Chapter 7. Capacity Planning and Management Homework problems: 1,2,5,6,7,8,9.
Feb 25, 2016
Chapter 7. Capacity Planning and Management
Homework problems: 1,2,5,6,7,8,9.
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.
1. The Role of Capacity Planning in MPC Systems
The primary objective of capacity planning techniques is to estimate capacity requirements early enough to be able to meet those requirementsFlawless execution of the capacity plan allows the firm to avoid unpleasant surprisesInsufficient capacity leads to deteriorating
delivery performanceExcess capacity may be a needless expense
1. The Role of Capacity Planning in MPC Systems
Capacity Planning: The process of determining the amount of capacity required to produce in the future. This process may be performed at an aggregate or product-line level (resource (requirements) planning), at the master –scheduling level (rough-cut capacity planning), and at the material requirements planning level (capacity requirements planning). Objective is to ensure a match between capacity available in specific work centers and capacity requirements implied by the production plan, MPS, and detailed material plans (note: all 3 levels).Its links to other MPC systems, see Fig. 7.1
Sales and operationsPlanning (SOP)
Demandmanagement
Master productionScheduling (MPS)
Detailed materialPlanning (MRP)
Shop-floorsystems
Suppliersystems
Capacity Planning in the MPC System
Resource (requirements) planning (RRP)
Rough-cut CapacityPlanning (RCCP)
Capacity RequirementPlanning (CRP)
Finite Loading
Input/output analysis
Long Range
Medium Range
Short Range
1. The Role of Capacity Planning in MPC Systems
Resource (requirements) Planning: Capacity planning conducted at the business plan level. It is the process of establishing, measuring, and adjusting limits or levels of long-range capacity. Resource planning is normally based on the sales & operations plan but may be driven by higher level plans beyond the time horizon for the production plan, e.g., the business plan. It addresses those resources that take long periods of time to acquire. Resource planning decision always require top management approval.Synonym: long-range resource planning, resource requirements planning (RRP).
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1. The Role of Capacity Planning in MPC Systems
Rough-Cut Capacity Planning (RCCP): The process of converting the master production
schedule (MPS) into requirements for key/critical resources, often including labor, machinery, warehouse space, suppliers’ capabilities, and in some cases, money.
Comparisons of capacity required of items in the MPS to available capacity is usually done for each key resource.
Three approaches to performing RCCP are: capacity planning using overall factors (CPOF), capacity bill (bill of capacity), and resource profile.
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1. The Role of Capacity Planning in MPC Systems
Capacity Requirements Planning (CRP): The process of determining in detail the amount of
labor and machine resources required to accomplish the tasks of production.
Open shop orders (scheduled receipts) and planned orders (i.e., orders planned for future release) in the MRP system are input to CRP, which through the use of part routings and time standards translates these orders into hours of work by work center by time period.
Even though rough-cut capacity planning may indicate that sufficient capacity exists to execute the MPS, CRP may show that capacity is insufficient during specific time periods.
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1. The Role of Capacity Planning in MPC Systems
Finite Loading: Assigning no more work to a work center than the
work center can be expected to execute in a given time period.
The specific term usually refers to a computer technique (called advanced production scheduling (APS)) that involves calculating shop priority revisions in order to level load operation by operation.
Finite loading can be seen as a shop scheduling process as well as a capacity planning procedure.
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1. The Role of Capacity Planning in MPC Systems
Input/Output Control: A technique for capacity control where planned and
actual inputs and planned and actual outputs of a work center are monitored. Planned inputs and outputs for each work center are developed by capacity requirements planning and approved by manufacturing management.
Actual input is compared to planned input to identify when work center output might vary from the plan because work is not available at the work center. Actual output is also compared to planned output to identify problems within the work center.
Syn: input/output analysis, production monitoring.
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Links to Other MPC System Module (Summary)
Resource Planning
• Linked to sales and operations planning (SOP)
• Converts SOP data to aggregate resource units
Rough-Cut Planning
• Linked to Master Production Schedule (MPS)
• Estimates capacity requirements of MPS
Capacity Requirements
Planning• Linked to
material requirements planning (MRP)
• Prepares detailed capacity plan based on time-phased material plans
Finite Loading
• Linked to material planning and shop floor control
• Considers adjustment of plans due to capacity utilization
Input/output Analysis
• Linked to shop floor control
• Monitors actual consumption of capacity during execution of detailed material planning
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2. Capacity Planning and Control Techniques
Capacity planning using overall factors (CPOF)Capacity bills more
Resource profilessophisticated
Capacity requirements planning (CRP)
The first three procedures are for rough-cut capacity planning (RCCP) and can be used with or without MRP. Capacity requirements planning (CRP) has to be used in conjunction with time-phased MRP records.
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2.1 Capacity planning using overall factors (CPOF)
1. MPS as the input2. Based on standards or historical data for end products3. Overall labor and/or machine-hour capacity
requirements are estimated.4. Example: Fig. 7.2 and 7.3
Pros: ease of calculation and minimal data requirements
Cons: valid only when the product mixes or historical divisions of workload between work centers remain constant.
CPOF Example (Fig. 2 and 3)
Total required capacity = (33*0.95)+(17*1.85) = 62.80
Work center capacity = Total required capacity *Historical percentage (e.g., 62.8 * 60.3%=37.87)
2.2 Capacity Bills
Rough-cut capacity planning method that provides more direct link to individual end productsBill 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 centerRequires more data than CPOF procedure
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2.2 Capacity Bills
In addition to what’s provided by CPOF, capacity bills takes into account any shifts in product mix. As a result, more data (e.g., BOM, routing, labor or machine hour for each operation) must be available.Figures 7.4 ~ 7.6. Capacity bills is more desirable than CPOF
especially for firms experience significant period-to-period product mix variation.
Learn how to prepare capacity bill Compare Fig. 7. 3 with Fig. 7.6 for results.
Capacity Bill Example
Std. Setup hours are spread over the standard lot size
Total hours include both std. run time and std. setup time
Capacity Bill Example (Fig. 5 and 6)
MPS quantities are multiplied by bill of capacity to determine work center capacity requirements by period (33*0.05 + 17*1.30 = 23.75)
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2.3 Resource Profiles
The standard hours of load placed on a resource by time period. That is, production lead time data has to be taken into account to provide time-phased projection of the capacity requirements for individual production facilities.Synonym : bill of resources, product load profileFigures 7.7~7.9. (Pay attention to 7.8) Bill of Resources: A listing of the required capacity
and key resources needed to manufacture one unit of a selected (typical) item or family. The resource requirements are further defined by a lead-time offset so as to predict the impact of the item/family scheduled on the load of the key resource by time period.
Resource Profile Example (Fig. 7.7)
Production 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
Resource Profile Example (Fig. 7.8)
Requirements (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
2.4 Capacity Requirements Planning (CRP)
Capacity requirements planning differs from the rough-cut planning procedures
Utilizes 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
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2.4 Capacity Requirements Planning
Capacity Requirements Planning (CRP): Input includes BOM + routing + time
standards + lead time (note: these are required by Resource Profiles) plus MRP (i.e., planned orders, WIP, scheduled receipts). Example, Fig. 7.10.
Capacity Requirements Planning ExampleD
etai
led
MR
P
Dat
a
Scheduled/planned quantity multiplied by processing time for work center
This process is repeated for each work center to complete the plan
3. Scheduling Capacity and Materials Simultaneously
Capacity requirements planning doesn’t consider capacity when planning materials
Assumes 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
Finite Capacity Scheduling
Simulates job order start and finish times in each work centerEstablishes a detailed schedule for each job in each work centerWhen a work center’s capacity is not sufficient for all planned jobs, prioritization rules determine which jobs will be shifted to later times
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3. Scheduling Capacity and Materials Simultaneously
Finite loading/scheduling can be seen as an extension of the approach used by CRP systems, except CRP calculate only capacity needs and it does not make adjustments for infeasibility. Finite scheduling determines which jobs will first be processed/completed based on various priority rules, though it does not solve the under-capacity problem. The result of finite loading is a set of start and finish dates for each operation at each work center based on work center capacities and the other scheduled jobs. (see Fig. 7.11).
Finite Capacity Scheduling
Product 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
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3. Scheduling Capacity and Materials Simultaneously Finite loading/scheduling approaches:
Vertical loading: deciding on which job to schedule next in a work center with a focus on planning and utilizing the capacity of a work center independently. Horizontal loading: the focus is on the entire shop orders with the highest priority shop order or job is scheduled in ALL of its centers.The horizontal loading may be in conflict with vertical loading, as horizontal loading may create more “holes” in the schedule (i.e., capacity utilization at work centers may not be as high). Nevertheless, horizontal loading will complete whole jobs faster than vertical loading.Back scheduling: scheduling job backward from their due dates.Front scheduling: scheduling job into the future, starts with the current date, so each job is completed as soon as possible. e.g., Advanced Production Scheduling (APS) Fig. 12 & 13.
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4. Management of Capacity Planning/Utilization
Capacity monitoring with Input/Output Control: Never release work that can not be completed, e.g.,
Fig. 7.14. Backlog: All of the customer orders received but
not yet shipped. Sometimes referred to as “open orders” or “ the “order board”. Syn: order backlog.
Backorder: An unfilled customer order or commitment. It is an immediate (or past due) demand against an item whose inventory is insufficient to satisfy the demand.
Capacity Monitoring with Input/Output Control
Planned inputs are determined by the capacity planning processPlanned outputs depend upon the nature of the work center
Capacity-constrained planned output is determined by the processing rate of the work centerNon-capacity-constrained planned outputs match planned inputs
Differences between plan and actual must be addressed (management by exception)
Managing Bottleneck Capacity–Theory of Constraints
Capacity Planning in the MPC System
Short-term capacity planning problems can be reduced by well-executed production and resource planningEfficient use of sufficient capacity by a good shop-floor system reduces capacity issues
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4. Management of Capacity Planning/Utilization
Measure of Capacity: Direct labor cost and its role in total production cost Hiring/firing vs. lifetime employment Machine/equipment capacity in the new
manufacturing environment. e.g., computer integrated manufacturing and flexible automation.
Capacity utilization and flexibility
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4. Management of Capacity Planning/Utilization Choice of the planning technique: general justification
Low cost AccuracyEase of preparation Complexitysimplicity
CPOF Capacity bills Resource profiles
Environmental dependent-- in JIT: Capacity bills is better than CPOF because product mix is
incorporated. Resource Profiles is of little need because lead time is insignificant. CRP is not necessary because WIP is minimal. I/O control is not needed for shop floor because of the use of “pull”.
Choice of a Specific Planning Technique
Rough-cut methods
CPOFCapacity bills
Resource profiles
Most generalWidely applicable
Easier to implement but less powerful
Useful in JIT situations
Capacity requirements planning
Requires more data and computational effortOnly applicable in conjunction with MRP
Unnecessary under JIT
APS SystemsHighest levels of effort
High levels of accuracy possible with good data and flawless execution
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4. Management of Capacity Planning/Utilization Using the Capacity Plan:
Ensure a match between available capacity and required capacity. If not, either available capacity or required capacity (material plan) has to be changed.
Available Capacity Required CapacityOver/under time Alternate routingHiring/firing Make or buyChange # of machines Subcontracting
Raw material changeInventory changePromise date change
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4. Management of Capacity Planning/Utilization
Data Base Requirements: CPOF: MPS, standard hours of end items, historical workload
patterns. Capacity Bills: MPS, BOM, routing, labor/machine hour for each
operation. Resource Profiles: all of the above + lead time for component
parts and subassembly. CRP: all of the above + MRP
Note: There is an increasing requirement for data from CPOF to CRP.
PrinciplesCapacity 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.
PrinciplesMore 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.