CLEP Management

Answer: B - 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.