Hales Company produces a product that requires two processes. In the first process, a subassembly is produced (subassembly A). In the second process, this subassembly and a subassembly purchased from outside the company (subassembly B) are assembled to produce the final product. For simplicity, assume that the assembly of one final unit takes the same time as the production of subassembly A. Subassembly A is placed in a container and sent to an area called the subassembly stores (SB stores) area. A production kanban is attached to this container. A second container, also with one subassembly, is located near the assembly line (called the withdrawal store). This container has attached to it a withdrawal kanban.
1. Explain how withdrawal and production kanban cards are used to control the work flow between the two processes. How does this approach minimize inventories?
2. Explain how vendor kanban cards can be used to control the flow of the purchased subassembly. What implications does this have for supplier relationships? What role, if any, do continuous replenishment and EDI play in this process?