Capacity decisions are crucial, as they influence product lead time, customer responsiveness, operating costs, and the organization’s competitiveness. In the following article, you will know the types of capacity planning. It would perhaps not be an exaggeration to state that such decisions are of survival value for the organization because of the following:
1) A higher capacity level may result in low return on assets, low morale, detrimental lay-offs, and, in extreme cases, facility closure, which may prove very expensive for the organization.
2) A lower capacity level may result in a reduction in sales, high operating costs, and, in extreme cases, shaking customer confidence and corrosion of loyalty.
Important Types of Capacity Planning
Broadly, two types of capacity planning are in vogue, which has been covered in the following points:
1. Rough-Cut Capacity Planning (RCCP)
This type of capacity planning finds a crucial place in the overall capacity planning of an organization, as it is a stepping stone towards the ensuing level of detail. Master Production Schedule (MPS) is used as the basic input by RCCP. RCCP is a medium-term planning technique used to ensure the adequacy (or otherwise) of existing capacity at critical resources (like bottleneck operations, labor, scarce materials, materials with long lead-time, etc.) to achieve the level according to the projections made under the MPS. It is one of the types of capacity planning. The RCCP has the following motives:
1) Checking the feasibility of MPS
2) Indicating the existence of bottlenecks, if any
3) Ensuring the use of work centers
4) Advising the vendors about capacity needs
The Rough Cut Capacity Planning (RCCP) technique is applied to validate the master schedule. This step, which is a part of the overall planning, is the most critical, especially because the Material Requirement Plan (MRP) driven by the MPS is capacity insensitive. The success or effectiveness of MRP depends upon a pragmatic Master Production Schedule (MPS).
Prerequisites of RCCP
The following are the prerequisites for the application of the RCCP:
1) Master schedule items or groups of similar Master Production Scheduled (MPS) items should be the base for the bill of resources.
2) In case of “lot-sizing being lot for loc,” the resource-profiling should necessarily be ‘weekly (same as MPS)
3) If the “sizes of production happen to be large and are unrelated to the weekly requirements in a direct manner, it is necessary to
i) express the resource profile in weeks or months.
ii) group the MPS requirements in a similar time bucket. Further, under such circumstances, it remains at a higher level to make allowances for weekly variations in demand.
2. Capacity Requirement Planning (CRP)
The concept of CRP may be explained as ascertaining (in detail) the levels of various resources (men and machines) required to accomplish the targeted production. It is closely associated with the Material Requirement Plan (MRP) level. It is the types of capacity planning. The process involves the conversion of planned orders emanating from the MRP and open shop orders (scheduled receipts) into demand for time in respect of every work center and every time zone.
It considers the lead times for operations, and the operations at work centers are offset accordingly. As far as open shop orders are concerned, the work already completed is considered. Capacity Requirement Planning is one of the most elaborate, holistic, and precise capacity planning techniques. The precision assumes great significance in the immediate time zones. Some data are sought, and much calculation is involved to ensure detailed information.
CRP is the last stage of the capacity analysis process. As stated earlier, it involves planning and controlling the procurement of various resources required to manufacture the desired goods/services as indicated by the MRP system. A realistic assessment of available capacity and its comparison with the requisite projected capacity is also undertaken. The entire process is carried out at each work center, covering the same horizon and time as covered under the MRP. The required capacity/workload is determined based on
i) open (released) shop orders,
ii) planned shop orders. Computation of the detailed schedules for all the orders is undertaken based on routing files, lot sizes, and work center files.
Such schedules regarding released and planned shop orders act as inputs for placing every work center’s load at the appropriate time. CRP is used to validate material requirement planning (MRP) output, which is similar to the use of the RCCP technique to validate the master production schedule.