Are you struggling with inventory management, facing stockouts, or dealing with excess stock that ties up valuable capital? The two-bin Kanban system offers a remarkably simple yet powerful solution to these common challenges. The two-bin Kanban system helps determine when materials used in production should be replenished, ensuring optimal inventory levels without excessive surplus.

These days efficient inventory management is crucial for maintaining operational excellence and customer satisfaction. The two-bin Kanban system has gained popularity across various industries due to its simplicity and effectiveness in managing inventory, particularly for small, frequently used items. This article explores how the two-bin Kanban system works, its benefits, implementation strategies, and real-world success stories.

What is a Two-Bin Kanban System?

The two-bin Kanban system is, at its core, a visual inventory management method that uses two physical containers (bins) for each item. The system operates on a simple principle: when one bin is empty, it signals the need to reorder while the second bin contains enough stock to cover operations until the replenishment arrives.

Here's how the two-bin system works:

• Bin A (Working Stock): Contains items currently being used in production.
• Bin B (Reserve Stock): Contains backup inventory to be used when Bin A is depleted.

When Bin A becomes empty, it triggers a replenishment order, and workers begin using items from Bin B. By the time Bin B is running low, the replenishment order for Bin A should have arrived, allowing the cycle to continue seamlessly. This creates a continuous flow of materials without excessive inventory or stockouts.

The beauty of the two-bin Kanban system lies in its visual nature. There's no need for complex software or constant inventory counts. The empty bin itself serves as the signal (or "Kanban") that triggers the reordering process.

How Does the Two-Bin Kanban System Work?

Implementing a two-bin Kanban system involves a straightforward process:

1. Place Bin A in the primary location where workers can easily access it.
2. Place Bin B behind or below Bin A as the reserve stock.
3. Place a reorder card at the bottom of both bins with relevant information (part number, quantity, supplier, etc.).
4. Use materials from Bin A until it's empty.
5. When Bin A is empty, move Bin B to the primary position and begin using those materials.
6. Use the reorder card from Bin A to place an order for replenishment.
7. When the ordered stock arrives, refill Bin A and place it in the reserve position.
8. The process repeats when Bin B becomes empty.

The system is designed to ensure that there's always enough inventory on hand to maintain production while minimizing excess stock. The key is determining the right quantity for each bin, which should be based on usage rates and lead times for replenishment.

For example, if a company uses 800 fasteners per week (160 per day) with a lead time of three days, the reserve bin should stock at least 480 fasteners. Adding some safety stock to account for potential fluctuations in demand or delivery delays is also recommended.

Benefits of the Two-Bin Kanban System

Reduced Risk of Stock Issues

The Two-Bin Kanban System significantly reduces the risk of running out of essential supplies thanks to its inherent safety net. The second bin acts as a reserve, ensuring you have enough inventory to cover the time it takes to reorder and receive new stock. This simple, yet effective approach provides continuous availability of materials and reduces disruptions.

Simplified Inventory Management

Unlike complex inventory tracking solutions that demand specialized knowledge and intricate systems, the Two-Bin Kanban System uses visual signals that are easy to understand for everyone. This ease of use translates into tangible improvements in efficiency. This system streamlines operations and enhances accuracy.

Simplified Inventory Management

The visual nature of the two-bin Kanban system makes it easy to understand and implement. Unlike the PAR system, which requires counting every item, the two-bin Kanban system essentially requires no counting. Each returned bin automatically triggers a count of zero, streamlining the reordering process.

Improved Efficiency

Assessment times in inventory management can be drastically reduced. One healthcare facility reported that assessment times went from 18-20 minutes for a single OR suite to just 20-40 seconds after implementing the Kanban system with enclosed carts. This represents an 18.5-minute savings per OR suite, or nearly a 7-hour reduction per assessment of their 22 ORs—an impressive 3800% improvement.

Reduced Coordination Costs

Organizations implementing Kanban can experience a 50% reduction in coordination costs in under six months. For a department with a $20M operating budget, this can translate to coordination costs decreasing from 20% to 10%, saving $0.5M in 12 months and $2M in 18 months.

Increased Throughput and Reduced Lead Time

Implementing Kanban can lead to up to doubling of throughput and lead time reductions between 10% to 50%. With a service orientation approach, lead time improvements can range from 50% to 90%.

Advantages in Specific Industries

Healthcare

The two-bin Kanban system has proven particularly effective in healthcare settings:

• Standardized Supply Rooms: The system helps standardize supply rooms, allowing healthcare facilities to run leaner on supplies, increase patient care time for nursing staff, and reduce the workload for supply chain teams.
• Reduced Assessment Time: As mentioned earlier, assessment times can be reduced by up to 3800%, freeing up staff to focus on patient care rather than inventory management.
• Prevention of Expiration: Supply is rotated via a first-in, first-out process, reducing the risk of items expiring before use.
  

Manufacturing

In manufacturing environments, the two-bin Kanban system helps:

• Maintain Continuous Production: Ensures that production lines never run out of necessary components.
• Reduce Waste: Minimizes excess inventory, reducing waste and freeing up capital.
• Improve Quality: With less pressure to produce in large batches, workers can focus more on quality.

Limitations of the Two-Bin Kanban System

While the two-bin Kanban system offers many benefits, it's important to understand its limitations:

Not Suitable for All Items

The system works best for small, low-value items with predictable demand. High-value items or those with highly variable demand may require different inventory management approaches.

Requires Accurate Demand Forecasting

The effectiveness of the system depends on accurate forecasting of demand and lead times. Inaccurate forecasts can lead to either overstocking or understocking.

Reliance on Timely Replenishment

The system relies on consistent and reliable suppliers. If replenishment orders are delayed, the second bin may be depleted before new stock arrives, leading to stockouts.

Calculating the Right Bin Size and Reorder Point

Determining the correct bin size and reorder point is crucial for the success of a two-bin Kanban system. The formula for calculating reserve stock is:

(Daily usage rate × lead time) + safety stock

For example, if a company uses 160 items per day with a lead time of three days, the reserve bin should contain at least 480 items (160 × 3). Adding safety stock to account for variations in demand or lead time is also recommended.

Two-Bin Kanban vs. Other Inventory Management Systems

One-Bin System

The one-bin system provides supply at preset intervals, not based on stock levels or Kanban signals. While simpler, it doesn't offer the same level of responsiveness to actual usage.

Three-Bin Kanban System

The three-bin Kanban system is similar to the two-bin system, but the supplier keeps one bin reserved at their location. This can provide additional security against stockouts but requires more coordination with suppliers.

Perpetual Inventory System

Used for higher-value items, the perpetual inventory system maintains a continuous record of inventory levels. While more precise, it requires more sophisticated tracking systems and regular counting.

Implementing a Two-Bin Kanban System: 10 Practical Tips

1. Determine a suitable location that is accessible to all involved departments and has enough space for all materials.
2. Use the right bins and contents that match the size of the materials and are light, sturdy, and easy to clean.
3. Determine the maximum capacity of the bins based on daily requirements and lead time for new stock.
4. Visualize by labeling bins clearly with the name of the material and product code.
5. Choose the correct signaling system to make it immediately clear which products are in stock and which are on order.
6. Train the staff on the system so they understand how to refill bins and order new stock.
7. Create clear order procedures that describe how and when to place new orders.
8. Carry out regular checks to assess stock levels and ensure bins are stocked correctly.
9. Determine the storage locations, placing frequently used items close to the entrance to minimize search and walking time.
10. Consider combining visual and digital solutions to save time, avoid errors, and integrate with existing systems.

How Arda Supercharges Traditional Two-Bin Kanban System

Traditional Kanban and two-bin systems have been manufacturing staples for decades—but they've always had limitations. Manual cards get lost, bins get misplaced and there's no data capture to optimize your inventory levels over time.

Arda's hybrid Kanban system preserves what works about traditional methods while solving their inherent problems. Our Kanban system combines the simplicity of physical Kanban cards with the power of real-time digital tracking, creating a solution that's both shop-floor friendly and executive-approved.

The result is a Kanban system that Toyota would envy—combining shop floor simplicity with digital intelligence. Our customers typically see a 90% reduction in time spent managing inventory while maintaining perfect stock levels.

Join the manufacturing leaders who've solved their inventory challenges. Book a demo to see Arda's system in action!

Conclusion

The two-bin Kanban system offers a simple yet powerful approach to inventory management that can significantly improve efficiency, reduce costs, and prevent stockouts. By implementing this system, organizations across various industries can streamline their inventory processes, free up capital tied up in excess stock, and ensure continuous operations.

While not suitable for every item or situation, the two-bin Kanban system excels at managing small, frequently used items with relatively stable demand. With proper implementation and regular monitoring, it can deliver substantial benefits to your organization's bottom line and operational efficiency.

Whether you're in healthcare, manufacturing, or any industry that manages physical inventory, the two-bin Kanban system deserves consideration as part of your inventory management strategy. Its simplicity, effectiveness, and proven track record make it a valuable tool in the pursuit of lean operations and continuous improvement.

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