Standard Article

Why Traditional Kanban Calculations Fail in Volatile Environments

  1. Colin Kessinger,
  2. Allan Gray

Published Online: 14 JAN 2011

DOI: 10.1002/9780470400531.eorms0967

Wiley Encyclopedia of Operations Research and Management Science

Wiley Encyclopedia of Operations Research and Management Science

How to Cite

Kessinger, C. and Gray, A. 2011. Why Traditional Kanban Calculations Fail in Volatile Environments. Wiley Encyclopedia of Operations Research and Management Science. .

Author Information

  1. End-to-End Analytics, Palo Alto, California

Publication History

  1. Published Online: 14 JAN 2011

Abstract

Recent years have seen the extension of “kanban thinking” from the factory floor to entire supply chain networks. However, the traditional calculations used to size kanbans often perform poorly in these new environments, which are characterized by longer leads times and higher demand volatility. This article examines why that is the case, and highlights many of the common pitfalls facing practitioners when implementing kanbans or reorder points (ROPs). Among the issues tackled are why “consumption-based” reorder points are flawed in volatile environments; how companies' attempts to incorporate forecasts in kanban calculations go awry; and how confusion among alternative definitions of service level can lead to excess inventory.

Keywords:

  • kanban;
  • reorder point;
  • inventory;
  • service levels;
  • lean;
  • volatility