Two Bin System
Two Bin System an Introduction
The two-bin system tells us about the inventory management system. It helps to determine when the inventory will be replenished and how to go about it. For example, there are 2 bins in the production, when one bin gets empty it is returned to the inventory. For the first bin the order is placed and the second bin in the production must provide the requisite inventory till the first bin is filled with enough raw materials or semi-finished goods. To understand various methods used in Kanban take up the Kanban training at StarAgile.
This system is sometimes called Kanban and the technique is called the Just-In-Time method.
The Impact of two-bin system in inventory management are as follows,
- It provides the method or the techniques on when the bins should be replenished with the materials.
- When the first bin is empty the order is placed to replenish the first bin. Till then the second bin must be used for production.
- The bin cards are used to record the inventory of the system
- This method is used for low value or small items that can be easily purchased or stored in large quantities.
Why 2 Bin System of Inventory
Today’s organizations face the tough task of maintaining the inventory. If the stock is less then that means the production will come to a standstill and there will be no sales. There is a problem of losing out to the competitors. On the other hand, if there is excess inventory there is a problem of theft, spoilage of damage, etc, and then there is a huge cost associated with the inventory and we will not be able to circulate the cost in other value-added activities.
The two bin method is the way out to solve the above-discussed problems that are to maintain the right level of inventory. Take up the Kanban training with Kanban management professional certification at StarAgile.
The 2 bin system in its simplest form is discussed below with the steps,
- The first bin is placed right ahead or top of the second bin.
- A card for reordering is placed right below the 2 bin.
- The items for production is taken from the first bin which is ahead or on top of the second bin
- The first bin is replaced with the second bin when the first bin runs out of stocks
- The first bin is restocked with the reorder card
- When the reorder stocks arrive it is used to fill the first bin and then the process will continue to repeat.
This type of system is used widely in many industries such as hospitals and manufacturing industry etc.
Good and bad about 2 Bin System
The 2 bin system seems an interesting and workable solution for inventory management however there are pros and cons for it. For example, it is assumed that the time taken to reach the bottom of the second bin is more than the arrival of the reordered stocks otherwise this system fails.
The objective of the second bin is to have enough stocks to continuously produce the output. That is why this system is used for small parts inventory and those that are needed for the low volumes. Also, it is used where the stocks reorder does not take much time for replenishment of the parts of the raw material.
Sometimes it is thought that putting more parts to the 2 bins will help solve the above-discussed problems. But actually, it is not. This way it only increases the reorder dates or delays the reordering of the stocks this is where the 2 bin system fails.
To work with 2 bin we must ensure that it is done for small parts, small or low volumes, and reorder time is less. We must remember the correct math to reorder the quantities for effectively use the 2 bin system of inventory management
How does a Two Bin System Work?
We need to discuss the 2 important strategies of maintaining and using the 2 bin system.
Economic Order Quantity (EOQ)
EOQ is the method of finding the best order quantity for the items when compared to the best price value. In this method, the inventory costs lean towards the high end along with the ordering costs. This is accommodated to avoid the risk of disrupting production. This is generally used where there are high-speed assembly lines and when there is a high demand period. It helps the management in the reordering of the materials by understanding the lead times and consumption rates.
Kanban System of Inventory Management Guidelines
- Here as discussed the 2 bins system is based on the visual signal to replacement of the bin.
- The concept is reordering the materials when the first bin is empty and uses the second bin in production.
- Then repeat the steps to fill the second bins and so on.
- The bin must be put enough quantity to produce and survive till the empty bin is replenished.
Typical tools and methods of Kanban are discussed in Kanban training online conducted by StarAgile.
The industries where the 2 bin Kanban system can be used are
- Home appliances
- Medical supplies
- Engineering equipment manufacturing
Advantages of Inventory 2 Bin System
- Helps in inventory management of simple products
- The stock replenishment is automated
- There is no risk of sudden shortages of materials
- It accommodates the sudden change in demand
- It helps in stocks management in the shop floor and warehouses
- There is enough time for reordering quantities till the second bin is empty
The limitations of the two-bin inventory system are as follows,
- Can be used for only small quantities
- Is used for low volumes
- There is some cost associated in this system when compared to other inventory management system
- Calculations of the reorder quantities are required
- The reorder and replenishment rates must be higher than the bin materials or parts quantity; otherwise, there is a disruption in the production.
There are 3 metrics to look for in the 2 bin system
- The first one is the Day Sale of Inventory that is the number of days before the inventory is empty. The DSI level must be as low as possible to ensure a continuous supply of stocks.
- Next is the Inventory Turnover Ratio that is the cost of goods sold to average inventory. This ratio needs to be higher to help organizations to produce goods at speedier rates
- Another metric in 2 bin system is the formula for inventory and production items
Kanban Cards - "C"
Size of the Kanban - "S"
The lead time to replenish the inventory - "L"
Daily demand of Particular Parts - "D"
Then for calculation, the formula is (C-1)*S = L*D
To learn more about the Kanban metrics go for the Kanban certification at StarAgile.
Typically the 2 bin seems simple but its implementation and along with planning the Kanban system is challenging practically. To know more about Kanban register for the training and Kanban course at StarAgile. StarAgile offers KMP 1 certification to the professionals who want to take up a career in project management using Kanban.