabilize and level the MPS with uniform plant loading (heijunka in Japanese): create a uniform load on all work centers through constant daily production (establish freeze windows to prevent changes in the production plan for some period of time) and mixed model assembly (produce roughly the same mix of products each day, using a repeating sequence if several products are produced on the same line). Meet demand fluctuations through end‑item inventory rather than through fluctuations in production level. Use of a stable production schedule also permits the use of backflushing to manage inventory: an end item's bill of materials is periodically exploded to calculate the usage quantities of the various components that were used to make the item, eliminating the need to collect detailed usage information on the shop floor.

2. Reduce or eliminate setup times: aim for single digit setup times (less than 10 minutes) or "one‑touch" setup ‑‑ this can be done through better planning, process redesign, and product redesign. A good example of the potential for improved setup times can be found in auto racing, where a NASCAR pit crew can change all four tires and put gas in the tank in under 20 seconds. (How long would it take you to change just one tire on your car?) The pit crew's efficiency is the result of a team effort using specialized equipment and a coordinated, well-rehearsed process.

3. Reduce lot sizes (manufacturing and purchase): reducing setup times allows economical production of smaller lots; close cooperation with suppliers is necessary to achieve reductions in order lot sizes for purchased items, since this will require more frequent deliveries.

4. Reduce lead times (production and delivery): production lead times can be reduced by moving work stations closer together, applying group technology and cellular manufacturing concepts, reducing queue length (reducing the number of jobs waiting to be processed at a given machine), and improving the coordination and cooperation between successive processes; delivery lead times can be reduced through close cooperation with suppliers, possibly by inducing suppliers to locate closer to the factory.

5. Preventive maintenance: use machine and worker idle time to maintain equipment and prevent breakdowns.

6. Flexible work force: workers should be trained to operate several machines, to perform maintenance tasks, and to perform quality inspections. In general, JIT requires teams of competent, empowered employees who have more responsibility for their own work. The Toyota Production System concept of "respect for people" contributes to a good relationship between workers and management.

7. Require supplier quality assurance and implement a zero defects quality program: errors leading to defective items must be eliminated, since there are no buffers of excess parts. A quality at the source (jidoka) program must be implemented to give workers the personal responsibility for the quality of the work they do, and the authority to stop production when something goes wrong. Techniques such as "JIT lights" (to indicate line slowdowns or stoppages) and "tally boards" (to record and analyze causes of production stoppages and slowdowns to facilitate correcting them later) may be used.

8. Small‑lot (single unit) conveyance: use a control system such as a kanban (card) system (or other signaling system) to convey parts between work stations in small quantities (ideally, one unit at a time). In its largest sense, JIT is not the same thing as a kanban system, and a kanban system is not required to implement JIT (some companies have instituted a JIT program along with a MRP system), although JIT is required to implement a kanban system and the two concepts are frequently equated with one another.

Kanban Production Control System

A kanban or "pull" production control system uses simple, visual signals to control the movement of materials between work centers as well as the production of new materials to replenish those sent downstream to the next work center. Originally, the name kanban (translated as "signboard" or "visible record") referred to a Japanese shop sign that communicated the type of product sold at the shop through the visual image on the sign (for example, using circles of various colors to indicate a shop that sells paint). As implemented in the Toyota Production System, a kanban is a card that is attached to a storage and transport container. It identifies the part number and container capacity, along with other information, and is used to provide an easily understood, visual signal that a specific activity is required.

In Toyota 's dual-card kanban system, there are two main types of kanban:

1. Production Kanban: signals the need to produce more parts

2. Withdrawal Kanban (also called a "move" or a "conveyance" kanban): signals the need to withdraw parts from one work center and deliver them to the next work center.

In some pull systems, other signaling approaches are used in place of kanban cards. For example, an empty container alone (with appropriate identification on the container) could serve as a signal for replenishment. Similarly, a labeled, pallet-sized square painted on the shop floor, if uncovered and visible, could indicate the need to go get another pallet of materials from its point of production and move it on top of the empty square at its point of use.

A kanban system is referred to as a pull‑system, because the kanban is used to pull parts to the next production stage only when they are needed. In contrast, an MRP system (or any schedule‑based system) is a push system, in which a detailed production schedule for each part is used to push parts to the next production stage when scheduled. Thus, in a pull system, material movement occurs only when the work station needing more material asks for it to be sent, while in a push system the station producing the material initiates its movement to the receiving station, assuming that it is needed because it was scheduled for production. The weakness of a push system (MRP) is that customer demand must be forecast and production lead times must be estimated. Bad guesses (forecasts or estimates) result in excess inventory and the longer the lead time, the more room for error. The weakness of a pull system (kanban) is that following the JIT production philosophy is essential, especially concerning the elements of short setup times and small lot sizes, because each station in the process must be able to respond quickly to requests for more materials.

Dual-card Kanban Rules:

No parts are made unless there is a production kanban to authorize production. If no production kanban are in the "in box" at a work center, the process remains idle, and workers perform other assigned activities. This rule enforces the "pull" nature of the process control.
There is exactly one kanban per container.
Containers for each specific part are standardized, and they are always filled with the same (ideally, small) quantity. (Think of an egg carton, always filled with exactly one dozen eggs.)

Decisions regarding the number of kanban (and containers) at each stage of the process are carefully considered, because this number sets an upper bound on the work-in-process inventory at that stage. For example, if 10 containers holding 12 units each are used to move materials between two work centers, the maximum inventory possible is 120 units, occurring only when all 10 containers are full. At this point, all kanban will be attached to full containers, so no additional units will be produced (because there are no unattached production kanban to authorize production). This feature of a dual-card kanban system enables systematic productivity improvement to take place. By deliberately removing one or more kanban (and containers) from the system, a manager will also reduce the maximum level of work-in-process (buffer) inventory. This reduction can be done until a shortage of materials occurs. This shortage is an indication of problems (accidents, machine breakdowns, production delays, defective products) that were previously hidden by excessive inventory. Once the problem is observed and a solution is identified, corrective action is taken so that the system can function at the lower level of buffer inventory. This simple, systematic method of inventory reduction is a key benefit of a dual card kanban system.

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SOURCING

Saving money is always at the forefront of every business decision but when it comes to purchasing and sourcing, there are a number ways to cut costs that are often neglected or which do not use to their full advantage. Companies who fail to see these possibilities could be standing in the way of significant savings that would dramatically improve their bottom line. Many of the ways that are available to cut costs vary depending on the business. For example, manufacturing companies may want to first start finding savings by talking to the suppliers of their raw materials. Since these represent a larger portion of their purchases, these areas often offer the greatest potential cost savings benefits. When buyers sit down with vendors, they can often negotiate an arrangement that will be more cost-effective. Other companies may find their great potential savings opportunities revolve around their MRO purchases.

In order to identify potential savings opportunities in this area, companies need to take a straight look at their current operations to determine areas that need improvement. Rejected parts or excessive downtime are two of the most common problems for many companies and both of these areas can significantly add to the cost of operations. To solve the problem, companies should call in their suppliers, provide them with the necessary information, and ask them to come up with suggestions.

These suggestions will usually come in the form of valued-added services from the suppliers. These extra services can sometimes then become the backbone of the supplier selection process. Many companies make the mistake of choosing vendors strictly on the basis of the quoted price; however, the lowest stated cost does not always spell the best deal for the business. Instead of focusing strictly on price, buyers need to evaluate suppliers additionally on their willingness to provide these value-added services.

Another way for companies to save money over the long term is by tracking the performance of their suppliers. Once relationships with select vendors have been formed, the company needs to begin assessing their overall job performance because poor performance translates into additional costs for the buyer. Some analysts suggest evaluating vendor performance in terms of Total Cost of Ownership (TCO). Essentially, this means that the company looks at one event that the supplier is responsible for and uses that as an indicator of their overall performance. For example, if a vendor is scheduled to provide a delivery of raw materials in two weeks but misses the target date by a full week, then that delay would need to be figured into the costs of doing business with that vendor. Most companies do not currently use the TCO model for judging vendor performance and instead base their decisions solely on quoted costs. These companies generally find out in the long run that a low price does not always equal adequate performance.

While all of these cost saving measures may sound good on paper, many companies may find suppliers reluctant to cooperate. One reason suppliers are often hesitant to get involved in these value-added ideas is that to achieve their objectives they require cooperation from within the company itself. If a vendor is asked to make a process within the plant more efficient but workers within the plant are interfering with their ability to make that happen, then this reflects badly on the vendor who doesn't live up to his or her end of the bargain. Companies need to reassure suppliers that they will have total cooperation from all levels of management and staff to accomplish their tasks. The individuals in charge of purchasing should also maintain an open line of communication with the suppliers throughout the process so that they can be alerted immediately if conflicts do arise.

Companies often overlook the value-added services that many vendors offer simply because their savings are harder to quantify. By using the TCO model and getting suppliers more actively involved in the creative process, however, companies can see definite improvements in their bottom line.

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