PURCHASING MODEL WITH KANBAN IN SAP

[kavithathangraj]

Overview

Maintaining Inventory at optimum level and at the same time ensuring adequate supply to customer or production line is all time challenge in supply chain process. KANBAN inventory system helps to achieve and saves inventory cost, time and effort in replenishment. This document demonstrates different methods of Kanban and how it can be mapped in SAP for different material procurement.

Introduction - KANBAN

Taiichi Ohno (Industrial Engineer) in Toyota, a Japanese multinational automotive manufacturer introduced kanban approach to standardize the flow of materials in just-in-time (JIT) to production lines. The Japanese word kanban means “card you can see” or “signal board”

Kanban card is attached to the material in the inventory and replenishment process is triggered by visually indication in the card. This is pull mechanism and improves timely material flow with optimum inventory. Kanban can be implemented using single bin, 2 bin or 3 bin and below process flow narrates a simple 2 bin Kanban system.

Step1: Kanban card is placed in each bin which has details of the materials and quantity of the bin. Material is issued to shop floor or customer for production or sale respectively.

Step2: Once the first bin gets empty, the card removed and dropped in common point.

Step3: Then operator reads the card either using RFID or manual feed the details in the system. This triggers for a communication to supplier for replenishment.

Step4: Once the material reaches the stores from supplier, the bin is filled with the material and card is placed in the bin.



KANBAN in SAP

To implement Kanban in SAP, production supply area (PSA) is configured for the storage location in a plant where material is stacked and control cycle master is created for the Kanban materials for the PSA. Kanban works based on Kanban procedures defined in control cycle and it is broadly classified as:

Classic: material is continuously replenished for quantity defined in the control cycle

Event driven: material is replenished when required for actual quantity and quantity not defined in control cycle.

Control cycle vs Purchasing Strategy

Mode of purchasing is influenced on factors like material demand, its lead time and cost. Kanban is suitable for below combinations. Kanban procedure and replenishment strategy are proposed as below.

 

Scenario	Demand	Lead time	Cost	Factors vs control cycle
Case 1	Fast moving	Less (within a week)	Low or Medium	Procedure: Classic Kanban with fixed number of bins and quantity Replenishment Strategy: Schedule agreement
Case 2	On specific request	Less (within a week)	High	Procedure: Event-driven Kanban Replenishment Strategy: Contract agreement

Process flow of Kanban compared with conventional

When Kanban becomes empty after consumption, JIT calls and purchase orders are created automatically for further supplies. In conventional purchasing, schedule lines are created for the complete demand and if the demand slows down, it’s difficult to stop or hold the supplies.



Conclusion

Efficiency purchase is not only meeting customer demands but also have better control on operating capital. Kanban model can be wisely based used which calls for minimum inventory and efforts in follow ups, thereby gives better control on inventory cost.