Economic Order Quantity (EOQ) and the kanban system are processes for reducing ____________.
A)Raw material inventories
B)Work-in-process inventories
C)Finished product inventories
D)Any inventories

Question

Quizplus · Accepted Answer

The kanban system is designed to reduce work-in-process inventories using a card system with small lot sizes (determined by the economic order quantity method).
Key Takeaway: Toyota first implemented the kanban system to reduce defective intermediate parts by reducing the work-in-process inventories for each part. The smaller work-in-process lot sizes allowed for reduced number of parts scrapped when a defect was found. The optimum size for each lot depended on the machine set up time to make the work-in-process part as well as the operating cost associated with each part production. The method used to calculate lot size was the economic order quantity method.

Economic Order Quantity (EOQ) and the Kanban System Are Processes