The Role of Capacity Planning in MPC Systems
Primary objective:
Capacity planning techniques have as their primary objective the estimation
of capacity requirements, sufficiently far enough into the future to be able to
meet those requirements.
A second objective is execution: the capacity plans need to be executed
flawlessly, with unpleasant surprises avoided.
Problems in insufficient and excess capacity.
Hierarchy of Capacity Planning Decisions
The scope of capacity planning starting from an overall plan of resource
needs, and then moves to planning procedures to estimate the capacity
implications of a particular master production schedule.
Thereafter the hierarchy depicts middle-range capacity planning,
which evaluates the capacity implications of the detailed material plans,
then to the short range actual scheduling/capacity trade-offs, and finally to
the evaluation of particular capacity plans.
Rough cut capacity
planning
Capacity Requirement
planning
Sales and operations
planning
Master production
scheduling
Demand
management
Front End
Detailed material
planning
Engine
Material Requirements
Plans (MRP)
Finite loading
Input/output
analysis
Shop-floor
systems
Supplier
systems
Back end
Enterprise Resource Planning (ERP) System
Resource
Planning
Links to Other MPC System Modules
Resource planning is directly linked to the sales and operations
planning module.
Resource planning typically involves converting monthly, quarterly, or
even annual data from the sales and operations plan into aggregate
resources such as gross labor-hours, floor space, and machine-hours.
The master production schedule is the primary information source for roughcut capacity planning.
A particular master schedule’s rough-cut capacity requirements can be
estimated by several techniques: capacity planning using overall factors
(CPOF), capacity bills, or resource profiles.
For firms using material requirements planning to prepare detailed material
plans, a much more detailed capacity plan is possible with the capacity
requirements planning (CRP) technique.
Finite loading in some ways is better seen as a shop scheduling process,
and therefore part of production activity control (PAC), but it is also a
capacity planning procedure.
Advanced production scheduling (APS) techniques to do finite loading.
Input/output analysis provides a method for monitoring the actual
consumption of capacity during the execution of detailed material
planning.
Capacity Planning and Control Techniques
There are four procedures for capacity planning.
The first technique is capacity planning using overall factors (CPOF). The
simplest of the four techniques, CPOF is based only on accounting data.
The second, capacity bills, requires more detailed product information.
The third, resource profiles, adds a further dimension—specific timing of
capacity requirements.
The fourth, capacity requirements planning, is used in conjunction with
time-phased MRP records and shop-floor system records to calculate capacity
required to produce both open shop orders (scheduled receipts) and planned
orders.
Capacity Planning Using Overall Factors (CPOF)
Rough-cut capacity planning, is typically done on a manual basis.
Data inputs come from the master production schedule(MPS).
When these planning factors are applied to the MPS data, overall labor- or
machine-hour capacity requirements can be estimated.
End Product
A
B
Master production schedule (in units):
Period
1 2 3 4 5 6 7
8 9 10 11 12
33 33 33 40 40 40 30 30 30 37 37 37
17 17 17 13 13 13 25 25 25 27 27 27
13 Total
37 457
27 273
Direct labor time per end product unit:
Total Direct Labor in
End Product
Standard Hours/Unit
A
0.95 hour
B
1.85
Estimated Capacity Requirements Using Overall Factors
(in standard direct labor-hours)
Period
Work Historical
Total
Center Percentage 1
2
3
4
5
6
7
8
9
10
11 12
13 Hours
100
60.3
37.87 37.87 37.87 37.41 37.41 37.41 45.07 45.07 45.07 51.32 51.32 51.32 51.32 566.33
200
30.4
19.09 19.09 19.09 18.86 18.86 18.86 22.72 22.72 22.72 25.87 25.87 25.87 25.87 285.49
300
9.3
5.84 5.84 5.84 5.78 5.78 5.78 6.96 6.96 6.96 7.91 7.91 7.91 7.91 87.38
Total
required capacity
62.80* 62.80 62.80 62.05 62.05 62.05 74.75 74.75 74.75 85.10 85.10 85.10 85.10 939.20
*62.80 = (0.95 33) + (1.85 17)
Capacity Bills
The capacity bill procedure is a rough-cut method providing more-direct
linkage between individual end products in the MPS and the capacity required
for individual work centers.
It takes into account any shifts in product mix. Consequently, it requires more
data than the CPOF procedure. A bill of materials and routing data are
required, and direct labor-hour or machine-hour data must be available for
each operation.
Product structure
B
A
C
D
D
E(2)
F(2)
Routing and standard time data
Lot size
Operations
Work
center
Standard
Standard
Standard
setup hours setup hours run time
per unit
hours per
unit
Total hours
per unit
A
40
1 of 1
100
1.00
0.25
0.25
0.50
B
20
1 of 1
100
1.0
.05
1.25
1.30
C
40
1 of 2
2 of 2
200
300
1.0
1.0
.025
.025
.575
.175
.60
.20
D
60
1 of 1
200
2.0
.033
.067
0.10
E
100
1 of 1
200
2.0
.020
.080
.10
F
100
1 of 1
200
2.0
.02
.0425
.0625
End product
Component
Bill of capacity : End product
A
B
Work center
Total time /unit
Total time /unit
100
.05 (.025+.025)
1.30
200
.70 (.60+.10)
.55 (.10+2*.10+4*.0625)
300
.20
.000
Total time /unit
.95
1.85
Capacity requirements using capacity bills
Work
center
Period
work
center
%
1
2
3
4
5
6
7
8
9
10
11
12
100
23.75
23.75
23.75
18.90
18.90
18.90
34.00
34.00
34.00
36.95
36.95
36.95
36.95 377.75
40%
200
32.45
32.45
32.45
35.15
35.15
35.15
34.75
34.75
34.75
40.75
40.75
40.75
40.75 470.05
50
300
6.60
6.60
6.60
8.00
8.00
8.00
6.00
6.00
6.00
7.40
7.40
7.40
7.40
91.40
10
Total
62.80
62.80
62.80
62.05
62.05
62.05
74.75
74.75
74.75
85.10
85.10
85.10
85.10 939.20
100
23.75= (33*0.05+17*1.30)
13
Total
Hours
Resource profile
Neither the CPOF nor the capacity bill procedure takes into account the
specific timing of the projected workloads at individual work centers.
In developing resource profiles, production lead time data are taken into
account to provide time-phased projections of the capacity requirements for
individual production facilities.
To apply the resource profile procedure information needed from bills of
material, routing, and time standard information given in previous slides.
Also need production lead time for each end product and component part
to our database.
In this simplified example,
One-period lead time for assembling each end product and one period for
each operation required to produce component parts.
Because only one operation is required for producing components D, E,
and F, lead time for producing these components is one time period each.
For component C, however, lead time is two time periods: one for the
operation in work center 200 and another for work center 300.
Operation setback charts for end products A and B
End Product A
Coomponent C Operation 1
Work center 200
Coomponent C Operation 1
Work center 300
Time/unit of A=0.60
Time/unit of A=0.20
.60 = Standard time per unit of C X
number of c’s per unit of A = .60X1
End product A Operation 1
Work center 100
Time /unit = 0.05
Coomponent D Operation 1
Work center 200
Time/unit of A=0.10
Period
Period 3
Period 4
Period 5
End product B
Coomponent D Operation 1
Work center 200
Time/unit of B=0.10
.25 = = Standard time per unit of F X
number of F’s per unit of B = .0625X4
End product B Operation 1
Work center 100
Time /unit = 1.30
Coomponent F Operation 1
Work center 200
Component E Operation 1
Work center 200
Time/unit of B=0.250
Time/unit of B=0.20
Resource profiles by work center
Time required during preceding periods for one end product
assembled in period 5
Time period
3
4
5
Work center 100
0
0
0.05
Work center 200
0.60
0.10
0
Work center 300
0
0.20
0
Work center 100
0
0
1.30
Work center 200
0.25
0.30
0
End product A
End Product B
Time phased capacity requirements generated from MPS for 40 As and
13 Bs in time period 5
Time Period
40 As
13 Bs
Total from period
5 MPS
3
4
5
Work center 100
0
0
2
Work center 200
24
4
0
Work center 300
0
8
0
Work center 100
0
0
16.9
Work center 200
3.25
3.9
0
Work center 300
0
0
0
Work center 100
0
0
18.9
Work center 200
27.25
7.9
0
Work center 300
0
8
0
Capacity requirements using resource profiles
WC
Past
due
Period
1
2
3
4
5
6
7
8
9
10
11
12
13
100
0.00
23.75
23.75
23.75
18.90
18.90
18.90
34.00
34.00
34.00
36.95
36.95
36.95
36.95
200
56.50
32.45
35.65
35.15
35.15
32.15
34.75
34.75
39.45
40.75
40.75
40.75
11.80
300
6.60
6.60
6.60
8.00
8.00
8.00
6.00
6.00
6.00
7.40
7.40
7.40
7.40
Total
63.10
62.80
66.00
66.90
62.05
59.05
59.65
74.75
79.45
82.15
85.10
85.10
56.15
Total
Hours
Cent
er %
377.75
40
470.05
50
10
36.95
939.20
100
Capacity requirement planning (CRP)
• Capacity requirements planning (CRP) differs from the rough-cut planning
procedures in four respects.
• First, CRP utilizes the time-phased material plan information produced by an MRP
system. This includes consideration of all actual lot sizes, as well as lead times for
both open shop orders (scheduled receipts) and orders planned for future release
(planned orders).
• Second, the MRP system’s gross-to-net feature takes into account production capacity
already stored in the form of inventories of both components and assembled products.
• Third, the shop-floor control system accounts for the current status of all work inprocess in the shop, so only the capacity needed to complete the remaining work on
open shop orders is considered in calculating required work center capacities.
• Fourth, CRP takes into account demand for service parts, other demands that may not
be accounted for in the MPS, and any additional capacity that might be required by
MRP planners reacting to scrap, item record errors, and so on.
• To accomplish this, the CRP procedure requires the same input information as the
resource profile procedure (bills of material, routing, time standards, lead times) plus
information on MRP-planned orders and the current status of open shop orders (MRPscheduled receipts) at individual work centers.
CRP example
Period
1
2
3
4
5
6
7
8
9
10
11
12
13
Product A MPS
33
33
33
40
40
40
30
30
30
37
37
37
37
Component C
Lot Size 40, lead time 2
Period
1
2
3
4
5
6
7
8
9
10
11
12
13
Gross requirement
33
33
33
40
40
40
30
30
30
37
37
37
37
38
8
11
14
17
20
40
40
40
40
Scheduled receipts
Projected available
balance
40
4
11
18
18
18
18
28
40
40
40
40
40
40
40
37
Planned order releases
Work center 300 capacity requirements using CRP
Period
Hours of capacity
Total =88
1
2
3
4
5
6
7
8
9
10
11
12
8
(40*.20)
8
8
8
8
8
8
0
8
8
8
8
13
Scheduling Capacity and Materials
Simultaneously
The traditional view of capacity in MPC systems: one
first plans the materials, and thereafter examines the
capacity implications of those plans.
In order to be profitable one must utilize capacities
more effectively, and satisfy end customer demands
faster with lower inventories. The bottom line is a need
to simultaneously schedule both capacity and materials.
Finite Capacity Scheduling
• Finite scheduling systems can first be seen as an extension of the
approach used by capacity requirements planning (CRP) systems,
with one major difference: CRP calculates only capacity needs—it
makes no adjustments for infeasibility.
• Finite scheduling systems simulate actual job order starting and
stopping times to produce a detailed schedule for each shop order
and each machine center; that is, finite scheduling loads all jobs in
all necessary work centers for the length of the planning horizon.
For this reason, the terms finite scheduling and finite loading tend
to be used interchangeably.
Finite Capacity Scheduling
• The result of finite loading is a set of start and finish
dates for each operation at each work center.
• Finite scheduling explicitly establishes a detailed
schedule for each job through each work center based
on work center capacities and the other scheduled jobs.
Finite Capacity Scheduling
• The approach we have just described, where a work
center is scheduled, job by job, is called vertical
loading. Its orientation is on planning/utilizing the
capacity of a work center—independently
• Horizontal loading- the highest-priority shop order or
job is scheduled in all of its work centers, then the job
with the next highest priority, and so on.
Finite Capacity Scheduling
There is also the issue of front scheduling versus back
scheduling.
The back-scheduling approach starts with scheduling jobs
backward from their due dates, whereas front scheduling starts
with the current date scheduling into the future, where each job is
completed as early as possible.
Finite Scheduling with Product Structures:
Using APS Systems
• The complexity of scheduling increases if one wishes to schedule not
only component parts but also products with part structures. The real
problem is in scheduling products A and B, not just in scheduling the
components C, D, E, and F.
• The approach used by classic MRP systems is to take a long time to
complete these jobs or else to have plenty of capacity available. With
present imperatives on deliveries, inventories, and capacity
investments, many firms are turning to finite loading systems that
schedule the entire product as an entity. These systems are called
advanced production scheduling (APS) systems, and several leading
edge software companies provide them.
Management and Capacity Planning/Utilization
• Capacity planning is one side of the coin; capacity management is
the other.
Capacity Monitoring with Input/Output Control
• The best-known approach to this issue is input/output control,
where the work flowing through a work center is monitored: the
planned work input and output are compared to the work actual
input and output.
Input/Output Control
• The capacity planning technique used delineates the planned
input. Planned output results from managerial decision making to
specify the capacity level; that is, planned output is based on
staffing levels, hours of work, and so forth.
Input/Output Control
• Actual input would use the same routing data, but for
the actual arrivals of jobs in each time period as
reported by the shop-floor control system.
• Actual output would again use the shop-floor control
data for exact quantities completed in each time
period, converted to standard hours with routing time
data.
Managing Bottleneck Capacity
• one needs to find the bottlenecks in any factory, and
thereafter manage their capacities most effectively.
Goldratt’s maxim is that an hour of capacity lost in a
bottleneck work center is an hour of capacity lost to the
entire company— worth a fortune.
• Today, he and his colleagues have generalized the ideas into
what they refer to as “theory of constraints” (TOC).
• For the purposes of capacity planning and management,
TOC teaches that the capacities of bottleneck work centers
need to be planned and managed much more carefully than
those of nonbottlenecks.
Managing Bottleneck Capacity
• The TOC approach to capacity planning is essentially to
first determine the bottleneck work centers. This can be
done with a rough-cut capacity planning model or with
CRP. Where are the bottlenecks? Next, TOC would try
to find the quick solutions for eliminating bottlenecks.
Finally, scheduling will concentrate on best managing
bottleneck capacity.
Capacity Planning in the MPC System
• To the extent that production planning and resource
planning are done well, problems faced in capacity
planning can be reduced, since appropriate resources
have been provided.
• If the material planning module functions effectively, the
MPS will be converted into detailed component
production plans with relatively few unexpected
execution problems.
Choosing the Measure of Capacity
• Several current trends in manufacturing have a significant bearing on
the choice of capacity measures. Each can have a major impact on
what’s important to measure in capacity. One important trend is
considerable change in the concept of direct labor. Direct labor has
been shrinking as a portion of overall manufacturing employment.
Distinctions between direct and indirect labor are becoming less
important. The ability to change labor capacity by hiring and firing
(or even using overtime) has been reduced; notions of “lifetime
employment” have further constrained this form of capacity
adjustment.
• Another important trend is decreased internal fabrication and
increased emphasis on outside purchasing, i.e., outsourcing.
Choosing the Measure of Capacity
• For many firms engaged in fabrication, machine
technology is changing rapidly. Flexible automation has
greatly increased the range of parts that can be processed
in a machine center.
• To the extent that cellular technologies are adopted as
part of JIT manufacturing, the unit of capacity may need
to change. Usually the entire cell is coupled and has only
as much capacity as its limiting resource. Often, the cell
is labor limited, so the unit of capacity is labor-hours
(continually adjusted for learning).
Choice of a Specific Technique
• In this chapter’s discussion, the capacity planning techniques for
converting a material plan into capacity requirements include three
different methods for rough-cut capacity planning (CPOF, capacity
bills, and resource profiles). We also examined capacity requirements
planning, CRP, which is particularly useful for medium range planning.
• For the detailed day-to- day capacity planning APS systems can be
valuable under some circumstances.
• The choice of method depends heavily on characteristics of the
manufacturing environment.
• Rough-cut approaches can be useful in JIT operations to estimate the
impact of changes in requirements called for by revisions to the master
production schedule.
Using the Capacity Plan
• The broad choices are clear—if there’s a mismatch between
available capacity and required capacity, either the capacity or the
material plan should be changed.
• If capacity is to be changed, the choices include
overtime/undertime authorization, hiring/layoff, and
increasing/decreasing the number of machine tools or times in use.
• Capacity requirements can be changed by alternate routing, makeor-buy decisions, subcontracting, raw material substitutions,
inventory changes, or revised customer promise dates.
Using the Capacity Plan
• Many firms plan capacity solely for key machines (work
centers) and gateway operations. These key areas can be
managed in detail, while other areas fall under resource
planning and the shop-floor control system.
• In the same vein, the relationship between flexibility and
capacity must be discussed. You can’t have perfectly
balanced material and capacity plans and be able to easily
produce emergency orders!