Thereafter, factors such as available manpower and the number of shifts to be worked are applied to determine actual capacity. This process, called rough cut capacity planning, matches overall demand to production capabilities.
In an ideal world, production capacity would equal demand so as to minimize inventory costs. However, this is rarely possible due to inventory and production lead times, so in practice most organizations carry a certain level of inventory to act as a buffer between production capacity and peak sales demand. The medium-term capacity plan normally aligns with the annual budget.
This is typically supplemented by a short-term capacity plan that concentrates on meeting the immediate production requirements for the next period of time, which may be a week, month or quarter. Additionally, a long-term capacity plan focuses on providing future capacity as part of the organization's strategic planning process. When looking at capacity planning, it's useful to learn the background details.
It's likely the first attempts at capacity planning occurred during the Industrial Revolution, and its importance grew as companies adopted mass production techniques in WWI. Initially, capacity planning was, by necessity, a clerical function performed by teams of industrial engineers who matched capacity of individual machinery and production lines to demand. However, the advent of computerized production planning in the last century opened up the potential for computers to do the number crunching, reducing the manual load.
Its primary focus was on the practical steps needed to provide a production capability to meet demand. If demand was predictable and stable, then rough cut capacity planning would be all that's needed when the question of what is capacity planning arises. Unfortunately, that is not the case.
There's intense competition between companies for market share, which sees enterprises continually searching for ways to reduce costs; at the same time product life cycles are getting shorter. Added to that, unpredictable global disruption such as weather events and trade wars threaten supply chains. The effect of this is that plans alter frequently and capacity planning techniques must adapt to these changing needs.
This means capacity planning needs to be more precise as well as be able to reflect both medium- and short-term realities. The time to prepare and review capacity plans needs to change from weeks and months to days if these plans are to be usable in a fast-changing world. This helps manufacturers optimize the production process and make them prepared for the future. The next step is for manufacturers to take a deeper estimate of the existing production schedule to evaluate the final capacity.
Manufacturers usually analyse separate workloads and follow these steps:. Here is a checklist of variables to consider while structuring your Manufacturing Capacity Planning Template :. The most basic element which is the number of units available of a specific resource for a particular length in time.
The next variable is to define how much time a specific operation on a job will take to eventually move through a resource. This is made up of a combination of setup time, which is a static number and the run time which depends on the number of items on the job.
Finally, the total hours are compared to the total capacity of the resources needed for planning. This variable is a measurement of the capacity usage and measures the total usage of the resource. It is important for capacity planning, as it is a measure of the actual capacity compared to the estimated capacity. Efficiency can help track how much capacity is needed actually and the difference from the original plan. When this is multiplied across several job loads, efficiency can be a critical measure to define final performance.
It usually takes a material handler to move a specific job from one resource to the next. From a capacity planning standpoint, a work job may progress in different ways including offset hours.
These hours that can always be offset to another job, and can help save time and resources. Knowing ahead of time of how one can plan for operations that can be offset can make a massive impact on the manufacturing capacity planning. Many times manufacturers need more than two or three resources to be available at the same time to complete a job operation.
Also, the ability of the worker to run all three together may also impact the completion of the job. Sometimes it may need multiple labour resources to run each operation. This can further get complicated once all of the jobs are multiplied and therefore concurrent resources is an important aspect to consider. With a strong Capacity Planning Software, manufacturers can ensure a structured approach to capacity planning and avoid surprises along the operations value chain. Here is a great comprehensive reference guide on how to go about selecting a sound Capacity Planning Software and how it can help manufacturers.
Save my name, email, and website in this browser for the next time I comment. Capacity Planning Strategy — Everything you need to know. June 16, The skilled resource could mentor, coach or train their colleagues to address the gap. When you manage your resources with capacity planning, you get the opportunity to forecast what your training needs might be.
You can look forward to the kind of work you will be doing next year and make sure that you are supporting your team to develop in ways that allow them to deliver what is required. Finally, use enterprise-wide systems that also let you book resources direct to projects.
This is a huge help in a matrix structure where many project and operational teams are relying on the same pool of people. Flag up conflicts, highlight people or teams who are taking on too much, and spot gaps where people can be better utilized with additional tasks. Managers have to be more strategic about how they use their teams and on what.
And always with a view to what is coming in the future so the organization is prepared to deliver new projects. Think of capacity planning as a secret weapon to help you balance the challenges of finding and allocating people to work in an efficient manner.
Want practical tips on how to improve your project outcomes with better resource management? Check out these additional resources:. Every day, thousands of companies rely on Upland to get their jobs done simply and effectively.
See how brands are putting Upland to work. Professional services automation. What is Capacity Planning? Why is Capacity Planning Important? An organization can easily monitor costs during recession and growths with the help of capacity planning as it takes into account supplies and schedules of production, facilities, and personnel.
The planning process allows the organization to make a viable budget and allocate financial resources where they are needed, developing shipping schedules for the finished product and delivery schedule for supplies.
The capacity planning report shows you whether you have the scope to accept new projects. Do you need to outsource or are your resources enough is an important question that is easily answered via this method?
An organization uses the process of capacity planning to maintain the necessary production cycle so that it does not have to stay behind during high demands.
There are certain products which have seasonal demand, for example, an umbrella or a raincoat and if you are dealing in these products, you can take help of capacity planning to work in accordance of the expected demands. The capacity planning will even help in recognizing the downward slide so that you can halt the process as you wish.
Capacity planning is linked with the skills inventory of a team, and it informs which member has the necessary skills for a particular job. It becomes easy to allocate resources as per needed. When a business entity starts on the path of growth and prosperity, it needs further space. This is the time when capacity planning proves its worth and helps to develop an accurate estimate in terms of expected production from the new location.
The first step in the procedure of capacity planning includes measuring the unit capacity in terms of input or output. Input measure is apt for the service industry, for instance, restaurants, airline sector, hospitals, universities, and theatres. Output measure is apt for manufacturing sectors like brewery, iron and steel, automotive, power, and cannery.
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