Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

Manufacturing Planning and Control

MPC 6th Edition

Chapter 7

7-2

Capacity Planning and Management

Capacity planning and management addresses two managerial problems:

Matching capacity to plans–by either providing sufficient capacity to execute the plan or adjusting the plan to meet available capacity.

Consider the marketplace implications of faster throughput times–at the expense of reduced capacity utilization.

7-3

Agenda

7-4

Role of Capacity Planning in Master Planning & Control

The primary objective of capacity planning techniques is to estimate capacity requirements early enough to be able to meet those requirements

Flawless execution of the capacity plan allows the firm to avoid unpleasant surprisesInsufficient capacity leads to deteriorating

delivery performanceExcess capacity may be a needless expense

7-5

Resourceplanning

Sales and operationsplanning

Demandmanagement

Master productionscheduling

Detailed materialplanning

Material andcapacity plans

Shop-floorsystems

Suppliersystems

Capacity Planning in the MPC System

Resource planning

Rough-cut capacityplanning

Capacity requirementplanning

Finite Loading

Input/output analysis

Long Range

Medium Range

Short Range

7-6

Links to other MPC System Modules

7-7

7-8

Capacity Planning Using Overall Factors (CPOF)

Simplest rough-cut capacity planning approach Data inputs from master production schedule Based on planning factors from historical data

(work center utilization, production standards) Overall labor- or machine-hour capacity

requirements are estimated from MPS dataEstimate is allocated to work centers based on

historical workloads Inherent inaccuracies may limit usefulness

7-9

CPOF Example

Total required capacity = (33*0.95)+(17*1.85) = 62.80

Work center capacity = Historical percentage*Total required capacity

7-10

Capacity Bills

Rough-cut capacity planning method that provides more direct link to individual end products

Bill of capacity indicates total standard time to produce one unit of an end product (by work center)

Master production schedule data is then used to estimate capacity requirements for each work center

Requires more data than CPOF procedure

7-11

Capacity Bill Example

Std. Setup hours are spread over the standard lot size

Total hours include both std. run time and std. setup time

7-12

Capacity Bill Example

MPS quantities are multiplied by bill of capacity to determine work center capacity requirements by period

7-13

Resource Profiles

Rough-cut capacity planning technique that includes production lead time information

Provides time-phased projections of capacity requirements for individual work centers

More sophisticated approach but requires tracking of relatively short time periods (< 1 week)

7-14

Resource Profile ExampleProduction of one unit of product A in period 5 requires production activity in periods 3, 4, and 5 and in work centers 100, 200, and 300

7-15

Resource Profile ExampleRequirements (by work center and period) for one unit of end product are multiplied by the MPS plan to determine capacity requirements

These requirements are then summed over all periods to finalize the process

7-16

Capacity Requirements Planning (CRP)

Capacity requirements planning differs from the rough-cut planning proceduresUtilizes time-phased material plan from MRPTakes into account materials in inventoryAccounts for the current status of work-in-processAccounts for service parts and other demands not

accounted for in the MPS Requires more inputs and more computational

resources

7-17

Capacity Requirements Planning Example

Det

aile

d M

RP

Dat

a

Scheduled/planned quantity multiplied by processing time for work center

This process is repeated for each work center to complete the plan

7-18

Scheduling Capacity and Materials Simultaneously

Capacity requirements planning doesn’t consider capacity when planning materialsAssumes that capacity can be adjusted,

given sufficient warning Planning capacity and materials at the same

time allows construction of a plan that works within current capacity constraints

7-19

Finite Capacity Scheduling

Simulates job order start and finish times in each work center

Establishes a detailed schedule for each job in each work center

When a work center’s capacity is not sufficient for all planned jobs, prioritization rules determine which jobs will be shifted to later times

7-20

Finite Capacity SchedulingProduct A does not consume all available capacity

Combination of all products consumes all available capacity in several periods

Planned orders are shifted to stay within capacity limitations

7-21

Work Center Scheduling

Vertical Loading–each work center is scheduled job by job without consideration of other work centersIncreases capacity utilization but may result in more

partial job completion Horizontal Loading–jobs are scheduled through all

work centers in order of priorityLower capacity utilization but generally a higher

proportion of jobs are completed in a shorter time span (higher customer service levels)

7-22

Finite Capacity Scheduling

The FCS plan is a simulation Randomness leads to actual times that don’t match

scheduled timesShould the work center wait for a job that isn’t

available on time (idleness = lost capacity) Over time, the accuracy of the plan deteriorates Frequent rescheduling may be needed to maintain

accuracy Rescheduling process is computationally expensive

7-23

Advanced Production Scheduling (APS)

Expands Finite Capacity Scheduling to the entire product structure (end products and sub-assemblies)

Can lead to a significant reduction in lead times

Requires accurate scheduling parameters, flawless execution, and prompt recovery from any problems

7-24

Capacity Management

7-25

Capacity Monitoring with Input/Output Control

Planned inputs are determined by the capacity planning process

Planned outputs depend upon the nature of the work center Capacity-constrained–planned output is determined by

the processing rate of the work center Non-capacity-constrained–planned outputs match

planned inputs Differences between plan and actual must be

addressed (management by exception)

7-26

Managing Bottleneck Capacity–Theory of Constraints

7-27

Capacity Planning in the MPC System

Short-term capacity planning problems can be reduced by well-executed production and resource planning

Efficient use of sufficient capacity by a good shop-floor system reduces capacity issues

7-28

Choosing the Measure of Capacity

Capacity can be measured in many ways Labor hours, machine hours, physical units, monetary units

The firm’s needs and constraints should determine the capacity measure

Trends Shrinking portion of direct labor Less clear distinctions between direct and indirect labor Reduced ability to change labor capacity Outsourcing Flexible automation/cellular technologies

7-29

7-30

Using the Capacity Plan

Two broad choices are available when actual capacity and plan are mismatchedChange capacity–reduce or increase capacity

as indicated (within constraints)Revise material plan–change requirements

and/or timing to match available capacity The amount of material that can be produced

is limited by the available capacity, regardless of the material plan

7-31

Principles

Capacity plans must be developed concurrently with material plans if the material plans are to be realized.

Capacity planning techniques must match the level of detail and actual company circumstances.

Capacity planning can be simplified in JIT environments.

Better resource and production planning processes lead to less difficult capacity planning processes.

Better shop-floor systems reduce the need for short-term capacity planning.

7-32

Principles

More detailed capacity planning systems demand more data and database maintenance.

When capacity does not match the requirements, it isn’t always capacity that should change.

Capacity must be planned, but use of capacity must also be monitored and controlled.

Capacity planning techniques can be applied to selected key resources.

Capacity measures should reflect reasonable levels of output from key resources.

7-33

Quiz – Chapter 7

Which capacity planning activities are considered long-range plans? Short-range plans? Medium-range plans?

Resource planning is most closely linked with which MPC element?

The capacity planning using overall factors (CPOF) technique is likely to perform poorly in a just-in-time (JIT) environment? (True/False)

Capacity requirements planning (CRP) ignores current finished goods and WIP inventory? (True/False)

According to the Theory of Constraints, bottleneck and non-bottleneck work centers should be managed similarly? (True/False)