2.
4 Capacity Planning
Learning Objectives
Explain functions & importance of capacity planning
State four techniques for capacity planning
Explain capacity planning factor and bill of capacity
techniques
Capacity Planning
Determining the level of capacity needed to achieve
scheduled production
Comparing this with available capacity
Plan necessary adjustments in capacity levels or schedules
Critical elements:
Labor
Machine hours
Facilities
Warehouse space
Engineering
Results of Insufficient Capacity
Shortages
Failure to meet production targets
Overdue shipments to customers
Frustrated production managers, and
Loss of confidence in the formal system
Results of Too Much Capacity
Low utilization of resources
Manufacturing inefficiency
High cost, and
Reduced profit margins
Actions when Capacity is Under-Utilized
Retrenchment
Transfer out workers
Look for more jobs
Re-training of the workers
Prepare Production Schedule
Determine Required Capacity
Iterative No
Required Capacity =
Available Capacity?
Yes STOP
Process for
Production
No
Scheduling
Plan Adjusted Capacity
and Capacity Plan
Capacity Satisfactory?
Planning Yes
STOP
The Hierarchy of Capacity Plans and their
Relationship with Production Schedule
Schedule Planning Capacity Planning
Production Planning Resource Planning
Master Production Rough Cut Capacity
Scheduling Planning
Material Requirement Capacity Requirement
Planning Planning
Production Activity Control
Planning Horizons and Degree of Detail
for Capacity Plan
Planning
Horizon
Long Resource Plan
Medium
Rough Cut Capacity Plan
Medium- Capacity
Short Requirement Plan
Plant Department Work Center
Degree of Detail
Capacity Planning Techniques
Business Planning
Demand Management
- Forecasting
Market Planning
- Distribution Req. Planning
- Order Entry Top
Management
Capacity Planning Production Planning
Resource Planning
Planning
Factors
Bill Of Capacity Final Assembly Master Production Rough Cut Operations
Management
Scheduling Scheduling Capacity Planning
Time-Phased Bill
Planning
Of Capacity
Material Capacity
Requirement Requirement
Planning (MRP) Planning
Capacity
Requirements Production Activity Control
- Order Release
Purchasing
- Vendor Selection
Operations
Management
Planning
- Operations Scheduling
- Order Placement Execution
- Dispatching
- Vendor Scheduling
- Expediting
- Order Follow-up
- Production Reporting
Performance
Measurement
Capacity Planning Factors
Conversion unit used to convert a planning output into the
number of units of some resource required to produce that
output
Conversion unit is obtained indirectly from aggregate
historical data (Product Family quantity)
Calculating CPF
305/840X100
Data Used in Resource Planning using CPF
Total standard hours produced last quarter = 840
Number of units of product produce last quarter = 120
Average standard hours per unit (= 840/120) = 7
Department Standard Labor Hours Percentage of Standard
Produced Last Quarter Labor Hours
1 305 36.3
2 535 63.7
Total 840 100.0
Production Plan Next Quarter
Month Jan Feb Mar Total
Units 40 48 50 138
Resource Plan Load in Standard Labor Hours for Next Quarter
Department Jan Feb Mar Total
1 0.363X280 101.64 121.97 127.05 350.66
2 0.637X280 178.36 214.03 222.95 615.34
Total 280 336 350 966
7X40 7X48 7X50 7X138
Limitation of CPF Technique
No consideration is given to the lead times
No consideration is given to current on-hand and work-in-
progress inventories of components
The average hours per unit used assumes that the same
product mix experienced in the past will continue in the
future
No consideration is given to service parts and rework
Bill of Capacity
States the capacities needed to produce a product
according to the bill of material
Basic data needed to construct a BOC are found in the
BOM and routing files
No consideration for lead times and current on-hand and
in process inventories of components
Does not take into account manufacturing lead times or
current on hand and in-process inventories of
components
Product Structure for Product U and V
U V
W X W Y
RM RM RM RM
Fixed
Variable per Batch
Routing Data batch Size
Item Oper No Dept No Work Run Time/Unit Setup Time Avg Lot
Center No (Std. Hrs) (Std. Hrs) Size
U 10 1 15 1.6 2.0 4
V 10 1 15 2.4 3.0 6
W 10 2 35 1.2 1.0 20
20 2 40 0.4 0.5 20
X 10 2 35 1.1 2.1 8
20 2 40 0.6 0.6 8
Y 10 2 35 0.5 1.4 6
20 2 40 2.1 0.5 6
Standard Hours per Units I
t
e
m
Ope
r No
De
pt
No
Work
Cent
er
No
Run
Time/Uni
t (Std.
Hrs)
Setup
Time
(Std.
Hrs)
Avg
Lot
Size
U V U 10 1 15 1.6 2.0 4
V 10 1 15 2.4 3.0 6
W 10 2 35 1.2 1.0 20
20 2 40 0.4 0.5 20
W X W Y
X 10 2 35 1.1 2.1 8
20 2 40 0.6 0.6 8
Y 10 2 35 0.5 1.4 6
RM RM RM RM
20 2 40 2.1 0.5 6
Item Dept Work Center Std. Hrs per unit
U 1 15 2.100 1.6+2/4
V 1 15 2.900 2.4+3/6
W 2 35 1.250 1.2+1/20
2 40 0.425 0.4+0.5/20
X 2 35 1.363 1.1+2.1/8
2 40 0.675 0.6+0.6/8
Y 2 35 0.733 0.5+1.4/6
2 40 2.183 2.1+0.5/6
U V
Bill of Capacity W X W Y
RM RM RM RM
Dept. Product U Std. Labor
Work Center Hrs per unit
1 15 2.100
2 35 2.613
40 1.100
Dept. Product V Std. Labor Item Dept Work Std. Hrs per
Work Center Hrs per unit Center unit
1 15 2.900 U 1 15 2.100
2 35 1.25(W)+0.733(Y) 1.983 V 1 15 2.900
W 2 35 1.250
40 0.425(W)+2.183(Y)2.608
2 40 0.425
X 2 35 1.363
2 40 0.675
Y 2 35 0.733
2 40 2.183
MPS for Product U and V
Week 1 2 3 4 5 6 7 8
U 4 3 3 3 3 4 4 5
V 6 7 7 7 8 8 8 8
Total (week) 10 10 10 10 11 12 12 13
Total (month) 40 X 48
Dept. Product U Std. Labor
X Work Center Hrs per unit
BOC
1 15 2.100
2 35 2.613
40 1.100
Dept. Product V Std. Labor
4x2.613+6X1.983 Work Center Hrs per unit
1 15 2.900
2 35 1.983
Rough Cut Capacity Planning
40 2.608
Week 1 + 2 3 4 5 6 7 8
WC15 25.8 26.6 26.6 26.6 29.5 31.6 31.6. 33.7
WC35 22.4 21.7 21.7 21.7 23.7 26.3 26.3 28.9
WC40 20.0 21.6 21.6 21.6 24.2 25.3 25.3 26.4
Total (week) 68.2 69.9 69.9 69.9 77.4 83.2 83.2 89.0
Total (month) 277.9 332.8
4X1.1+6X2.608
Characteristics of BOC
Conversion factors are developed directly and in detail
Facilitates the separate and more accurate treatment of
capacity required for service parts and rework
Conversion factors are developed by product and applied
to the MPS, the effects of projected changes in product
mix can be taken into account
Time-Phase BOC (TPBOC)
Similar to the BOC except time buckets in which loads occur
are determined by backward scheduling from MPS using
standard lead times
Current on-hand and in-process inventories of components
are not taken into account
