3Topics What is Pull and when do I use it Procurement Decision Tree Kanban CalculatorSAP reportsFieldseKanban/Reorder Point Setup
4Purchase Pull SystemPull systems establish strategically located “buffers” of parts within a process.Inventory (or part) replenishment is “triggered” based on consumption versus pushed based on net requirements.ManufacturingStrategicBufferSupplier Lead Time8 WeeksProcess Lead Time2 WeeksCustomer Expectation3 WeeksReplenishment Signal (Purchase Order)ConsumptionSupplierA pull system exists when a work center is authorized to produce only when it has been signaled that there is a need for more parts in a downstream (user) department.This implies no work center is allowed to produce parts just to keep workers or equipment busy.All movements and production are authorized by a signal from a downstream work center when it has a need for component parts.A primary payoff comes from discipline required to make the system work.Lot size reductionsLimited WIPFast throughputGuaranteed qualityPart shortages are reduced and/or eliminated (reducing expediting)Total inventory is reduced through better mix (right sizing)
5Pull System Design Drivers Pull is aboutSet UpMaintenanceDemand is dynamic and changes over timeSeasonality, ramp up/down, engineering changes, etc. drive need to resize Kanban quantitiesNeed to review Kanban sizes at least quarterlyGoal1. Establish inventory control (Kanban sizing)2. Stabilize process3. Reduce inventoryA primary payoff comes from discipline required to make the system work.Lot size reductionsLimited WIPFast throughputGuaranteed qualityEffectiveness, then efficiency
7Coefficient of Variation? Coefficient of Variation (CoV) measures the variability of demandIt is defined as the ratio of the standard deviation (σ) to the mean (μ)Used to determine if an item is a good candidate for pullLow variability: good candidate for pullHigh variability: poor candidate for pullCoV>=1.5Push1.0<CoV>1.5Additional Data RequiredCoV<=1.0Pull
8Standard Deviation (Variation) CoV ExampleWeeksDemandABC1253024034567015078910116012Mean (Average)Standard Deviation (Variation)0.025.058.4CoV1.02.3Parts A and B meet the rule of thumb COV<=1Part C has same average demand, but high variability
9CoV alone does not always indicate a good candidate for pull
10Standard Deviation (Variation) The Run RatioWeeksDemandABC1253024034567015078910116012Mean (Average)Standard Deviation (Variation)0.025.058.4CoV1.02.3Run Ratio100%58%17%The Proportion of Time a Part is Used or SoldA: 12/12=100%B: 7/12=58%C: 2/12=17%Frequency of Demand
12Kanban Calculator Helps determine good candidates for Pull Performs all of the calculations automaticallyCompares current situation vs. expected if part is converted to pullCalculates needed stocking levels (bin sizes) to maintain desired service levelRequires Master Data integrityFields can be manually adjusted in the calculator
13Calculator Transactions ZMMR is the first transaction that is run. This transaction gives us the Usage data for the materials.MC.1 and MCBZZMMRZMEVZPIRNZMEV is the second transaction that is run. This transaction gives us the master data for the materials.ZPIRN is the third transaction that is run. This transaction gives us the Supplier for the materials.MC.1 is the fourth transaction that is run. This transaction is used to get the 3 month average inventory and forecast data for the materials.PK18PK18 is the last transaction that is run. This gives us the current Bin sizes for any materials currently on Kanban
15Kanban Regular Inventory Consignment Inventory Kanban Internal Works with Production Ordersfor internally procured materialbetween workcenters at a plant.ExternalWorks with purchased parts,auto-generating PO’s,and vendor replenishment.RegularInventoryConsignmentInventory
16SAP eKanban Master Data Supply AreaPerson ResponsibleStorage LocationControl CycleNumber of BinsBin QuantityReplenishment StrategyIn house ProductionExternal SourceStock TransferKanban Specific Vendor (if the vendor has multiple Ordering addresses)New Info Record
17SAP eKanban External Procurement Step 1: Create Supply Area PK05Step 2: Alter Material Master MM02Step 3: Enter Materials into PK01Step 4: Managing the eKanban board
18Step 1: Create Supply Area PK05 First Transaction PK05The supply area
19Step 1: Create Supply Area PK05 Click New Entries to Setup Supply Area Information
20Step 1: Create Supply Area PK05 Enter the SupplyArea and descriptionStep 2Click drop downfor Storage Location be sure to choose the proper area (thus must be an IM location)Step 3Click drop down and select corresponding MRP controller code of the area
21EP Step 2: Alter Material Master Enter “MM02” to alter the Material Master. Enter the desired Part Number and Plant Number on the following screens
22EP Step 2: Alter Material Master Select “MRP1” tabChange MRP Type to “ND”You may want to create a special MRP controller for eKanban Items
23EP Step 2: Alter Material Master Select “MRP 2” tabEnter desired backflush location that items will be received into.Enter Lead Time vendor has committed to.
24EP Step 2: Alter Material Master In the “MRP 4” tab click “Organizational Levels”Key in the IM storage location you wish the items to drop into once received
25EP Step 2: Alter Material Master Change this Field to 1 (must be excluded from MRP) and save.This is also accessible through the transaction MMSC
26EP Step 3: Enter Materials PK01 Enter transaction PK01 tocreate Kanban controlcycle
27EP Step 3: Enter Materials PK01 Enter Material NumberEnter Plant NumberEnter Supply Area
28EP Step 3: Enter Materials PK01 Enter Number of KanbansEnter Kanban QuantityEnter “001” to issue PO’s and press “Enter”
29EP Step 3: Enter Materials PK01 Enter Purchasing OrgEnter Vendor #Leave Agreement field blank unless using Scheduling Agreement, then fill in Agreement # and Line #
30EP Step 3: Enter Materials PK01 Kanban Indicator must be marked “X” for Sch. Agreements at the Line Item level
31EP Step 4: Managing the eKanban board Enter transaction toview kanban Bin statusand to process Kanbanorder.
32EP Step 4: Managing the eKanban board Enter Plant Number and Supply Area
33EP Step 4: Managing the eKanban board In this view you can see the status of Bins in the Supply Area. This is where the operators can Empty the Bin in order to create a Purchase order to replenish stocking level of the Bin. The initial status of the Bin is Wait”. There are several statuses that can be set. Check the legend to see. To set the Bin empty, Select both bins and click the “To Empty” button. Multiple Bins can be emptied at the same time.
34EP Step 4: Managing the eKanban board When a Kanban Bin is emptied the Bin icon will turn red.A Purchase order will automatically be released.
35EP Step 4: Managing the eKanban board To change a Bin status to anything other than empty or full, Right click on a Bin and select “Kanban correction.”
36EP Step 6: Managing the eKanban board Double click a line. Select the desired status. If you are keying it to full, enter a qty. Once complete, select the “Status/qty” button.
37EP Step 6: Managing the eKanban board To set to the “Full” Status manually, select a bin and click “To Full”. This will make a FULL MIGO_GR! So be careful. Also, the bin will automatically be set to Full once any partial/full Migo_GR has been posted against the PO.
38EP Step 4: Managing the eKanban board To get any information about the bin, double-click on a bin. The PO can be altered by clicking the Replenishment button. The PO is also displayed here. The time the Bin status was changed is displayed in EST.
39Triggering Kanban in SAP Two Ways to Trigger Kanban:Using the PK13N Transaction in SAP2. Using the RF gun and Scanning the Kanban Label
40SAP Kanban - Demand View SAP Transaction: PK13NGreen Bin (FULL) = Bin is full or being used currently in productionRed Bin (EMPTY) = Bin is empty (on order)Purple (WAIT) = Temporary status
41Kanban RF Process1. When a Kanban Bin is Empty, Scan the Barcode Card for the Empty Bin2. Flip the Status Card to “On Order”BIN 1BIN 2BIN EMPTY
43Reorder Point/Min. Max.The reorder point ("ROP") is the level of inventory when a fresh order should be made with suppliers to bring the inventory up to a fixed level or by a fixed quantity.Reorder point quantity includes safety stock. The PO quantity depends on the lot size (e.g., fixed).
44Settings Maximum Stock Level Fixed Order Quantity MRP Type = “ZR” Lot Size Key = “HB” – Replenish to the maximum stock levelMaximum Stock Level: This is a required entry. It denotes the quantity of stock that may not be exceededIt calculates the Lot size using the following two Formulas and creates an order proposal using the greater of the two lot sizes calculatedMRP Type = “ZR”Lot Size Key = “FX” – Fixed Order QuantityFixed Lot Size: This is a required entry. It denotes the quantity that will be procured in the event of a shortage.If the amount of the shortage is less than the fixed lot size, it is the fixed lot size that is procured (and not the lesser quantity that is actually required).If the amount of the shortage is greater than the fixed lot size, a multiple of the fixed lot size is procured. The system creates several purchase order proposals for this purpose.Original Purpose of MRP:To manage inventory.Not intended for scheduling.MRP should not be fully “turned off .MRP is quite useful for dealing with the supply chain portion of the business; Lead time, safety stock, etc…Do you have MRP here? What do you use it for? Consolidate data?What parts of MRP do you keep? - Long term planning, keeps track of usage, consolidates raw material requirements.What parts of MRP do you turn off? - Daily management, production planning, and inventory management.Reasons not to turn off MRP: It’s contains the BOM and BOM structure, it is a useful tool for forecasting and planning. DO NOT BLINDLY TURN OFF MRP!!! It can be used for low volume items also…
45Kanban vs. Reorder Point Does not include future demandOperator triggers ordersProvides good visual controlShop Floor OwnershipForward Looking: includes spikesSystem-driven (MRP) ordersBOMs MUST be accuratePurchasing Ownership