# 8. Kanban

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Kanban, what I’ll show you now is how to calculate the size of a bin in a Kanban system. Just as a quick refresher a Kanban is a three-bin system and we have three equal sized bins in which we hold inventory, for a certain, let’s say manufacturing process.
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The idea behind the Kanban system is that Bin 1 sits right there where we use it. Bin 2 sits in the shop back room or in an attached warehouse, and Bin 3 sits with the supplier.
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Now the idea about Bin 3 is that it is ready to be shipped. We cannot add any wait time or any manufacturing time. You can’t just say, once I get the order I will start building products for Bin 3. That is not possible. It has to be finished goods ready to be shipped.
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Now back to be in Bin 1. As we take items out of Bin 1 and it becomes empty,
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we are going to move Bin 2 onto the shop floor and place an order to the supplier to move Bin 3 into our facility. Now in an ideal system, Bin 1 is almost empty as we move Bin 2 onto the shop floor. Bin 3 Is on the shop floor, ready to be shipped.
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Now the big question is, how large should the bins be?
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First of all, they should all be the equal size, and that corresponds to the lead time demand.
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After all those complex formulas that I taught you in the previous screen captures, this one will be very simple. Here we have an example of demand and the lead time for each order that has been shipped.
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Now, this is based on historical information and it is not set up to be a Kanban system yet. However, the calculation for Kanban is fairly simple. All we need to do is, we need to calculate average demand, average lead time, and then from that it’s fairly simple to do the lead time demand calculation.
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So to get the average demand, we use the Average function.
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There’s that to get the Average Lead Time, the average or historical lead times.
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And then the lead time demand equals the average demand times the average lead time.
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So in other words, we should have a Kanban size of 112 units because
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on average, that’s our lead time demand, and we should be able to have a functioning Kanban system with this set up. And ship out every five days, five and a half days if we need to.
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So there you see how simple it is to set up a Kanban system. There are more complex methods and sometimes you do need to take safety stock into account, but at its very core this is how simple it can be.

Jim Rohn Sứ mệnh khởi nghiệp