Loop: VRO versus Kanban
VRO like Kanban is using a loop to define the quantity to order.
The generic VRO loop formula is:
VRO Loop = quantity on hand + quantity promised not received + quantity ordered not promised + quantity to order
VRO and Kanban loop calculation are totally different:
- Kanban loop is the time required for producing the amount consumed. Its value is based on the average consumption, the queue time before production (generaly in a Batch Building Box) and production cycle times;
- VRO loop is the time to receive and consume what will be needed during a specific period. Its value is based on future customer demand and delivery schedule.
2 major differences:
- Kanban is based on average demand it is triggered by material consumption and takes in account production constraints (number of references produced on the same line, cycle times);
- VRO is based on future demand and is triggered by transportation schedules. Production constraints of the supplier are ignored (it means that these constraints have to be taken in account in the MPS).
Notes
- In a repetitive production mode with a smooth demand, VRO seems to work like a replenishment system because the loop does not change a lot.
- In a production to order, the loop can change for each order. This mode is called Dynamic VRO. It is also generally used for suppliers with long transit-time (overseas suppliers) and when MPS is done at the same frequency than the VRO order.
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