# How to Calculate Kanban Levels

Written by jean asta
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Kanban is a Japanese word meaning "signboard." It refers to the actual board used to manage production levels in factories, but has become synonymous with lean manufacturing methods such as demand scheduling or "Just in Time" manufacturing. The idea behind Kanban is to create a visual indication for operators who determine how much of a product to produce based on actual usage rates. Kanban methods reduce overproduction and have been shown to reduce inventory storage needs by almost 50 per cent.

Skill level:
Moderate

## Instructions

1. 1

Calculate the total number of parts used in a week from your existing production data. For example, let's say you use 2,000 of this particular part per week.

2. 2

Multiply that number by the lead time needed in weeks by the supplier of the part. In our example, 2,000 parts per week times 2 weeks lead time equals 4,000.

3. 3

Multiply that number by the number of locations you have for stock. Let's say we have three locations where we keep the stock of this part. 4,000 time three is 12,000. This number is our total required inventory of the part.

4. 4

Divide the total required inventory by the number of units that are in each container. For our example, imagine the parts come in containers of 500. That gives us the total number of Kanban cards you would need. In this case, 12,000 divided by 500 is 24.

#### Tips and warnings

• Kanban levels need to be calculated for each individual part produced or used in production in order to keep appropriate levels of stock on hand and to produce only the amount needed of a given item.

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