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Definitions
Planned Order Releases: Information from the Material Requirements Planning which tells when you should start the order so it can be completed on time. Routing Files: Information that details the requirements of equipment and labor to complete the order as needed in the required time frame. Open Orders Files: Information regarding the orders that are currently started and need to be completed.
Helping planners make the right decisions on scheduling before problems develop. Verifies that you have sufficient capacity available to meet the capacity requirements for MRP plans.
What is Capacity?
The work that the system is capable of doing in a period of time. It must be determined at different levels: plant department work center. It is normally stated in standard hours of work.
What is Capacity?
Capacity = (no. of machines or workers) x (no. shifts) x (utilization) x (efficiency)
(Russell & Taylor) Best operating level is the percent of capacity utilization that minimizes average unit cost. Usually 80% with a 20% cushion
Scheduled Available
Standard Hours Earned
Capacity Planning
How much to increase capacity demands depend upon a number of factors, including: Anticipated demand volume & certainty Strategic objectives Costs of expansion and operation
Adjustments to Capacity
Increase capacity by: Adding extra shifts Scheduling overtime or weekends Adding equipment and/or personnel Reduce load by: Reducing lot sizes Holding work in production control Subcontracting work to outside suppliers
Adjustments to Capacity
Reduce capacity by: Temporarily reassigning staff Reducing the length of shifts Eliminating shifts Increase load by: Releasing orders early Increasing lot sizes Making items normally outsourced
Capacity Planning
Best operating is seldom at 100% and varies with industry. In industries where demand is highly variable, large capacity cushions are common. Companies with less flexibility and higher costs maintain small cushions under 10%. Overbooking is common with some industries such as airlines.
Economies of Scale
Economies of scale is the best operating level. Economies of scale is the point where it costs less per unit to produce high levels of output. Occurs when fixed costs are spread over large number of units
Diseconomies of Scale
Occurs at a certain level of output. When fixed costs increase with number of units being produced, examples: Higher rework More equipment breakdown
What is a load?
Load refers to the standard hours of work assigned to a facility.
Load % Example
A local road construction company needs to develop engineering specifications prior to doing any pre-surfacing preparation. The company has been awarded the bid on four projects. They have one engineer. It takes 4 hours per mile to develop the engineering specifications. The first project is 30 miles long and must be started by March 15th to complete on schedule. The second project is 20 miles long and must be started by April 1st. The third project is 5 miles long and must be started by May 1st. The fourth project is 15 miles long and must be started by May 23rd. It is now February 15th. The engineer works a 40 hours week and is very experienced so he operates at 100% efficiency. Assume one project can not be started until the previous project is completed. Does the engineer have enough time to accomplish the specifications on time?
Summary
To operate at maximum capacity, companies must use the resources available. If resources under underutilized, the profit margin will not be maximum. Using capacity requirements planning helps a company identify potential problems, such as eliminating the possibility of overworking the current staff, overloading machines, losing customers because the work could not be completed as scheduled, paying penalties for late delivery.
Resources
Russell, Roberta A. and Bernard W. Taylor III Operations Management. 4th ed. New Jersey: Prentice Hall 2003 Capacity Requirement Planning MGT 651 IV, Dr. Ozatalay www.mitrol.com/html/capacityplanning.html www.coalitioncomputing.com/cccweb/products/software/ gp/eenterprise/modules/GP-CapacityRequirePlan.doc http://sandbox.aiss.uiuc.edu/oracle/nca/crp/crp.htm