In this module, we first review what a warehouse and a storage system are and how Warehouse Management is carried out. The following is what a Physical Inventory is, how inventories are classified and how inventories are valued. Next, a stock is defined and how inventory management is carried out. Finally some of the programming systems used and the selection of parts are presented, the FMS, MRP, Kanban, JIT and Jidoka system are briefly shown.
OBJECTIVES
Provide participants with the tools and knowledge that allow them to effectively apply concepts and criteria in Stock and Warehouse Management
UNIT 1
THE STORE
- Definition of Warehouse The storage system Evolution of the storage system Object of a storage system Objectives and importance of a storage system Storage management.
Planning and Organization in Warehouse Management
The Department of Warehouse Management:
Receipt of materials
Storage of materials
Movement of materials
Control in Warehouse Management: Information
DEFINITION OF WAREHOUSE
The warehouse is the premises, area or space, strategically and adequately located where the different types of materials necessary for the good running and operation of the organization are kept. They are subject here to inventory controls, entry, exit, relocation, presentation modifications, records, custody and temporary or temporary conservation, etc.
- The warehouse is essential in any business and therefore its management and operation is a reason for constant improvement and professionalization. There are covered, uncovered warehouses and sheds (mix of open and closed)
THE STORAGE SYSTEM
It is the ordered set of rules and procedures designed to safeguard the different types of materials necessary for the smooth running and operation of the organization.
- In this set of interrelated elements, there is a certain cohesion and unity of purpose
EVOLUTION OF THE STORAGE SYSTEM
| DECADE | SYSTEM |
| 1940 | Handbook |
| 1950 | Machining |
| 1960 | Automated |
| 1970 | Integrated |
| 1980 | Intelligent |
PURPOSE OF A STORAGE SYSTEM
| OBJECT | CAUSES |
| Solution to own business requirements | • Adaptation to demand - internal / external - (process times, seasonality, customer service…)
• Characteristics of the materials / products (perishable, dangerous, recycled…) |
| Optimization of financial resources | • Reduction of costs by increasing the volume operated (discounts on purchases, transport consolidation…)
• Cost reduction through production needs (groups used in different process units..) |
OBJECTIVES AND IMPORTANCE OF A STORAGE SYSTEM
The importance of having a warehouse can be reflected in the following objectives:
- Decrease in stock levels Decrease in physical space and maximize available volume Optimization of Purchase Management Obtain flexible production with minimization of handling and transport operations Reduction of process times Improvement of logistics quality Speed of logistics Deliveries Maximization of the level of customer satisfaction Reliability Reduction of administrative tasks Optimization of costs. Reduction of costs associated with management Optimization of the management of the level of investment in working capital
A good storage system
- Keeps materials safe from fire, theft, and damage. In the warehouse, the physical protection of the materials located there must be established and maintained, taking the necessary precautions to protect the articles from damage due to inappropriate use, mishandling, defects in the inventory rotation procedure, theft, etc. It allows carrying carry out the appropriate physical distribution of the articles, facilitating authorized persons quick access to the stored materials. In the warehouse, a record of the location of all materials must be kept to facilitate their immediate location. It facilitates stock control and allows constant information to be kept on the actual situation of available materials. In the warehouse, the physical control of all the items that are part of its inventory is carried out.carrying for it controls in a detailed way on the rotation of materials (inputs, outputs, transfers).
WAREHOUSE MANAGEMENT
Logistic process that deals with the reception, storage and movement of any material within the same warehouse up to the point of consumption, as well as the treatment and information of the generated data
Warehouse management process
1- Planning and Organization in Warehouse Management
2- The Directorate in Warehouse Management
- Receiving materials Storage of materials Movement of materials
3- Control in Warehouse Management (Information)
PLANNING AND ORGANIZATION IN THE WAREHOUSE MANAGEMENT
(Activities of a strategic and tactical nature)
Planning and organization activities in Warehouse Management have to do with
- Distribution and Storage Network Design Warehouse Location Warehouse Size Physical Organization Models of Warehouses Warehouse Design and Layout
LAYOUT
THE MANAGEMENT IN THE WAREHOUSE MANAGEMENT
It is related to
- Receiving materials Storage of materials Movement of materials
THE RECEPTION OF MATERIALS
Vitally important process related to product entries, download and verification; The quality of the final product depends largely on it.
It is closely linked to purchases, since the warehouse must coordinate aspects such as the type of packaging for the storage of the merchandise in the warehouse, the labeling or packages required, the date and time of receipt, etc., with the purchasing area.
The material received must be subjected to a preliminary inspection, before being introduced into the storage area, in the event that the initial inspection detects materials of inferior quality or in poor condition, it must be rejected.
Although the tendency is to eliminate the Control, when receiving a shipment it must be taken into account that it must be subjected to verification to check if it is in order and in good condition, if it is damaged or not, if the number of units required was received. Any qualification must be made immediately and no delivery receipt can be given. The object is to be able to support any claim.
Receiving process
Products are received and stored in good condition, signing and sealing the documents as a sign of conformity
1- Arrival of the product.
2- Checking and control.
3- Sealing, report, tests
The received products must be registered and controlled, classifying, coding and locating them within the warehouse.
4- Registration. Documents corresponding to the entry of merchandise are entered into the system or database immediately.
5- Labeling. All received products are labeled and their locations are placed in the system.
STORAGE OF MATERIALS
It is the sub-process concerning the storage and conservation of the products with the minimum risks optimizing the physical space.
Its basic functions are:
- Informs purchases about stocks, controls and maintains inventoried items, monitors that materials are not exhausted
Warehouse areas
- Reception: Area where the activities of the Reception process are carried out. Storage, reservation or stock: Destination area of the stored products. Includes specific areas of stock for special merchandise, returns, etc. Preparation of orders: Area where the goods are located for dispatch. Departure, verification or consolidation: Where the dispatch and final inspection of the goods take place. Step maneuver: areas intended for the passage of people, machines and the maneuverability of machines. Offices: area destined to the location of auxiliary jobs to the warehouse's own operations
Ways of storing materials
The physical appearance of a materials warehouse depends on the dimension and characteristics of the materials. These can require a simple rack up to complicated systems, involving large investments and complex technologies.
The choice of material storage system depends on the following factors:
- Space available for the storage of materials. Types of materials to be stored. Number of items stored. Speed of attention required. Type of packaging.
Materials can be stored in the following ways:
- Unit load: The name of unit load is given to the load made up of transport packages that arrange or condition a certain amount of material to enable its handling, transport and storage as if it were a unit. The unit load is a set of cargo contained in a container that forms a single whole in terms of handling, storage or transport. The unit loads are formed through pallets (platforms), which are schematic wooden stages of various dimensions. Its basic conventional measurements are 100 mm and 1,100 mm as the international standard to adapt to various means of transport and storage.
- Boxes or drawers: It is the ideal storage technique for small materials, such as screws, rings or some office supplies, such as pens, pencils, among others. Some semi-finished, in-process materials can be stored in boxes in the production sections themselves. The dimensions must be outlined and their sizes can vary according to the needs. Shelves:It is a storage technique for materials of various sizes and to support standardized drawers and boxes. The shelves can have different sizes and dimensions. The materials stored in them must be identified and visible. Racks are the simplest and cheapest storage medium. It is a technique adopted for small and light parts when stocks are not very large. Columns: The columns are used to accommodate long and narrow pieces such as tubes, bars, straps, thick rods, straps, among others. They can be mounted on casters to facilitate their movement. Its structure can be made of wood or steel. Stacks:It is a variation of box storage to make the most of vertical space. The boxes or platforms are stacked on top of each other, obeying an equitable distribution of loads. It is a storage technique that reduces the need for divisions in the shelves, since in practice, they form a large and unique shelf. The stacking favors the use of the platforms and consequently the piles, which constitute the ideal equipment to move them.
Types of storage of materials
- Racking: Allows the vertical space to be used efficiently, storing stocks in large racks, however it may require more work and be more expensive. It is very common to use storage techniques associated with the stacking system of boxes or platforms, which provide flexibility and better vertical use of warehouses By Zones: Group stocks of common characteristics together in easily accessible places Random: Group products according to the size of the lots and the available space without relating the characteristics of the products, the space is used efficiently but does not help for the seasonal or promotional dispatch: Intended for products that are easy to collect and supply to minimize handling costs. High Risk Quarantine: For products such as controlled substances, high value stocks or firearms that require special storage conditions. Temperature controlled: It is important to take into account the Employee safety and protect them from sudden temperature changes. Manipulation is slow
Warehouse types
| According to the nature of the stored items |
|
| According to its structure and handling techniques |
|
| According to its legal regime |
|
| According to its logistics function |
|
How the storage process should be carried out
The storage process must be carried out in such a way that the appropriate records are kept, using databases, plans, inventory control, all taking into account the following aspects:
1- Prevention of problems: Check if the warehouse or space where the products are stored complies with the basic standards such as ventilation and light, emergency exit, fireproof walls, weighing, etc.
2- Personnel training: Warehouse personnel must be properly trained and know the care that must be taken in handling these products.
3- Verification of communication systems and information management: These must function properly, allowing the adequate flow of information, facilitating the updating of data, making inventory management more efficient, avoiding the purchase of more product than is needed due to failure of communication, turning them into "materials that occupy space unnecessarily".
4- Collection of the following information:
- Items to be stored Maximum amount required to be stored in times of high demand. Type of container handled for each product.
5- Product grouping: Group the products by type of presentation. At this point, liquids will separate from solids, otherwise protection means should be provided to prevent a liquid spill from damaging a solid product, which are commonly packed in waterproof packaging.
6- Special products: Identify among the different types of products or materials those that require special storage conditions such as: refrigerated, flammable, etc. Evaluate whether they should be removed from the warehouse to a safer location based on current quantities and conditions.
7- Separators: Locate separators between the different types of presentation as follows:
- Products that within the same type of presentation are of a different denomination or name. Products of the same type and the same commercial name that have a different size.
8- Location: Update the physical location of the products or materials in your warehouse system or plan, the final position that the products will occupy considering areas of personnel movement, movement of stevedores, forklifts, emergency exits, dispatch area, etc..
9- Movement of materials: Carry out the physical movements of the materials according to the plan obtained and make the adjustments that you consider necessary.
THE MOVEMENT OF MATERIALS
It is the sub-process of the warehouse related to the transfer of materials from one area to another in the same warehouse or from the reception area to the storage location
Factors to consider, for the type of tool to be used in the movement
- Warehouse volume Product volume Product life Cost of equipment Amount of handling and shipping required Distance of movements
HANDLING EQUIPMENT
CONTROL IN WAREHOUSE MANAGEMENT: THE INFORMATION
Its scope extends to all the processes that occur in Warehouse Management.
Types of information
- Management Information Location Identification Product visibility and traceability
Management Information
- Warehouse Configuration Data on available means Technical data on stored products Activity reports Indicator evolution Work procedures and instructions Job profiles and requirements Daily activity records
Locations Identification
- By Shelving: It is the simplest and cheapest. Each shelf is sequentially coded By Aisle: Aisles are encoded with consecutive numbers
Visibility and traceability of products
- Stored products must be coded. This coding must be related to the one used to identify the locations and to the rest of the company's processes.
Warehouse Management Technology
- Bar Codes Radio Frequency On-Board Computers Handheld Terminals Voice Recognition
Integrated logistics management systems
UNIT 2
INVENTORIES AND THEIR VALUATION
- Inventory Classification of inventories: Physical and Accounting. Physical Inventory
- Measurement and physical counting Inventory control cards Conditions for successful inventory taking
- Stock valuation.
INVENTORY
The inventory is the verification of the existing products in the warehouse, in quantity and value at a certain moment.
With it you get:
- Know the exact situation of the products (in quantity and state of conservation) Control, confront and define the physical and accounting situation.
CLASSIFICATION OF INVENTORIES
The inventory can be physical or accounting.
PHYSICAL INVENTORY
It consists of the determination of the quantities stocked, through measurement and counting, at a certain time. This time is generally every end of the year, although it can also be extended throughout the year.
Physical inventory is the basic utility control element for production management and financial management. This basic utility is precisely to report, with the greatest possible precision, the amount of material actually staked.
- For financial management, the inventory serves as the basis for evaluating the stocks whose values will be taken to the balance sheet and the demonstration of profits or losses. For production management, the inventory informs about the availability for production and serves as the basis for determining the quantities to produce, taking into account the planned sales.
Physical inventory is essential to periodic accounting inventory. The perpetual accounting inventory also needs to be periodically confirmed through the physical inventory, because the accounting balance may not coincide with the physical balance, either due to an error in the entry (or not entry) or in the calculation.
Rotating or cyclical physical inventory
The rotation of the physical inventory consists of determining an order of priority among the inventoried items and determining the inventory periods, that is, it is carried out during a period considered, for example quarterly, counting all the items that registered movement during that period. time interval.
It has the advantage of reducing to a minimum the time in which the organization must stop due to physical inventory, even being possible that it does not need to stop completely.
The disadvantage of rotating inventory is that at the end of the year only the inventory items that were inventoried in those days will have the highest probability of having their correct balances, while the balances of the items inventoried on a rotating basis at other times will be only that end of the year, accounting balances extracted from the stock cards. This situation can take us to the company for several days to physically inventory all the items in the stock.
MEASUREMENT AND PHYSICAL COUNT
The determination of the number of units of a certain stock item is naturally made by a simple count. If that number of units is very large, it would be interesting to weigh them and divide the total weight by the weight of one, thus obtaining, indirectly, the number of units. Weighing is a form of measurement.
Measurement consists essentially of comparing the item to be measured with a known measurement object, such as the meter. This would measure the quantity of a certain stock item linearly. Said quantity can also be obtained by weighing: for example, by weighing a roll of wire, and knowing the weight of one meter of said wire, the length of the roll can be known indirectly, and more easily. This means substituting one form of measurement for another.
In general, it is faster to measure than to count, because counting is only effective when it is fast. The measurement methods are approximate methods while the counting methods can be exact if there were no human error caused by fatigue or little attention. Counting efficiency can be increased by mechanical, electromechanical, or electronic devices. However, in these cases errors can also occur caused by equipment defects.
The physical inventory will be faster the more count and measurement methods are. Hence the interest in modern electronic devices, whose possibilities are almost limitless
Inventory Control Cards:
In these cards the movements of income and exits of the materials and the immediate obtaining of the existing balances are recorded. For this the storekeeper must have his files organized and updated of all the documentation that originates movement of materials.
Apart from current computer programs, whether through income (purchases) and exits (sales), it is important that the cards continue to be carried, since these programs are not so perfect, since they tend to solve part of the problem but not its entirety.
Every item once it enters the warehouses must be located correctly and, in order to be located, some companies use identification cards that describe the item, date of entry and quantity.
The following model of a valued merchandise control card, also known as “Kardex” cards, is presented below.
CONDITIONS FOR A SUCCESSFUL INVENTORY TAKE
The information resulting from the physical count is not a sufficient element, since it must be compared with the balances managed by the accounting area. This phase is called reconciliation and the final objective is the correct determination of the differences that the accounting adjustment will produce, according to the costing method used by the Company.
A Physical Inventory made with a good methodology will always have as added value having the stock fully ordered and stored in the place chosen by the Company.
This will help us to:
- Have the warehouses with the stock fully ordered and coded, with respect to a Warehouse Location Code System. Have exact knowledge of the stock that the Company has at the date of inventory. Have the basis of its accounting adjustment, with due support for tax authorities.
ACCOUNTING INVENTORY
It is that done through accounts on the stock tab, adding the inputs and subtracting the outputs.
Accounting inventory can be periodic or permanent
- Periodic accounting inventory. It consists of registering only the entries. Periodically the balance is determined through a physical inventory of the stock and then the outputs are known by difference. Permanent accounting inventory. It consists of registering all the entries or exits of the stock, through annotations in the stock card, and calculating the existing balance in stock immediately, after each entry or exit
STOCK ASSESSMENT
Valuing a stock may seem like a simple task, in effect, simply multiplying the existing units by their unit value.
- Difficulties start when trying to determine the unit value to be considered.On the other hand, it is necessary to take into account the valuation difficulty implied by the fact that the currently existing units are the result of inflows and outflows of partial quantities carried out at moments different.
Valuing the materials is of great importance, since if its costing is correct, so will its results as far as it depends.
The problem of valuing an inventory must be solved according to the established rules since companies generally acquire a certain item without having exhausted their inventories, but it is difficult to acquire them at the same price or in the same quantities.
It is convenient for companies to determine a uniform and constant valuation policy, that is, it is convenient for the company to take into account the established rules and according to the accounting principles of consistency, the valuation should not change in the future, unless authorized of the Ministry of Finance.
VALUATION RULES
If the material was acquired specifically to be used in a certain production order or order, there will be no doubt in recognizing how much to attribute to it: it will be its specific acquisition price. Meanwhile, if different equal materials were purchased at different prices, mainly because they were purchased on different dates, and were interchangeable with each other, some alternatives arise:
- Average cost or average price method Moving weighted average price Fixed weighted average price PEPS cost method - FIFO UEPS cost method - LIFO
Average Price Rule
To develop this rule, one must consider the variations that occur in the Continuous Inventory, that is, that from the Initial Inventory that have a unit and total price, sales are deducted. When a new purchase income is made, the units are increased and the total price varies when considering the new prices between the new balance and thus new costs are found every time a new purchase is made.
Moving Weighted Average Price
It is so called the one maintained by the company with constant control of its stocks and that is why it updates its average price after each acquisition.
Example
Suppose that in a certain month the following purchases and consumption of a certain material occurred
Fixed Weighted Average Price
It is used when the company calculates the average price just after the end of the period, or when it decides to appropriate to all the products produced in the year or in the single month a price per unit.
Example
Suppose that in a certain month the following purchases and consumption of a certain material occurred
PEPS Cost Rule (FIRST ON ENTER, FIRST ON EXIT)
Also known as the «LESS OLD COST», it consists of considering the final Inventories of the last purchases, that is, from the bottom up and it is determined: The final Inventories come from the last purchases
In this criterion, the material is paid for by the oldest prices, the most recent remaining in stock.
The first to enter is the first to exit (FIRST IN - FIRST OUT)
UEPS Cost Rule (LAST ON ENTER, FIRST ON EXIT)
This last-in-first-out (LAST IN - FIRST OUT) rule, also known as the "OLDEST COSTS" rule, states that every going concern maintains a balanced volume of items to serve its customers, therefore, It must be considered as an investment and, consequently, all investment is valued at the acquisition price and in this case comes from the first purchase.
This theory is considered too conservative because they keep assets low and consequently determine lower profits, lower taxes and lower dividends and only offer greater benefits to the company in terms of availability or liquidation.
With the adoption of the UEPS - LIFO, there is a tendency to appropriate the most recent costs to the products made, which normally causes a reduction in accounting profit. Probably for this reason, this form of appropriation, despite being accepted by accounting principles, is not accepted by income tax collectors.
There is a risk in the adoption of LIFO, looking at the example, we verify that the stock of materials is evaluated by old prices. On the day that stock is used. Without additional purchases, it will be charged to the product, this will then be undervalued compared to recent prices and all results not previously presented will be accounted for now.
COMBINATIONS
There is also the possibility of adopting mixed criteria for evaluating the price of materials used.
The important thing, from the point of view of costs for evaluating results, is that, once a criterion has been adopted, it should not be modified from the operating hierarchy (Consistency Doctrine), so that there are no forced alterations in obtaining profit.
If for any reason, there is an interest or need for this change, the company must mention in its balance sheet, that modification and the value of the difference introduced in the result.
- For PEPS, the values during and after are the same. PEPS, presents the lowest costs of the materials used. For UEPS, the values during and after are the same. The UEPS, presents the highest costs of the materials used. The average price is between the ends
It is clear that these differentiated situations are compensated later.
When all the stock of materials has to be used, the sum of the costs of the materials applied by the different exercises will be the same, when we apply a higher value, it is because the remaining stock is less important, and when this was used it would cause the appearance of a lower applied cost. The differences exist when the material stocks exist.
Permanent, Physical or Periodic Control System:
This system involves the execution of a physical inventory from time to time, that is, a physical count of the items is carried out. By the physical count of the existing merchandise at the end of the fiscal year, the final cost and by difference the cost of the merchandise sold would be determined.
Through this system, the existence of merchandise held by the company is determined, in a certain accounting period, materially or physically counting unit by unit and valuing at cost price, thus determining the final existence of the merchandise. This control must include all the items that the company has, regardless of where it is located.
In the same way, you must take into account the items that have been sold but have not been registered.
On the other hand, items requested (order) but not received, items dispatched on consignment, etc. must be taken into account.
Since the physical inventory at the end of the year is the initial inventory for the following year, therefore any error may affect the result and, consequently, the income statement.
Perpetual, Valorized or Continuous Control System:
Under this system, a detailed accounting record of the income and exits of each item or item that has inventories is kept, which constitutes a major analytical account, where both the amounts in monetary units and the physical amounts that are supplemented for purposes of adjustments with a physical inventory. At the end of each fiscal year, the balance is the amount of that item in the ending inventory, and the sum of the balances of all the items will be the ending inventory of the company's inventories. Likewise, the cost of the merchandise sold would be the result of the sum of all the exits that have been settled on each card or auxiliary major.
It is a permanent control of entries and exits of the articles, through the inventory valuation cards "kardex", auxiliary books, computers, which immediately indicate the existence of merchandise at any time, as recorded in the accounting books.
The importance of this control system consists in the exact representation both in the balance sheet and in the income statement.
Any error in the valuation of inventories affects both financial statements. In the case of the income statement, an overvaluation of inventories causes an increase in profits in the 1st year and a decrease in profit in the following year.
UNIT 3
THE MANAGEMENT OF STOCKS
- Introduction Stock definition Stock function Stock classification Stock management definition Stock management objective Stock symptoms Usual symptoms of poor stock management Stock levels
INTRODUCTION
From the point of view of production management, the main purpose of the stock is to feed the production-sale flow, continuously and uniformly, avoiding interruptions. In general, stocks have become an instrument to satisfy the needs of customers, ensuring that products reach them when they are needed and in the right form and quantity.
On the other hand, if the financial management of the company reports that it does not have sufficient capital to maintain certain levels of stocks, it will have to adapt to the available financial resources, thus causing a greater risk of disruption to the flow. production - sale.
It may also happen, on the contrary, that the company has sufficient capital and wishes to invest it in stocks, either for its own use, or to resell it. In the latter case, it is then another commercial activity of the company. In other words, the purchase and resale of a certain material, which can be one of the company's raw materials or one of the semi-finished products, also used by other companies.
As a consequence of the financial tensions and economic crises of recent years, companies have realized that investments in stock constitute an immobilized financial mass that increases costs without increasing the value of the product. The current trend is towards the general reduction of the level of stocks, and even towards their possible elimination, which has caused a real revolution in the techniques of organization of companies. Indeed, the analysis of the origins of these levels of stock or the causes of their creation, show, in most cases, defects in the structure of the company itself or in its operation.
A reduction in the level of stocks of certain articles, brings to light the origins of organizational problems that were previously hidden by their excessive availability. Among the most common include: defects in the quality of the products obtained or in the organization for their control, excessively long or inconsistent delivery times, obsolete or inflexible production means, insufficient or poorly fluid logistics chain, etc.
DEFINITION OF STOCK
Stock is considered that quantity of a product that is accumulated in a certain place, fixed or in movement towards its distribution centers.
ROLE OF STOCKS
Its function is to serve as an instrument for regulating the entire logistics chain, in order to achieve a continuous flow of materials.
The stocks also allow:
- Absorb the differences between the demand forecasts made and the actual movements that occur.Avoid ruptures in the flow of materials due to various circumstances, such as malfunctions in replacement transportation systems, transportation to customers, unforeseen demands, non-compliance by part of suppliers. Specialization in production. Use economies of scale.
STOCK CLASSIFICATION
DEFINITION OF STOCK MANAGEMENT
Stock management is understood to be planning, organizing, directing, controlling and providing feedback to all stocks belonging to a company.
Planning consists of determining a priori the values that the stock will have over time, as well as determining the dates of entry and exit of the materials from the stock and determining the order points of the material; that is, it means:
- Establish forecasting methods. Determine replacement times and amounts.
Organizing means
- Set the criteria and policies for its regulation. Define the techniques to be used. Determine the most convenient quantities of each of the articles.
They must be Directed (and Controlled)
- The movements of Entry / Exit to the warehouses. The valued stock.
The control consists of the recording of the actual data, corresponding to what was planned, these may naturally differ from those and the more so the stronger the period between planning and control.
The feedback consists of comparing the control data with the planning data, in order to verify the deviations of this, determine the causes of the deviation and, when appropriate, correct what was planned, so as to make it more realistic., making planning and control more and more coincident.
OBJECTIVES OF STOCK MANAGEMENT
The very definition of inventory management shows that its objectives are essentially to plan, control and re-plan the stock, that is, the quantities of materials that enter and leave, the times when these entries and exits occur, the time that elapses between these times, and the points of order of the materials.
The relationships between the quantities that enter and leave, and the times in which this occurs, also provide the rates of demand (inputs) and consumption (output) of the materials.
These objectives of inventory management can be practically achieved through the exercise of the following main functions:
- Make the calculation of the demanded lot (Economic lot). Make the calculation of the minimum stock. Make the calculation of the maximum stock. Issue the complete stock sheet. Keep the stock sheet updated. Reorder the data when reasons arise to modify them. for the materials that have been delegated to them. Provide the other bodies of the company with the information that is requested. Receive the material that enters together with the delivery note (or Fiscal Note) Identify the material with the internal code of the company, in case you do not have it.Save the material.Place the input of the material in the stock file.Keep the material in the safest conditions.Deliver the material by requisition.Place the output of the material in the file of stock.Reserve the material according to accepted order.Save input and output documentation. Organize storage and keep your organization.
These main functions can be grouped into:
Entry movements
Stock entry movements are basically divided into four types:
- From supplier: they include all the receptions of the different products purchased by the company. They can be of finished product for its commercialization, of raw materials, of spare parts and of new containers and packaging. Customer return: they collect all the material rejected by customers due to some type of defect or misunderstanding. Reception of other warehouses / centers of the same company. Regularization of physical count: when proceeding, it may be necessary to make entries for products to adjust stocks.
For the correct treatment of entry movements it is necessary to record them in a document in which it is necessary to state at least:
- Purchase order reference. Name of the material received. Quality control result (quality / quantity). Material placement reference.
Exit movements
There are basically four types of exit movements:
- To customer, with or without charge. Return to supplier: here are included both those sent for quality problems, as well as returns of containers and packaging. Shipments to other warehouses / centers of the same company. Physical count regularization, to adjust the stock values by less.
Like the entry movements, the exit movements must be included in some type of document, which must include at least:
- Identity of the person who withdraws the product.Designation and classification of the material.Removed quantity.Destination of the material.Date and signature of the person in charge.
Balances
The balance includes the actual stocks of the item. The document that supports it is the warehouse file, with it you get:
- Control the movements of the articles. Indicate the levels of stock to plan their replenishment. Facilitate inventory operations. Comply with legal provisions.
Normally, entries and exits are recorded in the File, with data referring to the quantity, date, etc.
USUAL SYMPTOMS OF A DEFICIENT STOCK MANAGEMENT
- Increase of pending orders to serve Increase of the investment in stock keeping constant the number of pending orders High customer rotation Increase of the number of canceled orders Periodic shortage of sufficient warehouse space Large differences in stock rotation between the different distribution centers, and among most products. Deterioration of the relationship with intermediaries in the distribution chain, quantified by canceled purchases and decrease in orders.
STOCKS LEVELS
The management of the stock in our warehouses is a process that requires a lot of care, since if we do not have the adequate inventory, we will not be able to supply the merchandise that our clients require.
Normally, having missing merchandise for sale constitutes 4% to 10% of a company's sales. This figure is important since it shows what is not perceived in sales. In general, shortages are caused by internal company errors. Consequently, the client is forced to look for them with other providers and we may never see him again. Maintaining a balanced and well-determined inventory ensures that we can adequately serve our customers.
On the other hand, the inventory balance impacts the company's capital flow operation.
- If the inventory is very large, the operating costs are increased due to financial costs on the merchandise, that is, you have static money sitting on a shelf, which could be productive. If the inventory is small, then transportation costs are incurred, labor, placement of various purchase orders and increased stress.
For this reason we will analyze the optimal inventory to maintain and then the way to do it correctly by setting:
- The minimum stock - the safety stock The maximum stock The demanded lot (Economic lot).
THE MINIMUM STOCK
It is the quantity that we must consume during the supply period, that is, during the time that elapses from the moment we make an order to the moment in which the supplier indicates that this will be delivered to our warehouse.
Example
Suppose we place an order for a material on a certain date and our supplier tells us that you can deliver that order to us only after ten business days have passed. If we know that on average during those ten days we will consume 25 units / day. What will be our minimum stock?
Solution
Minimum stock = Supply term * Average consumption
Minimum stock = 10 * 25 = 250 units.
THE SECURITY STOCK
It is the additional quantity that we must add to the minimum stock to be protected in the event that the following occurs:
- Delay in the delivery of the supplier. Abnormal increase and in extraordinary situation of the estimated quantity of consumption for the supply period.
Although some authors have been concerned with developing mathematical formulas for calculating the safety stock, the best formula is to know our supplier well and to know or know how to predict the consumption behavior of our market. In this way, an estimate of the safety stock is obtained as a function of time.
Example
In the example presented for the calculation of the minimum stock, suppose that although it is true that our supplier has indicated 10 useful days as a delivery period, we know from experience that this supplier when it says 10 days is because it will actually take 15 days In addition, foreseeing, according to the analysis carried out, a possible increase of 20% in demand, we estimate 2 additional days. What will be the safety stock?
Solution
Supplier delay = 5 days
Increased consumption = 2 days
Security Stock = 7 days
Safety stock = 7 * 25 = 175 units
REPLACEMENT LEVEL OR ORDER POINT
It is the level of the Stock at which an order must be made for the material, in order that the stock does not reach its breaking point (no unit in the warehouse). This point is calculated by adding the Minimum Stock plus the Safety Stock.
Example
Following the case presented in the minimum stock and the safety stock, the replacement level would be
Replenishment level = Minimum stock + Safety stock
Replacement level = 250 + 175 = 425 units
This point indicates that we should not drop 425 units in the warehouse to make a new purchase order; In the event that we did not do so, we would be risking being at some point without any unit in the warehouse, waiting for the entry of our order by the supplier, with the consequences that this situation would entail.
MAXIMUM STOCK
The maximum stock is calculated by adding the replacement level to the economic purchase lot.
Example
Maximum stock = Replacement level + Economic batch
Maximum stock = 425 + 3,000 = 3,425 units
HOW YOU CAN GET AN OPTIMAL INVENTORY LEVEL
1- First we have to divide the sales of a company into
- Line products. They are all those in which their sales have a constant regularity, Day by day, week by week and month by month. Offline products. They are all those who come out of the first list; that is, sporadic products, on request, for single use.
Depending on the rotation they have.
2- Once the company's sales have been divided, we apply the inventory optimization method only to line products. We know that these products, in case of return, can be resold to other customers without having to leave them in the warehouse for a long time. That is, their storage time is relatively short and allows them to be rotated properly.
Offline products only have to be purchased when requested by the customer. Avoid having inventories of these products. In case you do, prepare to have outdated, low-turnover products.
3- Below is the methodology used to program and project the required inventory levels, the growth rates, the quantification of the maximum, minimum levels and reorder points. It also shows how the analysis to determine the optimal point of inventory based on financial costs and material moved should be done.
Growth Rate
In order to describe the process, let's start with an example that will help us in the presentation. Suppose the data in the following table is obtained by selling two different products. (in pieces / month)
This information allows us to observe that for product 1 in the months of June and August extraordinary sales were presented.
- These data will produce an increase in expectations that are unreal, therefore they have to be replaced by the average of the attached months: June = (3326 + 3724) / 2 = 3525 August = (4660 + 3724) / 2 = 4192.
In order to estimate December sales, it is recommended to graph these values on a scale. In Microsoft Excel there are graphs and functions that perform this calculation directly (it was seen in the previous module)
With the information presented, the growth rate for product 1 is 4.238% per month, which corresponds to a compound growth rate of 57.88% per year. Similarly for product 2 it is 2,314% per month or 28.80% per year.
We can see that product 1 is growing almost twice as fast as product 2. The growth rate of these products is high, so it is necessary to be reviewing inventory levels more carefully. The results are shown in the following graph.
In some cases, when you have cyclical markets, for example school uniforms, Christmas items, occasion items and novelties, it is difficult to apply this technique and you have to use data over a longer period of time and in some cases it is not applicable.
Highs, Lows and Reorder Point
On the other hand, we have that the inventory levels depend on other factors such as the sales estimate and the refilling time. Refill time is the time that elapses in working days from when a purchase order is placed with the supplier and the merchandise arrives at the warehouse. This includes daily manufacturing, transportation and customs clearance (if applicable).
The following graph shows the number of pieces in inventory as a function of working days.
- We observe that the initial inventory starts at 6000 and as the days go by the product is sold. The yellow line corresponds to the estimated monthly sales. The blue line represents the reorder point, The red line the minimum.
A maximum is the quantity of product that will have to be requested from the supplier when a purchase order is triggered.
- This value is linked to the monthly consumption. In the example it has been considered that the maximum corresponds to 2 months of inventory; So, if the monthly consumption is 3000 pieces, the maximum will be double 6000 pieces. This quantity takes into account the time required for the supplier to supply the material. The longer the refill time, the greater the maximum quantity of product in stock. In the previous example, 5 business days have been considered. The reorder point, on the blue line, has been marked as the moment when stocks reach half of monthly consumption. For a 5-day replenishment period it is observed that in almost all cases a functional system can be maintained. Red line corresponds to the pussycat. When inventory reaches this level,causes an alarm in the system that warns users that this product is going to end. We see in the first period that stocks ran out. This happens when there is an over-demand for the product. As a preventive measure and to maintain sales, when it reaches below the minimum, the company must purchase this product, even with the competition taking care of the operating margin.
Lost sales can lead to a loss of customers. As we observed in the other periods, although the level of inventories crossed the minimum, the merchandise was about to arrive at the warehouse and it was decided to wait for it without having shortages.
If the inventory reaches a Minimum it implies that the merchandise must be obtained anywhere; Many times paying more for it.
For perishable products the concept is the same although much lower refilling time values have to be used. This analysis has to be done with each of the line products.
As it can be seen, all the Minimum Maximum and Reorder Points values depend on the real displacement of the merchandise, that is, it must be based on historical values. Sellers often, due to their desire to make sales, estimate values that are often unrealistic. Sales estimates are just this…. Dear. If inventory levels begin to drop and a large order is expected, the reorder point can be brought forward as long as sales commitments are met.
Optimal Order
As a last point we have to consider the optimal value of a purchase order. Within this category are the inventory management models. Here we are concerned with the optimal amount of inventory a business should have.
This problem has to be seen from two points of view
- The first is according to the amount of fixed costs The second according to the cost of placing a purchase order.
According to the amount of fixed costs
On the one hand, fixed costs increase with the amount of inventory.
- Increasing inventories requires more space that generates an income; you have more capital invested in inventories that stop paying interest and more personnel to handle them. When inventory is excessive you have tied capital that has to pay interest or can be used to pay debt. We have to include here the costs of obsolescence, insurance, abuse, deterioration.
Cost of placing a purchase order
On the other hand, the costs of placing a purchase order are reduced when the volume of an order increases.
- That is to say, placing a purchase order for 10,000 pieces has a lower cost than placing 10 purchase orders of 1000 units each. The increase in cost is mainly generated by the increase in paperwork, bank transfers, telephone bills, personnel who perform payments, customs brokers, among others.
To this we must add to the loss of volume discounts that can be obtained with large orders.
CASE: Purchase in constant quantities
A commercial house that operates in the middle, has the policy of working every day of the year (from Monday to Monday), it is dedicated to buying and marketing products from national manufacturers. To date she is carrying out the study of purchases and storage that must be carried out during the year 2003. Product P1 is one of the products that you normally buy and sell the most and you are interested in knowing how many units you should buy next year, which will be the ideal purchase quantity that will give you the maximum benefit, as well as the number of times you have to buy said product during the year, which will be the minimum and safety stock as well as the level of replenishment related to each of the orders to be made.
This means that we must buy the following quantity 12 times in the year (purchases in constant quantities)
Economic lot = 52,760 / 12 = 4,397 units
According to this, for each purchase we calculate:
- The stock breaking date The date we will have to place the order The date the order must be entered The minimum stock The safety stock The replacement level The maximum stock
Applying the accounting method, for each case, it will be necessary to calculate the stock and rectify the stocks generated after the income of the purchased, attending to the stock break points.
CASE OF APPLICATION - REGULAR DAYS
For the year 2007 a Clothing Company wants to know the economic lot and the way to buy fabrics to make Jeans, the way of consumption of the fabrics in meters is foreseen as follows (on ordinary days).
We know that:
- The average purchase price planned for 2007 is 6,800 / meter. The possession rate considered is 36%. The cost of making a purchase is 1,000,000. There is an initial stock of 620 meters. The supply period is 7 days.The safety stock is 7 days.
You are asked to calculate:
- How many times should we buy during the year 2007 How many meters of fabric for Jean should we buy for the year 2007 Specify for each purchase order:
- The stock break date, the date the order will be placed, the minimum stock units, the safety stock, and the replenishment or replenishment level.
To consider:
- Purchases for constant quantities Purchases for regular periods.
Case 1: Purchases for constant quantities
In the case of purchases for constant quantities, the economic purchase lot is:
Economic lot = 11,832 / 4
Economic lot = 2,958 meters
As the jean fabric comes in rolls of 100 meters, the economic lot will be 3,000 meters (30 rolls). This means that we will buy 4 times a year, in irregular periods, but each time we make a purchase it must be 3,000 meters, in total 12,000 meters (120 rolls) will be bought.
When we calculate the first point of rupture of the stock (Moment in which we remain in the warehouse without any unit), in this case January 31, we proceed to calculate below:
- Date on which we will place the order Date on which the order was entered Number of units of the minimum stock Quantity of units of the safety stock Level of replacement or replenishment.
Maximum stock
Next we proceed to calculate the second break point, for this we first enter the purchased, then we rectify the stock and then we begin to discount the consumed until we have no more units in the warehouse:
The new break date is calculated as follows:
- We have 1,131 units to consume in April. In April it is consumed at the rate of 40 units / day. 131/40 = 28, that is, April 28 is the stock break
When we calculate the second point of rupture of the stock (Moment in which we remain in the warehouse without any unit), in this case April 28, we proceed to calculate below:
- Date on which we will place the order Date on which the order will be entered Quantity of units of the minimum stock Quantity of units of the security stock Level of replenishment or replenishment Maximum stock
Next we proceed to calculate the third breakpoint, for this we first enter the purchased, then we rectify the stock and then we begin to discount the consumed until we have no more units in the warehouse:
The new break date is calculated as follows:
- We have 295 units to consume in August.In August it is consumed at the rate of 28 units / day.295/28 = 28, that is, on August 10 is the stock break
When we calculate the third point of rupture of the stock (Moment in which we remain in the warehouse without any unit), in this case August 10, we proceed to calculate below:
- Date on which we will place the order Date on which the order will be entered Quantity of units of the minimum stock Quantity of units of the security stock Level of replenishment or replenishment Maximum stock
Next we proceed to calculate the fourth breaking point, for this we first enter the purchased, then we rectify the stock and then we begin to discount the consumed until we have no more units in the warehouse:
The new break date is calculated as follows:
- We have 383 units to consume in November.In November it is consumed at a rate of 40 units / day.383/40 = 9, that is, on November 9 is the stock break
When we calculate the fourth point of rupture of the stock (Moment in which we remain in the warehouse without any unit), in this case November 9, we proceed to calculate below:
- Date on which we will place the order Date on which the order will be entered Quantity of units of the minimum stock Quantity of units of the security stock Level of replenishment or replenishment Maximum stock
Finally we calculate the final stock (as of December 31), for this we proceed to enter the purchased, then we rectify the stock and then we begin to discount the consumed until December:
From where the final stock at December 31 will be 788 units
Case 2: Purchases for regular periods
In the case of purchases for regular periods, the economic purchase lot is the consumption expected for the next period, the last month you buy what you want to leave as final inventory.
When we calculate the first point of rupture of the stock (Moment in which we remain in the warehouse without any unit), in this case January 31, we proceed to calculate below:
- Date when we will place the order Date when the order was entered Quantity of units of the minimum stock Quantity of units of the security stock Level of replacement or replenishment Quantity to buy (February, March, and April) Maximum stock
Next we proceed to calculate the second breakpoint, for this we first enter the purchased (3,100 is calculated and not 3,069 because we know that it is bought in rolls of 100 meters), then we rectify the stock and then we begin to discount the consumed until it is not Let's have more units in the warehouse:
The new break date is now April 30 (although we still have 31 units as of that date), then we proceed to calculate.
- Date when the order was entered Quantity of units of the minimum stock Quantity of units of the safety stock Level of replacement or replenishment Quantity to buy (May, June and July) Maximum stock
You really buy 2,700 meters (because the rolls come from 100 to 100 meters)
Next we proceed to calculate the third breakpoint, for this we first enter the purchased, then we rectify the stock and then we begin to discount the consumed until we have no more units in the warehouse:
The new break date is now July 31 (although we still have 95 units as of that date), then we proceed to calculate.
- Date when the order was entered Quantity of units of the minimum stock Quantity of units of the security stock Level of replacement or replenishment Quantity to buy (August, September and October) Maximum stock
UNIT 4
THE PROGRAMMING SYSTEMS AND THE SELECTION OF PARTS
- IIntroduction: Repeatability coefficient and Variation coefficient FMS system MRPE system The Minimum Inventory Program in Process The Kanban System The JIT System The Humanized Automation System (JIDOKA)
INTRODUCTION - Repeatability coefficient and Variation coefficient
Although it is true the ideal of a company is to reduce the stock to zero, the reality shows us that in our environment what can be done is to minimize the inventory, for this we must evaluate in which merchandise we must maintain stock and in which we should only purchase on request.
What is the first thing to take into account when deciding whether or not to stop a merchandise, this will be the fact of being a merchandise that we always acquire and that normally will vary little; In this case, we must maintain a stock of it. But if it is a merchandise that we very rarely or never use; or if it is merchandise that we do not know we are going to use, in that case we should not keep stock of it and only purchase it on request.
In other words, the selection of the pieces to buy must be based on two indices:
- Repeatability coefficient Variation coefficient
Repeatability coefficient
It is a coefficient that indicates the number of times the consumption of a merchandise is repeated. This is the relationship between the average value of the consumption of the pieces and the value of the economic lot. The higher this coefficient, the more it will indicate the need to maintain a stock of the merchandise and the lower it will tend to be purchased on request.
Coefficient of variation
It is a coefficient that indicates the variation or standardization of the merchandise we consume. This is the relationship between the value of the standard deviation of the consumption of the pieces and the average value of this consumption. The higher this coefficient, the more it will indicate the need to be purchased on demand and the lower it is. It will indicate the need to maintain a stock of said merchandise
We take these two coefficients to a Cartesian axis system.
When looking at the figure of the Cartesian axis system we consider the following:
- The pieces framed in the second quadrant, that is, those that have a high repeatability coefficient and a low coefficient of variation, are suitable for applying the MRP System.
Depending on the repeatability coefficient, a fixed interval order system or a fixed quantity order system may be used.
- In the fourth quadrant are the pieces with a low repeatability coefficient and a high coefficient of variation. For them, the most appropriate is a system by order, serving request by request. (FMS system).
THE FMS SYSTEM
- It is the order-to-order manufacturing production system. This system seeks to accelerate the productive sectors in a sense of rapid customer service. This procedure is diametrically opposed to the MRP system.This system seeks to transform a commissioned operation into agile, flexible manufacturing with reduced delivery times. Following the FMS Operations Scheduling criterion, inventory maintenance is not a vital issue importance for any type of business, whether it is oriented to production or services. Although it is true that the materials or finished products included in this system are not available when they are needed, this does not imply that workers will not be able to carry out your activities or the company will not be able to make the sales you need,since they are materials or products with a high coefficient of variation and a low coefficient of repeatability.
THE MRP SYSTEM
- It is the serial production system. It is the traditional weekly, monthly, and even quarterly programming system, where the products are manufactured following the historical trend of consumption, with little possibility of change during the execution of the program. of MRP Operations (Material Requirement Planning), inventory maintenance is a matter of vital importance for any type of business, whether it is oriented to production or services, if the materials or finished products necessary for the good The operations of the company are not available when they are needed, the workers will not be able to carry out their activities or the company will not be able to make the sales that it needs, but if the amount stored is raised excessively,This will increase the financial costs of the company and consequently the company loses competitiveness before its competitors. Therefore, it is necessary to achieve a balance by providing adequate inventories with a minimum financial impact for the consumer..
Reasons to keep inventories under the MRP system
The primary reason inventories must be kept is that it is physically impossible and economically impractical for each item to get to where it is needed and when it is needed. Although it is physically possible for a supplier to supply raw materials at intervals of a few hours, for example, this would be prohibitive due to the cost involved. Therefore the manufacturer must maintain additional inventories to use when required.
Example of requirement of materials in a Productive Organization under the MRP System
1- Sales Forecast
Sales forecasting is basic, because through it we will be able to order our way of operating and producing in the productive organization, knowing the products and the quantities of each one of them that we must produce and, above all, calculating the needs for labor, materials and machines, to carry out said production.
The quantities to manufacture have a definite importance in the cost of the product, so it is necessary to know the expected consumption.
When we manage the operations of a productive organization, the first thing we must do is to coordinate sales and production, so that they perfectly coordinate business plans with production plans.
Sales forecasting can be done:
- By estimation based on historical data and information on the future situation. Calculating the trend of the time series of previous consumption. By extrapolation of the average consumption in the previous periods (month, quarter, etc.).
By exponential smoothing or short-term forecast based on the weighted average of previous consumption, applying decreasing coefficients in geometric ratio to the age of the information.
2- PRODUCTION SCHEDULE
From this information we can project our operations in the production area, for which we must calculate the quantity to produce.
The quantity to be produced is calculated based on the finished production to be kept as stock at the beginning of each period. In this case, the company's policy is to count between 15 to 30 days from the average monthly sale of the period or year that begins.
THE MINIMUM INVENTORY PROGRAM IN PROCESS
(MINIMIZED INVENTORY PRODUCTION SYSTEM - MIPS)
In 1971, The Mitsubishi Electric Company was experiencing a severe debt crisis. Looking for the solution, two goals were established:
- Vitalize stock control systems. Maintain rigid control in the delivery times of purchase orders, eliminating missing or excess parts or raw materials.
This program brought some benefits and reduced the debt of the company. After 1975, the problems were accentuated again, this time it was clear that the traditional treatment used to reduce stocks had not been enough to compensate for the violent difficulties. It was when SHINDO, president of the company, asked the following questions to his subordinates:
- Are the storage of materials really necessary for production? Would it be possible to synchronize the manufacturing and assembly sectors in order to eliminate the storage of manufactured parts?
In search of the answer to these questions, the executives of the Mitsubishi discovered that the Toyota Motor Company, sought to totally eliminate the stocks of manufactured parts, while they intended to reduce it by half. Based on this finding, the MINIMUM INVENTORY IN PROCESS PROGRAM was developed at Mitsubishi.
Basic concepts of the minimum inventory program in process
1- Cleaning and order
The cleaning and order program has as main stages:
- Determination of the premises for each material Complete elimination of obsolete machines, tools and materials Regular program of inspection and painting of machines and facilities Hospital-type floor cleaning Cleaning and order as a synonym of discipline
2- Machines always available.
The traditional concept used in the productive sectors that the machine cannot stop, generally results in the production of excesses, which causes bottlenecks during the manufacturing cycle.
Conversely, the always available machine concept focuses on the angle of maximum efficiency of the man - machine - tool set, at the exact moment when the need arises. Producing at the right time, in the right quantity, with quality, without interruption, becomes the orientation followed by the production sector.
In search of this objective, the following stages are necessary:
- Rigorous preventive maintenance program. Daily maintenance and lubrication executed by the operator. Operation in a single work shift. Cadenced operation without forcing wear. Maintenance proportional to the time of use of the equipment.
3- Quality - Quality Control Circles
The main points of this process are:
- Quality control circle program Inspection by the operator Failure-free production
Functions of the minimum inventory in process
1- Quick tool change
Advantages of quick tool change
- Reduction of the economic production batch. Increase of the machine use time. Reduction of the manufacturing cycle.
2- Multipurpose operator
Advantages of the multipurpose operator
- Reduction of the inventory in process. Reduction of the manufacturing cycle. Greater productivity and flexibility.
3- Low cost automation
Requirements:
- It must be compatible with the cost of the equipment. It must adapt to the space limitations of the equipment. It must take advantage of the existing equipment. It must be able to operate manually.
Advantages of low cost automation
- Complement to the Multipurpose Operator Program. Reduction of inventory in process. Reduction of the manufacturing cycle. Increase in productivity. Less investment.
4- Small batch production
All the stages presented so far have the main objective of establishing the basis for small batch production, transforming manufacturing into an extremely flexible system. For many years the manufacturing sectors operated on the premise that high machine set-up costs should be offset by large production batches.
The Japanese challenged that theory and, through the stages described above, created the condition for producing in small batches economically. This fact greatly contributed to decongesting the manufacturing areas, eliminating bottlenecks and enabling the production sector to quickly attend to market needs.
The Production System in small batches, became the first step for the implementation of larger programs, such as the Kanban and the FMS
Advantages of Small Batch Production
- Control of the quantities produced. Better quality and reduction of rejects. Better attention to programming. It is a complement to the functions Quick tool change, versatile operator and low cost automation.
THE KANBAN SYSTEM
The Toyota production system, better known as the "Kanban System," is a technique originally developed at the Toyota Motor Company. This logistics-focused system is also called the Just-in-Time (JIT) system, or Zero Inventory, and its basic idea is that inventories only exist to hide problems, which is why it prioritizes reduction. of inventories, thus leaving the problems exposed, so they must begin to be solved before making another reduction in inventories.
The word Kanban in Japanese has several meanings:
- Cardboard Symbol Panel
From a generic point of view Kanban is a production control system
- Traditionally, production scheduling searches various service orders to manufacture the different types of parts that make up a given product. Each section executes independent operations according to the manufacturing orders in its possession and supplies them to the subsequent sector. This method is known today as PUSH METHOD. In other words, a method that could be understood as PUSHING PRODUCTION. In the Kanban system, production is controlled by the assembly lines. Only after the consumption of the parts on the assembly line is the manufacturing authorization for a new batch generated. The KANBAN is a production system for smaller batches. Each batch is stored in standardized containers (containers), containing a defined number of pieces. For each batch there is a corresponding Kanban card.The pieces inside the standardized containers, accompanied by their corresponding cardboard, are moved through the sections, undergoing the various operations of the process until they reach the assembly lines on the finished piece shape. In the assembly of the finished product, and the containers are emptied, the corresponding Kanban cartons are placed in files placed in the next place. Once or twice a day, the cartons are removed and together with the containers, they are sent to the section where The manufacturing process of that piece begins. Each Kanban board represents an authorization for the manufacture of a new batch of pieces, in well defined quantities. The new batch of pieces, again inside the containers, together with their Kanban board,It goes through all the stages of the manufacturing process again until it reaches assembly, completing the cycle. If for some reason the consumption of parts were interrupted in the assembly line, the Kanban cards will no longer be placed in the files, thus interrupting the The manufacturing start sections, having no more Kanban boards, authorizing the manufacture of new batches, automatically suspend production. Literally no additional investment in stocks is made until new needs arise with the restart of consumption in the production lines. mounting.consequently interrupting the flow. The manufacturing start sections, having no more Kanban cards, authorizing the manufacture of new batches, automatically suspend production. Literally no additional investment in stocks is made until new needs arise with the restart of consumption on the assembly lines.consequently interrupting the flow. The manufacturing start sections, having no more Kanban cards, authorizing the manufacture of new batches, automatically suspend production. Literally no additional investment in stocks is made until new needs arise with the restart of consumption on the assembly lines.
Origin of the Kanban
The idea of kanban was copied from the operating system of a supermarket, which is why it is also known as the SUPERMARKET SYSTEM.
- In a supermarket, the merchandise is distributed in gondolas, with the necessary information placed on a cardboard. When a consumer wants to buy a certain product, he goes to the supermarket and picks up the merchandise in the necessary quantity. The supermarket according to demand, replenishes the merchandise sold. The supermarket is also responsible for replenishment on time, in quality, in quantity and at compatible prices. The Kanban system eliminates the storage of finished parts, which are replaced by small supermarkets close to the consumption premises. As Kanban boards are exchanged for parts in supermarkets, they are automatically replaced by the manufacturing sectors. Synchronization between manufacturing and assembly can eliminate the needs of the supermarket.
System caracteristics
There are two different characteristics in the system:
- One is Just in Time production, where only the necessary products, at the exact moment, in the required quantities, must be produced, keeping stocks at minimum levels. The other seeks to obtain full use of human resources, through exploration of their capacity, active participation in production, improvement of productivity and general work conditions. It should be expected as a consequence of the participation of workers in solving problems, an expansion of their skills and an increase in their motivation.
High stocks
In the conventional production system, the most important conditioning factor for high stocks is that arising from the lack of coordination between the successive manufacturing stages. Excessive interdependence and freedom incentivize efficiency by sector in isolation. This system contributes to the increase in inventories, considering that deficiencies in the fluctuation of demand, caused by production problems, quality failures and equipment breakdowns, must be made up.
In contrast, stock in the Kanban system is mentioned as a collection of problems and inefficiencies. In this case, the stocks are considered responsible for the imbalance between the various operations of the production process, causing excess machine and labor. In this way, inventories and stocks resulting from excess production were recognized as the worst cause of waste, once they contribute to cover up their different configurations.
Waste in operational activities
It comes in seven different forms:
- Due to excess work Due to idle time Due to improper manufacturing Due to stock Due to transportation Due to rejected production Due to unproductive activities
Kanban System Functional Description
The Kanban board is responsible for the communication and operation of the entire system. There is no standardized cardboard model. It must contain the necessary information for the perfect operation, taking into account the characteristics of each company.
The cardboard must contain the following information:
- Name and code of the piece.Name and location of the sections where the pieces are produced. (process flow). Name and location of the sector where the parts are consumed (assembly lines). Location of the stocking areas (supermarket). Quantity represented by the cardboard. Total quantity of the production batch. Sequential number of the cardboard u total number of cartons of the item in question Type of containers Total process time and time per operation.
Kanban system implementation scheme
The Kanban System implementation scheme, although not rigid, must go through some stages considered fundamental:
- Introduction of the Minimum Inventory in Process Program (MIPS) Define the items to be controlled by the Kanban. Determine the types of containers and quantities of pieces per container. Calculate the number of Kanban cards. Install the necessary facilities. Prepare the training manuals. Train the personnel directly involved. Expand the system.
Selection of items for the Kanban
Despite the fact that there are no limitations for the implementation of the Kanban, through the use of cardboard, it was verified that the system is more efficient when the controlled items have high activity, repeatability and small variation in the quantities consumed.
Let us remember that the objective of the Kanban is to minimize the stocks of material in process, producing in small batches only what is necessary, with quality, productivity and in the right time.
The Kanban is based on the concept of reducing the costs of machine preparation (setup), which results in the reduction of the economic production batch. (This concept can help in the selection of items for the use of Kanban).
Determination of the number of Kanban cards
The number of Kanban cartons and the quantity represented per carton are directly related to the speed of consumption on the assembly line and the replacement time required to replenish the batches.
The ideal is the perfect balance between production and consumption. In the most unfavorable case in which the consumption is faster than the batch replacement speed, the inevitable interruption of the assembly line will occur. In the opposite case, there will be an increase in the stock of materials in process, which will be as great the greater the phase shift.
The selected items must have gone through the stages of the MIPS Program, in such a way that the assembly costs have been reduced, the process times decreased, the tools revised and the operators trained to guarantee deadlines and quality.
The initial variables used in determining the number of Kanban cards were gathered in a simple formula that can be calculated manually or through the computer:
Initial variables:
D f = Manufacturing cycle in days.
D e = Waiting time in days.
N = Demand or consumption per day.
C = Number of pieces of the Container.
Y = Number of Kanban cards.
KANBAN CARDBOARD NUMBER DETERMINATION CALCULATION EXERCISES
- Calculate the quantity of Kanban cards needed for a production that has been calculated with a manufacturing cycle of 1 day, a demand or consumption of 24,000 pieces / day, a waiting time of 0.25 days and a quantity of 300 pieces. in each Container. The safety factor (a) considered is 0.5.
Solution
Y = 24,000 (1 + 0.25) (1+ 0.5)
300
Y = 150 Kanban cards
- Calculate the number of Kanban cards needed for a production that has been calculated with a half-day manufacturing cycle, a demand or consumption of 30 pieces / day, a waiting time of 1 day and a quantity of 15 pieces in each Container. The safety factor (a) considered is 0.7.
Solution
Y = 30 (0.5 + 1) (1+ 0.7)
fifteen
Y = 5 Kanban cards
Based on the examples we have seen, we can see that consumption variations will be reflected in more or less speed in the use of Kanban cards, forcing replenishments at a more or less accelerated rate. Variations within reasonable limits are perfectly absorbed by the operation, but we find it difficult to remember that one of the most significant points for greater Kanban efficiency is the balancing of production.
As the balance between consumption and production improves, vulnerabilities in manufacturing decrease, processing time is reduced, and the number of Kanban cartons can also be reduced.
Preferably, the items controlled by the Kanban should be produced in sectors or equipment separate from the others, so as to minimize interference with items manufactured by the conventional system.
The occurrence of quality problems in the Kanban pieces, requires the immediate interruption of the process and elimination of the causes before restarting manufacturing. Pieces in the containers, accompanied by the Kanban cardboard, must have the guarantee of good quality.
JIT - JUST IN TIME PROGRAMMING SYSTEM
In the Just in time system, the following points are addressed:
- Production commanded by the subsequent process, which means that the manufacturing need was generated after consumption, at the right time and in the necessary quantities. Production in small batches and accelerated movements in the various phases of the process, avoiding accumulation of stocks, decreasing the bottlenecks created during the operation, and making the sector agile and flexible to the sales requirements. Balancing the daily production of the assembly sectors, resulting in the leveling of the manufacturing areas.
HUMANIZED AUTOMATION (JIDOKA)
It means that the equipment not only operates automatically, but if any abnormality occurs, the interruption of the operation is automatic, with information being sent to the person responsible.
The main objectives of JIDOKA are:
- Avoid excess production due to equipment stoppage, when the necessary quantity is reached. No excess must be produced. Prevent the production of defective parts, interrupting the production, whenever a fault occurs.
Facilitate the identification of abnormalities, with the stoppage and immediate investigation for removal and correction of the causes.
Download the original file
