Question

Lou's Bakery has established that JIT should be used for chocolate chips due to the high probability of the kitchen heat melting the chips. The average demand is 160 cups of chocolate chips per week. The average setup and processing time is 1/5 day. Each container holds exactly 3 cups. The current safety stock factor is 8 percent. The baker operates four days per week.

a) How many Kanbans are required for the bakery?
b) What is the maximum authorized inventory?
c) If the average setup and processing time is increased to 3/8 of a day due to a process change, what are the new answers to (a) and (b)?

Answer 1

a) 3 Kanbans are required for the bakery.

b) The maximum authorized inventory is 6 Kanbans.

c)

6 Kanbans are required for the bakery.

The maximum authorized inventory is 12 Kanbans.

Step-by-step explanation:

a.

Use the following formula to calculate the numbers of Kanbans required

Numbers of Kanbans required = Average Demand x ( average setup and processing time + Current Safety Stock ) / Container quantity

Numbers of Kanbans required = 160 cups x ( ( 1/5 days )/4 x ( 1 + 8% ) ) / 3 cups

Numbers of Kanbans required = 2.9

Numbers of Kanbans required = 3 Kanbans

( Rounded to whole Kanbans )

b.

Use the following formula to calculate the maximum authorized inventory

Maximum authorized inventory = Numbers of Kanbans required x 2 = 3 Kanbans x 2 = 6 Kanbans

c.

Use the following formula to calculate the numbers of Kanbans required

Numbers of Kanbans required = Average Demand x ( average setup and processing time + Current Safety Stock ) / Container quantity

Numbers of Kanbans required = 160 cups x ( ( 3/8 days )/4 x ( 1 + 8% ) ) / 3 cups

Numbers of Kanbans required = 5.4 Kanbans

Numbers of Kanbans required = 6 Kanbans

( Rounded to whole Kanbans )

Use the following formula to calculate the maximum authorized inventory

Maximum authorized inventory = Numbers of Kanbans required x 2 = 6 Kanbans x 2 = 12 Kanbans