Capacity Planning

Planning

• Planning involves establishing suitable goals, anticipating what action must be performed to accomplish the goals & determining when action must be initiated so there will be sufficient Lead Time for the activity to be accomplished smoothly & efficiently

• Planning takes place at numerous levels• Mfg. operations must plan to make to make both the

Capacity and the Material available

Capacity v/s Materials

• Since Capacity is usually less flexible to vary than Material deliveries the usual approach is to develop plans that make sufficient capacity available & that use the capacity wisely

• Then suppliers deliveries can be planned to facilitate execution of the plan.

Levels of Plan

Business Plan

Production Plan

Master Production Schedule

Establishes the specific products to be produced

Establishes the rate for which production must prepare to produce

Establishes budgets & guidelines to coordinate functions

Business Plan (BP)

• BP is a statement of organization overall level of business activities and it addresses both the long range (5 yrs.+) and the inter-mediate range (1 yr. To 1.5 yr) horizons & usually expressed in financial terms (sales in Rs etc)

• BP in a sense is an agreement between all functional areas

The Production Plan ( PP)

• It states in general terms the amount of output the operations is responsible to produce for each planning period (in terms of money / tons or some other units)( Some pseudo product)

• Planning at this level ignores such details as how many of each individual product, style, colour option or models to produce

• PP is useful for top level coordination with other functions.

Production Planning Hierarchy

Master Production Scheduling Master Production Scheduling

Production Planning and Control SystemsProduction Planning and Control Systems

Pond DrainingPond DrainingSystemsSystems

Aggregate PlanningAggregate Planning

PushPushSystems Systems

PullPullSystemsSystems

Focusing onFocusing onBottlenecksBottlenecks

Long-Range Capacity PlanningLong-Range Capacity Planning

Production Planning HorizonsProduction Planning HorizonsProduction Planning HorizonsProduction Planning Horizons

Master Production Scheduling Master Production Scheduling

Production Planning and Control SystemsProduction Planning and Control Systems

Pond DrainingPond DrainingSystemsSystems

Aggregate PlanningAggregate Planning

PushPushSystems Systems

PullPullSystemsSystems

Focusing onFocusing onBottlenecksBottlenecks

Long-Range Capacity PlanningLong-Range Capacity PlanningLong-RangeLong-Range

(years)(years)

Medium-RangeMedium-Range(6-18 months)(6-18 months)

Short-RangeShort-Range(weeks)(weeks)

Very-Short-RangeVery-Short-Range(hours - days)(hours - days)

Production Planning: Units of MeasureProduction Planning: Units of MeasureProduction Planning: Units of MeasureProduction Planning: Units of Measure

Master Production SchedulingMaster Production Scheduling

Production Planning and Control SystemsProduction Planning and Control Systems

Pond DrainingPond DrainingSystemsSystems

Aggregate PlanningAggregate Planning

PushPushSystems Systems

PullPullSystemsSystems

Focusing onFocusing onBottlenecksBottlenecks

Long-Range Capacity PlanningLong-Range Capacity PlanningEntire Entire

Product LineProduct Line

ProductProductFamilyFamily

SpecificSpecificProduct ModelProduct Model

Labor, Materials,Labor, Materials,MachinesMachines

PP

• PP is operation’s commitment to support the overall BP.• Towards the intermediate or near term horizon this plan

is operation’s authorization to produce at a rate consistent with marketing plans, financial resources etc.

• As PP is expressed in financial terms / or some other units it is not specific enough to be the basis of purchasing materials and scheduling of individual products.

PP

• While time periods are still far enough into the future, the PP for those periods must be developed into a detailed master production schedule (MPS) which states what specific products to be produced and when

• Planning must focus beyond some minimum horizon• Planning for some time horizon has to be done while the

period is far enough into the future to allow sufficient time for execution of the plan.

PP …….. Time Fence

• Considerable time has to be provided for the execution cycle (procurement, production, testing, packaging)

• Co. often consider that there is a “Time Fence” just beyond the longest execution cycle and that most of the planning has to be focused on periods while they are beyond this minimum planning horizon

The Master Production Schedule (MPS)

• Each individual product /model / item may require unique set of materials / components and a unique series of work tasks.

• Procurement of materials requires that the plan specify precisely what is to be made

• MPS states what is to be produced, how many are to be complete and when they are to be completed

• It should include all planned production that will place significant demand on manufacturing resources

Capacity Planning (CP)

• CP or Aggregate Planning (AP) is used to evaluate the capacity requirement and to plan the best way to make the capacity available.

• AP is the process of consolidating / grouping all the requirements for capacity for each period in the intermediate horizon and determining the best way to provide the needed capacity

• It is IMP that work load required by MPS be within the capacity of the co. and that it makes wise use of capacity

Objectives of CP /AP

• Feasibility – the internal capacity needs must be within the capability of the operations system

• Optimality – it is desirable to determine the least costly way to meet the capacity needs

• AP considers the variables that can be used to adjust capacity. The most common variables in adjustable capacity are work force size, no. of hours worked per day and inventory. Sometimes Back ordering and sub-contracting are used.

• If one variable is adjusted – Pure Strategy• More than one variable – Mixed Strategy

TV Sets

ColourBlack & White

PortableModels

ConsoleModels

Black & White

SpecificModels

209

SpecificModels

303

SpecificModels

503

SpecificModels

501

SpecificModels

102

SpecificModels

101

Colour

SpecificModels

304

Approaches to AP

• 2 general approaches with the difference being the level in a breakdown of the Co.’s product line at which demand is consolidated before the capacity requirements are determined and capacity is planned.

• Top – Down Capacity Planning• Rough Cut Capacity Planning

Production Plan Top Down Aggregate Planning

Master Production Schedule

Rough Cut Capacity Planning

Top – Down Capacity Planning

• It determines the capacity required by working directly from the production plans (PP) expressed in general units.

• Estimate of total capacity required in each period is determined by multiplying the no. of products by the work hours required to produce the average product.

• Several methods are used to evaluate the cost of providing adjustable capacity to meet the capacity required – Trial & Errors, Linear Programming etc.

Top – Down Capacity Planning

• The adequacy TDCP rests on assumption that if there is enough total capacity, each dept. will have enough capacity

• It is possible however for a co. to have sufficient total capacity (for average product) but some deptt. could be under loaded while others overloaded.

• This problem is very likely to arise if the product mix changes over time.

• A PP may not be feasible if specialized equipments or skills are required to produce some products and can’t be used for others.

Rough Cut Capacity Planning

• It involves planning production quantities at some lower level in the breakdown of a co product mix and then aggregating the capacity requirements of these more detailed plans.

• Plans may be developed for individual products or logical group of products and then aggregate.

• RCCP can be used to evaluate the feasibility of a trial MPS and to plan how to make the needed capacity available before the time period enter the time fence and execution must begin

Rough Cut Capacity Planning

• In our example of TV sets (Portable B/W, Pot. Colour, Console B/W, Con. Colour) Four plans can be developed.

• The Co. would need an estimate of amount of work each product groups required in each work center. Usually the information is calculated for key work centers (bottlenecks).

• To determine total capacity requirement at a particular work center quantity to be produced is to be multiplied by data from bill of labour.

Rough Cut Capacity Planning

• For each work center the capacity required by all family is summed in each week. This services of capacity requirement is called a load profile / load report. The each load profile is examined to see if it is within the available capacity of the center and appears to make wise use of the capacity.

• If there is a serious problem in load profile of a work center trial MPS would be revised to move some of the planned work to another period.

Load Profile

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1st w 2nd w 3rd w 4th w

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