1. Pull and Kanban in SAP

3. Topics What is Pull and when do I use it Procurement Decision Tree
Kanban Calculator
SAP reports
Fields
eKanban/Reorder Point Setup

4. Purchase Pull System
Pull 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.
Manufacturing
Strategic
Buffer
Supplier Lead Time
8 Weeks
Process Lead Time
2 Weeks
Customer Expectation
3 Weeks
Replenishment Signal (Purchase Order)
Consumption
Supplier
A 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 reductions
Limited WIP
Fast throughput
Guaranteed quality
Part shortages are reduced and/or eliminated (reducing expediting)
Total inventory is reduced through better mix (right sizing)

5. Pull System Design Drivers
Pull is about
Set Up
Maintenance
Demand is dynamic and changes over time
Seasonality, ramp up/down, engineering changes, etc. drive need to resize Kanban quantities
Need to review Kanban sizes at least quarterly
Goal
1. Establish inventory control (Kanban sizing)
2. Stabilize process
3. Reduce inventory
A primary payoff comes from discipline required to make the system work.
Lot size reductions
Limited WIP
Fast throughput
Guaranteed quality
Effectiveness, then efficiency

6. Kanban

7. Coefficient of Variation?
Coefficient of Variation (CoV) measures the variability of demand
It 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 pull
Low variability: good candidate for pull
High variability: poor candidate for pull
CoV>=1.5
Push
1.0<CoV>1.5
Additional Data Required
CoV<=1.0
Pull

8. Standard Deviation (Variation)
CoV Example
Weeks
Demand A B C 1 25 30 2 40 3 4 5 6 70
150 7 8 9 10 11 60 12
Mean (Average)
Standard Deviation (Variation)
0.0
25.0
58.4
CoV
1.0
2.3
Parts A and B meet the rule of thumb COV<=1
Part C has same average demand, but high variability

9. CoV alone does not always indicate a good candidate for pull

10. Standard Deviation (Variation)
The Run Ratio
Weeks
Demand A B C 1 25 30 2 40 3 4 5 6 70
150 7 8 9 10 11 60 12
Mean (Average)
Standard Deviation (Variation)
0.0
25.0
58.4
CoV
1.0
2.3
Run Ratio
100%
58%
17%
The Proportion of Time a Part is Used or Sold
A: 12/12=100%
B: 7/12=58%
C: 2/12=17%
Frequency of Demand

11. Kanban Calculator

12. Kanban Calculator Helps determine good candidates for Pull
Performs all of the calculations automatically
Compares current situation vs. expected if part is converted to pull
Calculates needed stocking levels (bin sizes) to maintain desired service level
Requires Master Data integrity
Fields can be manually adjusted in the calculator

13. Calculator Transactions
ZMMR is the first transaction that is run. This transaction gives us the Usage data for the materials.
MC.1 and MCBZ
ZMMR
ZMEV
ZPIRN
ZMEV 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.
PK18
PK18 is the last transaction that is run. This gives us the current Bin sizes for any materials currently on Kanban

14. Calculator Demo

15. Kanban Regular Inventory Consignment Inventory Kanban Internal
Works with Production Orders
for internally procured material
between workcenters at a plant.
External
Works with purchased parts,
auto-generating PO’s,
and vendor replenishment.
Regular
Inventory
Consignment
Inventory

16. SAP eKanban Master Data
Supply Area
Person Responsible
Storage Location
Control Cycle
Number of Bins
Bin Quantity
Replenishment Strategy
In house Production
External Source
Stock Transfer
Kanban Specific Vendor (if the vendor has multiple Ordering addresses)
New Info Record

17. SAP eKanban External Procurement
Step 1: Create Supply Area PK05
Step 2: Alter Material Master MM02
Step 3: Enter Materials into PK01
Step 4: Managing the eKanban board

18. Step 1: Create Supply Area PK05
First Transaction PK05
The supply area

19. Step 1: Create Supply Area PK05
Click New Entries to Setup Supply Area Information

20. Step 1: Create Supply Area PK05
Enter the Supply
Area and description
Step 2
Click drop down
for Storage Location be sure to choose the proper area (thus must be an IM location)
Step 3
Click drop down and select corresponding MRP controller code of the area

21. EP Step 2: Alter Material Master
Enter “MM02” to alter the Material Master. Enter the desired Part Number and Plant Number on the following screens

22. EP Step 2: Alter Material Master
Select “MRP1” tab
Change MRP Type to “ND”
You may want to create a special MRP controller for eKanban Items

23. EP Step 2: Alter Material Master
Select “MRP 2” tab
Enter desired backflush location that items will be received into.
Enter Lead Time vendor has committed to.

24. EP 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

25. EP 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

26. EP Step 3: Enter Materials PK01
Enter transaction PK01 to
create Kanban control
cycle

27. EP Step 3: Enter Materials PK01
Enter Material Number
Enter Plant Number
Enter Supply Area

28. EP Step 3: Enter Materials PK01
Enter Number of Kanbans
Enter Kanban Quantity
Enter “001” to issue PO’s and press “Enter”

29. EP Step 3: Enter Materials PK01
Enter Purchasing Org
Enter Vendor #
Leave Agreement field blank unless using Scheduling Agreement, then fill in Agreement # and Line #

30. EP Step 3: Enter Materials PK01
Kanban Indicator must be marked “X” for Sch. Agreements at the Line Item level

31. EP Step 4: Managing the eKanban board
Enter transaction to
view kanban Bin status
and to process Kanban
order.

32. EP Step 4: Managing the eKanban board
Enter Plant Number and Supply Area

33. EP 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.

34. EP 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.

35. EP 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.”

36. EP 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.

37. EP 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.

38. EP 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.

39. Triggering Kanban in SAP
Two Ways to Trigger Kanban:
Using the PK13N Transaction in SAP
2. Using the RF gun and Scanning the Kanban Label

40. SAP Kanban - Demand View
SAP Transaction: PK13N
Green Bin (FULL) = Bin is full or being used currently in production
Red Bin (EMPTY) = Bin is empty (on order)
Purple (WAIT) = Temporary status

41. Kanban RF Process
1. When a Kanban Bin is Empty, Scan the Barcode Card for the Empty Bin
2. Flip the Status Card to “On Order”
BIN 1
BIN 2
BIN EMPTY

42. SAP RF Menu
Using the RF Tablet, Select 6  3  1

43. Reorder 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).

44. Settings Maximum Stock Level Fixed Order Quantity MRP Type = “ZR”
Lot Size Key = “HB” – Replenish to the maximum stock level
Maximum Stock Level: This is a required entry. It denotes the quantity of stock that may not be exceeded
It calculates the Lot size using the following two Formulas and creates an order proposal using the greater of the two lot sizes calculated
MRP Type = “ZR”
Lot Size Key = “FX” – Fixed Order Quantity
Fixed 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…

45. Kanban vs. Reorder Point
Does not include future demand
Operator triggers orders
Provides good visual control
Shop Floor Ownership
Forward Looking: includes spikes
System-driven (MRP) orders
BOMs MUST be accurate
Purchasing Ownership

46. Questions