What Is a Two-Bin Kanban System and Should You Implement it?

Kanban is an excellent method for managing workflow, inventory, and more. Kanban uses visual indicators to improve the flow and efficiency of production, making it perfect for physical goods manufacturers. The two-bin Kanban system is one of the most common tools used in Kanban manufacturing.

Literally, the two-bin Kanban system uses two physical bins for managing the inventory of the two most important parts for a given manufacturing business. The two-bin Kanban system is a pull system, and the goal is to have enough inventory of the parts in the bins, but not too much surplus.

How Does a 2-Bin Kanban System Work?

In the 2 Bin Kanban System, workers are provided with two plastic storage bins, which they use to fill orders and provide supplies to departments. The speed at which the items are used determines the number of items placed in the bins.

The logic behind the two-bin Kanban system is very simple. Workers pull items from one bin until it gets emptied. Then they switch to the second bin while placing an order to refill the items in the first bin. It is predetermined how many items are needed to replenish the first bin, so there is little risk of running out of items (which could slow down production).

Which Industries Are Ideal For Implementing Two-Bin Kanban?

Listed below are a few industries in which implementing the two-bin Kanban system would be ideal.

• Equipment manufacturing.
• Automobile sector.
• Electronics.
• Home appliances.
• Healthcare.
• Furniture.
• Medical supplies.

What Are the Advantages of the Two-Bin Kanban System?

These are the most important advantages when utilizing a two-bin Kanban system.

• Ensures optimal availability of inventory.
• Reducing inventory held and, therefore the associated costs.
• It gives adequate time for ordering replenishments.
• Traceability of stock.
• Prevents running out of stock.
• It mitigates the risk of abrupt shortages.
• Managed in lead time.
• Meet the demand of customers.
• It allows the distribution of stock among the shopfloors and warehouses efficiently.

What Are the Limitations of the Two-Bin Kanban System?

Some of the most common limitations of the two-bin Kanban system are listed below.

• The inventory level is high.
• Spend more to get insured.
• More investment.
• Extra expenses to manage extra stock.
• Increase costs due to high-level demand.

How Does Two-Bin Kanban System Affect Inventory Management?

A two-bin system's goal is to have enough inventory to produce outputs without having too much surplus inventory continuously. For this reason, many companies opt to only use the two-bin method for small parts needed in small quantities which they can order and receive quickly. Many factors can impact the order requirements to keep the Kanban system running smoothly, such as minimum orders, lot quantities, and fluctuating demand.

What Are the Metrics to Look for in a 2-Bin Kanban System?

The value of exceptional benefits cannot be demonstrated until they show up on your balance sheet. The two most common metrics to look for in 2-Bin Kanban System are inventory turnover ratio and days sale of inventory. Both metrics point out that a faster manufacturing process generates more profit.

1. Inventory Turnover Ratio

The cost of goods sold (COGS) to average inventory represents the efficiency of the company in managing its inventory. By having two-bins of inventory, the company is able to move products through its production lines more rapidly. This metric is enhanced by the company's two-bin inventory control system.

2. Days Sale of Inventory

DSI is an indicator of a firm's ability to operate more efficiently since it measures the number of days until inventory is sold. Naturally, a lower DSI is preferred, and stock supply plays an important role in achieving it.

What Are the Examples of Two-Bin Kanban Systems?

In internal combustion engines, spark plugs are a primary component. These spark plugs are used on almost all models, except those equipped with fuel injection systems. Therefore, the workers installing these components can use them throughout the assembly line. Spark plugs are stored in these two-bin type containers so that they can receive the benefits previously mentioned. Keep in mind that the item used here is relatively inexpensive, generic, and does not depend on the specific model of an automobile.

How Is Economic Order Quantity (EOQ) Related to Two-Bin Kanban System?

The economic order quantity is a method for comparing prices and order quantities to determine the best order value. Economic Order Quantity (EOQ) is a good method for managing inventory efficiently. On the other hand, the two-bin Kanban system uses two physical bins for managing the inventory of the two most important parts for a given manufacturing business.

EOQ is solely a cost model, Kanban is time-driven. What EOQ does is try to find the optimum quantity that should be ordered. This will minimize the total variable costs - purchasing, shipping, carrying, etc. The formula essentially gives you the reorder point as well. In this case, the quantity is determined by your bins' capacity.

What Are the Other Kanban Bin Systems?

Additionally, there are two more Kanban bin systems - one-bin system and three-bin Kanban system.

1. One-Bin System

A one-bin inventory system is a simple inventory control system that provides supply at preset intervals and not based on minimum stock levels or signals from a Kanban system.

While the two-bin Kanban system is based on stock levels, the one-bin system provides supply on predefined intervals. The one-bin system doesn't need signals from a Kanban system, while the two-bin does, as it is a Kanban pull system.

2. Three-Bin Kanban System

The three-bin Kanban system allows a company to control inventory at each step of the production process and ensures smooth product delivery. It is similar to the two-bin system, with the difference that the supplier of the inventory in the three-bin Kanban system will keep one bin reserved at his location. Both, the two-bin Kanban system and the three-bin Kanban system are built on the concept of the Kanban system, a system used by Japanese manufacturers.