Detailed Scheduling and Planning

Unit 2
UUnit
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DDetailed
etailed SScheduling
cheduling aand
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PPlanning
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Lesson 7
Detailed Capacity Planning Continued
 Detailed Scheduling and Planning

Unit 2
© 2004 e - SCP -The Centre for Excellence in Supply Chain Management
No portion of this publication may be reproduced in whole or in part.
The Leading Edge Group will not be responsible for any statements, beliefs, or opinions expressed by the
authors of this workbook. The views expressed are solely those of the authors and do not necessarily
reflect any endorsement by The Leading Edge Training Institute Limited.
This publication has been prepared by E-SCP under the guidance of Yvonne Delaney MBA, CFPIM,
CPIM. It has not been reviewed nor endorsed by APICS nor the APICS Curricula and Certification
Council for use as study material for the APICS CPIM certification examination.

The Leading Edge Training Institute Limited

Charter House
Cobh
Co Cork
Ireland

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 Detailed Scheduling and Planning

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Preface............................................................................................................4
Course Description................................................................................................................. 4
Lesson 7 – Detailed Capacity Planning Continued...........................................5
Introduction and Objectives.................................................................................................. 5
Capacity Planning Hierarchy Review.................................................................................. 5
Capacity Planning Outputs ................................................................................................... 7
Balancing Load and Capacity ............................................................................................. 10
Unit of Measure for Load.................................................................................................... 10
Calculating Load.................................................................................................................. 11
Balancing Options ................................................................................................................ 11
Detailed Capacity Planning Performance Measurement ................................................. 14
Calculating and Analysing CRP ......................................................................................... 14
MPS, Final Assembly Schedule (FAS), and Configuration to Order.............................. 20
DRP........................................................................................................................................ 20
Interactions within Detailed Scheduling and Planning .................................................... 20
Execution and Control of Operations Interactions ........................................................... 21
Advantages and Disadvantages of CRP ............................................................................. 21
Without CRP ........................................................................................................................ 22
Summary ............................................................................................................................... 23
Further Reading ................................................................................................................... 23
Review ................................................................................................................................... 24
What’s Next? ........................................................................................................................ 27
Appendix.......................................................................................................28
Answers to Review Questions .............................................................................................. 29
Glossary ........................................................................................................31

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 Detailed Scheduling and Planning

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Preface
Course Description
This document contains the seventh lesson in the Detailed Scheduling and Planning unit, which
is one of five units designed to prepare students to take the APICS CPIM examination. Before
completing the Detailed Scheduling and Planning unit, you should complete the Basics of
Supply Chain Management unit or gain equivalent knowledge. The five units that cover the
CPIM syllabus are:
Basics of Supply Chain Management
Detailed Scheduling and Planning
Master Planning of Resources
Execution and Control of Operations
Strategic Management of Resources
Please refer to the preface of Lesson 1 for further details about the support available to you
during this course of study.

This publication has been prepared by E-SCP under the guidance of Yvonne Delaney MBA,
CFPIM, CPIM. It has not been reviewed nor endorsed by APICS nor the APICS Curricula and
Certification Council for use as study material for the APICS CPIM certification examination.

© Copyright Leading Edge Training Institute Limited 4

 Detailed Scheduling and Planning

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Lesson 7 – Detailed Capacity Planning Continued
Introduction and Objectives
This lesson explains how to use detailed capacity planning to adjust capacity or load in order to
achieve required dates. The lesson covers the formulation of capacity plans, tooling
requirements, and overload or underload information. It also explains how to calculate the ability
of the production process to meet capacity targets. Finally, the lesson looks at closing the loop
with master planning of resources, distribution planning, detailed scheduling and planning,
execution and control of operations.
On completion of this lesson you will be able to:
Identify the level of detail needed to produce effective load and priority plans
Explain the purpose of safety capacity
Identify the outputs required from capacity planning to formulate capacity plans, tooling
requirements, and overload or underload conditions
Balance capacity and load by rescheduling orders, splitting orders, modifying capacity,
order quantities or priorities
Verify the effectiveness of a capacity planning process by ensuring the workload
scheduled is within capacity
Analyze ‘failed’ capacity plans through looking at past due load
Calculate the ability of production to meet work- in-process (WIP) capacity targets
Provide product quantities, timing and priorities to close the loop between capacity
planning and master planning of resources / distribution planning
Close the loop within the detailed scheduling and planning process with respect to
purchased and self- manufactured materials and part quantities, timing and priorities
Verify that manufactured parts, subassemblies and assemblies were produced in the
required quantities at the right time
Priority Planning Capacity Planning
Capacity Planning Hierarchy Review
Sales and Operations Resource Requirements
Capacity Requirements Planning (CRP) is only Plan Plan (RRP)
one of a series of capacity planning and control
activities that depends on the effectiveness of
previous resource planning and rough-cut Master Production Rough-Cut Capacity
capacity planning efforts. It should be Schedule Plan (RCCP)
considered a fine-tuning of those efforts while
providing a greater level of planning detail, built Material Capacity
upon previous planning processes. Requirements Requirements
Planning (MRP) Plan (CRP)
CRP cannot compensate for mistakes made
higher up the planning hierarchy that have led to
overloaded conditions. Purchasing and Input/Output Control
PAC
Capacity planning takes place at each level of Operation Sequencing
priority planning and validates each priority

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plan. In some cases, if resource planning and rough-cut capacity planning are accurate, it may
not be necessary to perform more detailed capacity requirements planning. However, this is only
the case under certain MRP conditions and when there is no major change in products or
manufacturing processes. Repetitive and continuous production environments do not often use
CRP for this reason. CRP is most useful in job shop and batch production environments, both of
which are often characterized by varied product mix and product volumes.
Resource planning works with general loads such as days of work and numbers of personnel or
numbers/types of finished goods. The planning horizon is linked to the business planning cycle,
covering years, quarters, and months.
Rough-cut capacity planning translates the resource planning figures into capacity figures for
key work centers, such as bottleneck work centers. It takes into account the Master Production
schedule and bill of resources (BOM) requirements for each item. At this stage, the key work
centers are balanced, which should lead to good balance in the work centers upstream and
downstream.

Relationship between Capacity and Priority

Capacity Priority

Tools Order
People Due
Equipment Dates

The scales above show how Capacity and Priority are both required to balance in order to
achieve the common aim of completing the production schedule. Capacity planning at each stage
of planning is dependent upon the input it receives from the priority planning functions. These
priority plans are in turn validated by the corresponding capacity plan.
The accuracy of capacity planning is subject to the period selected. If the period is too long,
situations can occur where it appears that there is sufficient capacity but, crucially, there is not
sufficient capacity at the time it is needed.

Capacity Complications
Gauging capacity is complicated by several factors such as:
Lot sizing and variability of order mix
Variable timing of orders due to aggregation
Bottlenecks
Complexity, which increases as the number of products increases, the load nears
maximum capacity, alternate routings are used, and demand varies
The order mix and type varies from period to period, so lot sizing in MRP may cause variation in
the timing and quantity of production orders. This complexity requires a further level of control
at the capacity requirements planning level, detailing the hours of work at each work center. This
is necessary as bottlenecks may move depending on timing and work center loads. Utilization
and efficiency may need to be determined where the standard hours used in the higher levels of

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planning do not correlate with demonstrated output rates. Another factor to be considered is the
requirement for alternative routings, and the subsequent effect on work center loads.

Planned Capacity
Although capacity may appear sufficient at CRP level, timing of individual products through
each work center may still prove difficult and result in delays. For example, if there are two
products that must be made, each requiring 4 hours of processing on machines A and B and there
are 8 hours of capacity simultaneously available on those two machines, it would appear that
there is sufficient capacity to deal with the orders.

Available Capacity Load from Product 1 Load from product 2

Machine A 8 4 4
Machine B 8 4 4
However, if both orders must be processed on machine A before they progress to machine B then
the capacity is insufficient. Machine B will be left idle for the first four hours waiting on product
from machine A. It will be able to handle the first product, but will not have available capacity
when the second product has been processed on machine A. The processing of the second
product on machine B must be carried over to the following day.
Hours 1 2 3 4 5 6 7 8
Machine A
Machine B

Product 1
Product 2
Unused
Capacity

If capacity isn’t available when it is required orders will be delayed. Finite capacity planning and
scheduling is used to seek to prevent this type of situation occurring.

Capacity Planning Outputs

Capacity Requirements Planning (CRP) Input/Output Model
The CRP model illustrates the basic inputs and
outputs of the capacity requirements planning Production Scheduled and
Order Status
process. Scheduled and planned manufacturing Planned Orders

orders, along with the status of each order, routing Routing Work Center
Information Information
data and work center data are all required to produce
the CRP outputs: a work center load report and a
revised schedule of planned manufacturing releases.
The revised schedule of planned manufacturing
Capacity
releases loops back MRP with affected orders Requirements
flagged. The recommended changes are not always Planning
incorporated into the materials requirements plan but
they will all be considered. Each time the planning Work Center
Revised Order
Load Report
cycle occurs the capacity requirements plan is Release Schedule

recalculated.

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Work Center Load Report
The work center load report illustrates the loads expected at each work center for each period
measured against the capacity of each work center. Usually this is portrayed as a bar chart of
load over time with related data for each workstation. This makes it easy to spot when the work
center is over or underloaded. In the example below, the work center is unloaded in periods 1
and 4 but overloaded in period 2
Production
40
Overload
Production 35
Underload 30

25
Capacity
20

15

10

0
1 2 3 4

When tooling, personnel or other key resources are constraints on the capacity plan, further
reports may be needed. For example, if there are four machines available to perform a particular
operation but there are only 3 trained operators then the full capacity of the machines cannot be
realised.
1. Which of the following capacity planning techniques translates planning
figures into capacity requirements for key work centers such as bottleneck
centers, with reference to MPS and BOM information :
A. Resource planning
Review Q B. Rough-Cut Capacity Planning
C. Capacity Requirements Planning
D. Planner estimation

Constraints on Resources
Capacity is constrained by the number of available operators if machines cannot run
unattended.
Additionally, if special skills are required to operate the machines, a further constraint
may be imposed relating to the level of training and experience of the available operators.
A further consideration may be the availability of tools. It may not be possible to
manufacture a product on a machine without a particular tool and if those tools are in
short supply they are a constraint to capacity.

Revised Planned Order Release Schedule

Once CRP outputs have been analyzed the MRP schedule may require revision in order to
accommodate the capacity constraints that have been uncovered in the CRP process. By bringing
forward or delaying start dates for planned orders, many capacity imbalances can be addressed
without the need to change the level of capacity.

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The loop between CRP and MRP should be closed in this manner as quickly as possible to guard
against nervousness in the overall material plan. When planned start dates are moved they can be
locked in place by changing their status to that of a firm planned order.

Analysis of CRP Work Center Outputs

Planners analyse work center reports for evidence of :
Balanced load Safety capacity
Excessive overload Past due backlogs
The planner must also be aware of the effects of various constraints on the work center as
discussed above.
Ideally load and capacity will be closely matched in all periods. Typically however, the load on
workstations falls off toward the end of the planning horizon as no further customer and planned
orders are entered into the calculation.
Where load is well balanced but constantly exceeds W 210

available capacity, as shown in the example on the

35
right, the work center may become a bottleneck in 30

the process. When all levels of capacity planning are 25

20
followed correctly, this situation should not occur. 15
10
Constant under loading of a work station, in contrast, 5
0
is wasteful and should be addressed either by 1 2 3 4 5 6 7

decreasing capacity (for example, by reducing

personnel in the work center) or increasing the load.
However, a planned amount of ‘safety’ capacity should be reserved in some cases to protect
against the effects of preventive maintenance, machine failure, excessive rework or delays. Load
should only be placed on the ‘productive capacity’ (which is equal to total capacity - safety
capacity).
Cumulative capacity and load are calculated by adding together the number of hours’ capacity
(or load) on a work center over several periods. Comparing cumulative capacity and load over a
longer period of time will give a clear indication of
W 210
the likelihood of bottlenecks occurring.
40 An unbalanced load, as shown in the example on
35
30 the left, may be resolved by balancing the load
25
20
between periods. However, cumulative capacity
15
10
and loading must be compared to ensure there is
5 no long term over or under loading. Although they
0
1 2 3 4 5 6 7 do not have to be exactly equal, cumulative load
and capacity should be quite close.

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Balancing Load and Capacity
Definition of Load
Load represents the amount of work
imposed on each work center. Where Juicer A1 Bottler

several parts impose a load on the same

Pasteurizer 1 Order 1
work center, the overall load is a composite
of several smaller loads. In the graphic to
the right, each work center is represented Juicer A2

by a triangle. Each order is represented by

a line that travels through the work center
in the same sequence as the order during Labeller Manual
production. The load imposed on a Juicer B1 Labelling
Pasteurizer 2
workstation is denoted by a circle. Where Order 2
several loads are imposed, the circle
becomes larger. The largest circle indicates Order 3

a work station which is overloaded.

Definition of Capacity
Capacity is the amount of work that can be accomplished. It is based on the number of resources
in the work center and the length of time available to work. The capacity, and therefore the
production rate, will be affected by facilities, tooling, human resources and equipment.

Relationship between Load and Capacity

The process represents a single work center. The work- in-process represents already released
open orders that are in queue or in process. Capacity represents the rate at which work is
performed on open orders. It can be adjusted by adding or removing resources. New orders
represent work just being released or processed at prior work centers. The rate of input of work
is adjustable.
When working with a gateway work center, where the first operation on a work order is
performed, the input rate may be adjusted by production control, which decides when to release
the work order. Downstream of the gateway work center it is more difficult to adjust the arrival
rate of new jobs. This is where CRP or finite capacity planning and control processes are
required.
The time that elapses from the entry of a work order into a work center queue until it is
completed and moved away from that work center is the period of time used to denote the
production lead time for that operation.

Unit of Measure for Load

Work center loads and capacities are usually measured in hours as time may often be the only
common element between work centers. Using a common unit of measure across all work
stations helps provide consistency in planning and reporting. Standard hours are the most
commonly used measurement. Standard product per time may be more useful for operating
personnel. At the MPS level however, aggregate measures such as product type and product
category may be used.

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Calculating Load
The main source of load measured by CRP is from open order status information. This
information is derived from production control and from the planned order releases produced by
the MRP system. On top of this, additional load may be imposed due to product rework, higher
than expected levels of scrap, or quality issues. Where possible these should also be accounted
for. Finally, work center efficiency and utilization factors must be incorporated into the capacity
of each work center.

Balancing Options
Load should be balanced on each workstation to ensure that capacity surpluses or shortfalls are
evened out. The cumulative load or capacity measurement is useful in this case for identifying
overall overload or underload. In general, the load on workstations downstream from a
bottleneck workstation will be affected by changes to that work station. Ways in which load can
be balanced on work centers include:
Increased capacity
Reduced load
Reduced capacity
Increased load
Redistributed load

Increased Capacity
Capacity can be increased in the following ways:
Adding extra shifts, increasing the length of shifts, or including weekend shifts. This is
usually a medium-term solution as it is not desirable to change scheduled shifts
frequently.
Scheduling overtime: an effective solution in the short term where the capacity shortfall
is likely to be temporary
Add personnel: as this generally involves hiring extra staff it is usually a longer term
solution although it may be possible to bring in temporary help for unskilled or
commonly known work.
Reassignment of indirect personnel to direct jobs. For example, involve some office staff
in shop floor operations where they have experience.
Add equipment and facilities: an expensive solution, usually only if the capacity shortfall
is likely to be long term. It may be possible to rent equipment and space in the shorter to
medium term.

Reduced Load
Load may be reduced by:
Subcontracting to outside suppliers where feasible
Reducing lot sizes, which often reduces the run-time of the load but at the expense of
extra setup time, may be a good solution in the short term depending on the relationship

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of run times to setup times. For special cases, this can be accomplished by using firm
planned orders or revising the MRP and CRP for more extended periods.
Holding orders in production control: this option reduces the load by delaying orders but
increases delivery lead times. This approach may work if there is a subsequent underload
and the due date is not in danger.
Reducing the MPS: This should be a last resort as a change in the MPS requires a
complete rerun of MRP and CRP

Reduced Capacity
Capacity may be reduced by eliminating shifts or reducing shift lengths. This solution might be
appropriate in the context of general business slowdown. Alternatively personnel may be
temporarily reassigned if there are overloads on other work centers. The temporary excess
capacity provides a useful opportunity to perform extra preventative maintenance or other tasks
that cannot be performed during normal production time.

Increased Load
Increasing load to make use of excess capacity can lead to improved quality and delivery
metrics. It can also be useful as a means of retaining skilled staff. Where excess capacity has
been identified it may be possible to increase load by manufacturing items that are normally
purchased or subcontracted. This approach would require a make-buy analysis to ensure that it
makes financial sense to use the excess capacity in this way. Such an approach would not be
suitable for short term excess capacity.
The load may also be increased by the following steps:
Release orders early: this is only advisable in temporary situations as it leads to higher
WIP and finished goods inventories. It does not necessarily increase the load unless
more orders are added as a result. This option is appropriate for fine-tuning of load
balancing rather than for correcting cumulative capacity excess.
Increase lot sizes: this can be achieved by using firm planned orders although, as it leads
to excess inventory it should only be a short term solution
Increase the MPS: As this option requires a full rerun of MRP and CRP, it is the least
desirable solution unless sales projections indicate that demand is sufficiently high. This
solution can also have unpredictable consequences for workload levels.

Redistribution of Load
Load can be redistributed, by using alternate work centers and routings where possible. Usually
alternate work centers are not the optimal choice: they may be less efficient or more expensive to
run. Alternate routings are also a possibility for redistributing load where there are some
sequences of operations that can be reordered: for example, when packing aspirin tablets, it may
be possible to label bottles before filling them.

Capacity Planning in Repetitive Pro duction

In repetitive production, capacity planning is often called line balancing. Loads are determined
by product mix and line rate. Workstation capacity may be changed by adjusting equipment and
personnel to achieve a balanced rate. The capacity at each station should be adjusted to sustain
the production rate.

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Most often, capacity in repetitive production is planned at the MPS level. This is because the
capacity is based on line rate and product mix. Both these factors can usually be determined at
MPS level. Often, it is possible to perform line balancing using mathematical techniques and
CRP, as a balancing tool, is not required.
CRP, or line balancing, in repetitive manufacturing is characterised by:
Fixed routings and variable run times. A production line is setup for a specific mix of
products and all work flows in the same way through the line. Despite this, operation
times can vary depending on the type of product, although standard times are estimated
for all products in the mix.
Insignificant queue and wait times. In repetitive manufacturing work- in-process levels
tend to be lower and queue and wait times are very low in comparison to job shop
environments.
Setup time occurring only during line changeover. Line changeover in repetitive
production is often accomplished by shutdown of the line, during which time all
workstation setup and balancing is accomplished. Production may run for days or weeks
between changeovers.
Production rates that are constrained by the slowest workstation, which often dictates the
production rate
Feedback at key points in production, rather than after every operation, is more efficient
as work generally flows quickly in repetitive production. For example, a production line
for breaded frozen chicken will involve shaping the meat, covering in breadcrumbs,
freezing, and packing. However, the key feedback point may be the freezing of product
prior to packing.

2. Which of the following measures lead to increased capacity?

A. Increase shift length
B. Perform preventive maintenance

Review Q C. Use alternate work stations

D. Release orders early

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Detailed Capacity Planning Performance Measurement
Performance Objectives
The effectiveness of capacity planning leads to a range of improvements and should therefore be
measured in a range of ways. Ultimately, capacity performance impacts customer service by
ensuring elimination of past due orders, shorter queues, and higher productivity, all of which
contribute to shorter lead times, thereby improving customer delivery. Successful CRP is
indicated by:
Eliminated past due load. Past due loads, beyond a small amount due to variability in
day-to-day execution, indicate capacity imbalances and therefore inefficiency in capacity
planning. Eliminating past due loads leads to more accurate material priorities, reduced
MRP nervousness, shorter queues and reduced lead times.
Balanced load according to capacity, particularly at constraining operations
Shorter queues, which perform the function of absorbing minor imbalances during
production.
Reduced WIP, which can be measured through inventory turns and order cycle times.
Higher productivity, due to reduced loads and better load balancing
Reduced idle time , as potential idle time is used to offset overloads in other work centers
or time periods
Reduced overtime , as imbalances are eliminated through forward planning such as
shifting start dates or realigning shifts
Increased throughput, as orders are subject to fewer exceptions caused by overloads,
leading to reduced queues and lead times

Calculating and Analysing CRP

The following paragraphs walk through the CRP logic, explaining how the various CRP inputs
are used to calculate work center load profiles, the mechanics of backward scheduling and
infinite loading, and CRP logic used to distribute load between periods.
CRP involves the following activities:
Backward scheduling
Infinite loading
Distribution of load between work centers
Load distribution within work centers for each period
Calculation of capacity at each work center

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Work center Data
The work center information below shows the work Pasteurizer B1

centers available on the production floor along with

important information on utilization, efficiency, Juicer A1 Labeller D1

queue and wait times (in hours).

This information will be used in the calculation of
capacity.
Bottler C2

Work Center Description Number of Machine Efficiency Planned Planned

Machines Utilization Queue Hrs Wait Hrs
A1 Juicer 3 80% 110% 8 4
B1 Pasteurizer 4 70% 90% 12 2
C2 Bottler 2 90% 100% 10 2
D1 Labeller 3 95% 95% 8 4
Figure 1 Work Center Data

Routing, Open Order Status, and Planned Order Data

ABC Beverages manufacture a variety of fruit juices and smoothies. The following table
indicates several planned orders for weeks 20 to 24.

Part Number Order Quantity Planned Order Planned Lead time Planned Order
Release Receipt

A 40 Week 20 4 weeks Week 24

B 20 Week 20 3 weeks Week 23

C 40 Week 20 4 weeks Week 24

Figure 2 MRP Planned Orders

The table on the next page provides information about routing and open order status for the
products manufactured in the above work centers. There are three items in production, Grapefruit
juice (GJ), Orange Juice (OJ) and pineapple juice (PJ), each of which has one order in process.
Open orders should be completed before the beginning of their due dates. Run times are
expressed as hours per piece and must be multiplied by the order quantity to determine total run
time for the order.

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Item Order Quantity Due Operation Work Standard Setup Standard Status
No. Date No. Center Time (Hrs) Runtime/piece
GJ-A 101 20 415 10 A1 2 .2 Compl
20 C2 2 .4 Compl
30 D1 4 .2 Compl
40 B1 2 .1 Compl
50 D1 2 .3
OJ-B 106 40 419 10 D1 2 .3 Compl
20 B1 4 .1
30 C2 2 .2
40 B1 2 .3
PJ-C 109 30 424 10 C2 2 .1 Compl
20 A1 4 .4 Compl
30 D1 2 .4
40 A1 2 .2
50 B1 0 .2
Figure 3 Routing and Open Order Status

Move From/To Matrix

This table indicates the times, in hours, required for movement of WIP material between work
centers. It will be useful in calculating move times. As these affect interoperation time and
therefore overall lead time, they have an impact on CRP.

A1 B1 C3 D1 Stores
A1 0 4 2 4 2
B1 2 0 2 2 2
C2 2 4 0 4 2
D1 3 2 2 0 2
Figure 4 Move to/From Matrix

Lead Time Elements

It is important that not only operation times such as setup time and runtime are considered but
also queue times, wait times and move times. Queue time is the time spent waiting before an
operation, wait time is time spent after operation and move time is the time taken to move
product between operations.

Shop Calendar
The shop calendar (Figure 5) shows all available manufacturing days over a four week period.
Each day is split into 4 parts, each representing two hours: eight hours per day in total.

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Week
20

410 411 412 413 414

Week
21

Holiday 415 416 417 418

Week
22

419 420 421 422 423

Week
23

424 425 426 427 428

Figure 5 Shop Calendar

Calculating Capacity
The rated capacity for any given work center is equal to the number of hours available multiplied
by the number of machines and by utilization and efficiency quotients. The first step is to work
out the total number of hours available by performing the following calculation:
Total hours = hours per shift x days per week x shifts per day
The rated capacity formula is as follows:
Rated Capacity = Total Hours available x Number of Machines x Utilization x Efficiency
Using the information given on the previous page, and assuming 1 8 hour shift per day and five
production days a week, the weekly capacity for each work center would be as follows:

Work Center Calculation Capacity

A1 8 x 5 x 1 x 3 x 0.8 x 1.10 105.6
B1 8 x 5 x 1 x 4 x 0.7 x 0.9 100.80
C2 8 x 5 x 1 x 2 x 0.9 x 1.0 72.00
D1

3. Using the information in Figure 1, page 15, calculate the capacity for work
center D1 over a 5-day week assuming 1 8 hour shift per day.
A. 108.3
B. 100
Review Q
C. 132
D. 100.8

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Week 21 has only four days available, so capacity is reduced accordingly. The table shows
capacity for each work centers A1, B1, and C2 in week 21.
Work Center Calculation Capacity
A1 8 x 4 x 1 x 3 x 0.8 x 1.10 84.48
B1 8 x 4 x 1 x 4 x 0.7 x 0.9 80.64
C2 8 x 4 x 1 x 2 x 0.9 x 1.0 57.60

4. Using the information in Figure 1, page 15, calculate the capacity for work
center in D1 for week 21.
A. 108.3
B. 72
Review Q
C. 108
D. 86.64
The capacity for each workstation is then represented as a level line on a bar chart. The
following table shows the capacity for workstation A1.

110
100
90
80
70
60
50
40
30
20
10
20 21 22 23
The following grids show capacity at the other work centers:
110 110 110
100 100 100
90 90 90
80 80 80
70 70 70
60 60 60
50 50 50

40 40 40

30 30 30
20 20 20
10 10 10
20 21 22 23 20 21 22 23 20 21 22 23

Work Center B1 Work Center C2 Work Center D1

Figure 6 Capacity Levels for Work Centers A1, B1, C2, and D1

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Calculating Load
The shop order 101 has only one operation remaining (number 050). The due date for the order
is day 415, so to post the operation to a work center, you backward schedule from the end (4pm)
of the previous day, day 414.
Backward Scheduling Example
After the final operation, time must be allowed to move the finished material to stores.
From the matrix on page 16, the time allowed for this is 2 hours. (2pm to 4pm, day 414)
The planned wait time for work station D1 is 4 hours. (10 am to 2pm on day 414).
Next, the run time for operation 050 is .3 hours per piece. There are 20 pieces, so the
operation will take 6 hours in total. (12 noon on day 413 to 10am day 414)
Setup for the operation is 2 hours. (10 am to 12 noon on day 413)
This confirms that setup for operation 050 on order 101 must commence by 10am on day 413 in
order to meet the required due date. The setup and run time for this operation can now be added
to the work center load in the correct time period. These can be represented visually on the grids
above by shading in the appropriate cells on each grid. Loads have been represented below in
tabular form.

Order Operation Work Center Load Week

Shop Order 109 Part C 050 WC200 6 22
040 WC100 8 22
030 WC400 14 21
Planned Order for Part A 050 WC400 14 23
040 WC200 6 23
030 WC400 12 22
020 WC300 18 21
010 WC100 10 20
Planned Order for Part B 040 WC400 8 22
030 WC300 7 22
020 WC200 6 21
010 WC400 8 20
Planned Order for Part C 050 WC200 8 23
040 WC100 8 23
2 22
030 WC400 18 22
020 WC100 20 21
010 WC300 6 20

5. What is the purpose of safety capacity?

A. To allow for production delays due to health and safety regulations
B. To protect against machine failure or excessive rework

Review Q C. To protect against fluctuations in lead times

D. To protect against fluctuations in demand or supply

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MPS, Final Assembly Schedule (FAS), and Configuration to Order
Capacity requirements planning is performed at a level below the master and final production
schedules. However, the summarized level of detail used for rough-cut capacity planning may or
may not come from the same files that provide the detailed CRP data. Therefore the master
planner should monitor key work center capacities and verify that the master planning process is
not the cause of the overload. Regular overloads may indicate that the rough-cut capacity
planning data must be revised. This also applies if there are consistent under loads although this
may also be the result of business conditions.

DRP
Detailed capacity planning in a distrib ution and warehousing environment is mainly for
manpower planning. The number of people and demonstrated throughput capabilities of
automated and mechanized systems will determine the capacity. The key factor is the location of
personnel in each wave, shift or day as this will affect capacity in each area.
A wave is a set of store orders or routing stops being picked at one time. For example, if twenty
trucks are loaded with three stores each of products there will be three waves, beginning with the
third store on the route. This ensures that all the items for each store are loaded onto the truck
together in reverse unload sequence. As the balance among receiving, storage, split case
replenishment, full case, split case, non-conveyable picking, and shipping changes over a day,
the need for personnel performing these functions changes. This is where manpower planning is
critical: no area must be allowed to get behind the others. Wave planning (cases shipped and
replenished) is a critical input in manpower planning
The distribution planning function is concerned with demonstrated capacity over time, which can
be measured in cases or lines shipped per person. Large distribution centers experience seasonal
peaks that may approach 50% or more, so forward planning is critical.

Interactions within Detailed Scheduling and Planning

CRP completes the loop with MRP to ensure the required resources are available to support
MRP priorities. The less this is an uncoupled batch process and the more it is an online real-time
integrated process, the better the material plan.
Interactions required to close the loop are:
Identification of orders for which capacity exists
Identification of orders for which there is a capacity shortage, details of the shortage and
suggested alternative dates. The se are to be considered by the materials planner and
production control planner, to ensure the best decision is made, for example changing
order due dates, splitting orders or changing capacity
Based on the feedback to MRP there may be a need to revise manufactured parts timing and
quantity to support the revised materials plan. These action messages are generated via the
material requirements planning process and related production activity control interactions.

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Execution and Control of Operations Interactions
CRP forms a key link between detailed scheduling and planning and the execution and control of
operations. Detailed scheduling and planning provides detailed information on material
requirements and priorities. CRP translates these into levels of capacity on each work center in
each period.
CRP provides valuable information to execution and control of operations, such as:
Identification of orders for which capacity exists
Identification of orders that cannot be completed with current capacity levels, the extent
of the shortage (measured in quantities of hours that can be produced) and recommended
new due dates. The production planner and MRP planner will agree on any necessary
actions here.
Balancing of capacity and loads

Advantages and Disadvantages of CRP

Advantages
CRP provides advance visibility of load/capacity imbalances by time period in each work
center so that action may be taken to ameliorate such problems before they escalate.
Finite capacity planning provides even more detail.
CRP verifies the rough-cut capacity plan by checking cumulative capacity against
cumulative load over the planning horizon. Where CRP is consistently different to
RCCP, it can be assumed that the RCCP process needs to be more comprehensive in its
consideration of capacity factors.
CRP analyzes the effects of the MRP plan using specific lot sizes and routings. It can be
used in what- if analysis to evaluate the effects of changing planning factors such as lot
sizes or routings.
CRP helps stabilise lead times by providing accurate data to the planner and smoothing
the load across work centers. This also has the effect of stabilizing queue times.
CRP is more accurate than MRP when estimating lead times. Along with forward
scheduling, CRP can use slack times to balance loads and provide a more accurate start
time.
Disadvantages
CRP is most applicable in environments where there is variability of load and order
priority must be managed. It is only effective if it can be completed quickly enough to
support material planning and execution of operations.
CRP requires a lot of computer processing and attention from the planner and must be
completed in real time for maximum effectiveness
Although detailed, CRP uses highly variable lead time and wait time estimates, which
can result in misleading figures. Therefore the outputs of CRP must be treated as
approximations of load across time periods.
CRP cannot provide precise day-to-day short term decisions. This must be provided by
execution and control.

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CRP does not clearly show the effect of master schedule revisions on achieving load
balances. IF the MP Sis revised, CRP must be run again before the effects can be
monitored.

Without CRP
Although a difficult activity in the overall planning system, where there is great variability in
product mix and order priorities, CRP is invaluable for managing work- in-process related
inventory turns and customer service objectives. If CRP is not used the consequences can
include:
Bottlenecks during overloaded periods
Lower productivity as idle time is not used to smooth out overloads
Higher WIP inventory as queues increase at overloaded work centers
Later delivery and possible shortages due to unbalanced and therefore stressed work
centers, where items may be rushed through with inadequate quality control, leading to
scrap and rework.
Longer lead times due to increased queues at bottleneck work centers
Higher labor costs as there is likely to be greater idle time, additional setups, split lots,
operation overlapping, resulting in poor efficiency and utilization of equipment and labor.
Last minute overtime and extra shifts are expensive.

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Summary
This lesson explained how to use detailed capacity planning to adjust capacity or load in order to
achieve required dates. It covered the fo rmulation of capacity plans, tooling requirements, and
overload or underload information and explained how to calculate the ability of the production
process to meet capacity targets. Finally, the lesson examined the process of closing the loop
with master planning of resources, distribution planning, detailed scheduling and planning,
execution and control of operations.
You should be able to:
Identify the level of detail needed to produce effective load and priority plans
Explain the purpose of safety capacity
Identify the outputs required from capacity planning to formulate capacity plans, tooling
requirements, and overload or underload conditions
Balance capacity and load by rescheduling orders, splitting orders, modifying capacity,
order quantities or priorities
Verify the effectiveness of a capacity planning process by ensuring the workload
scheduled is within capacity
Analyze ‘failed’ capacity plans through looking at past due load
Calculate the ability of production to meet work- in-process (WIP) capacity targets
Provide product quantities, timing and priorities to close the loop between capacity
planning and master planning of resources / distribution planning
Close the loop within the detailed scheduling and planning process with respect to
purchased and self- manufactured materials and part quantities, timing and priorities
Verify that manufactured parts, subassemblies and assemblies were produced in the
required quantities at the right time

Further Reading
Introduction to Materials Management,
JR Tony Arnold, CFPIM, CIRM and Stephen Chapman CFPIM
5th edition, 2004, Prentice Hall

APICS Dictionary
10th edition, 2002

Manufacturing Planning and Control Systems,

Vollmann, T.E.; W.L. Berry; and D.C. Whybark
5th edition, 2004, McGraw-Hill

Production & Inventory Management,

Fogarty, Donald W. CFPIM; Blackstone, John H. JR. CFPIM; and
Hoffmann, Thomas R. CFPIM
2nd edition, 1991, South-Western Publishing Co., Cincinnati, Ohio

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Review
The following questions are designed to test your recall of the material covered in
lesson 2. The answers are available in the appendix of this workbook.

6. Using the information below, calculate when an order of 100 pieces would be completed,
assuming production has an efficiency rate of 100%, is scheduled for eight hours each day
and begins the morning of day 1

Queue (Days) Cycle Time Per Piece (Hours) Setup (Hours)

Sawing 1 .1 2

Panels 2 .1 2

Padding 2 .5 5

Drilling 2 .3 2

Grinding 2 .4 1

A. Day 20
B. Day 23
C. Day 28
D. Day 30

7. An employee has been in attendance for 10 hours, eight of which have been spent
directly on production. He has completed 10 pieces. Given that the standard hours per
piece is 1, what are the efficiency and utilization percentages for the employee?
A. Efficiency = 80%, utilization = 125%
B. Efficiency = 100%, Utilization = 133%
C. Efficiency = 125%, utilization = 80%
D. Efficiency = 133%, Utilization = 100%

8. ABC Beverages have won a contract to produce a new product range for a large café
chain. To cope with the increased capacity requirements they have added a second shift to
the work schedule with capacity and efficiency equal to that of the first shift. Given that the
input remains constant, which of the following statements are true?
I. Planned queue times should be adjusted downward
II. Lead time through the shop is reduced
III. Planned setup and run times should be reduced

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A. I and II only
B. I and III only
C. II and III only
D. I, II, and III

Work Center 1170

Week 153 154 155 156 157

Actual 240 120 200 150 190

Input

Actual 190 200 200 200 210

Output

The table above is required to answer questions 9, 10 and 11

9. Which of the following problems are illustrated in the input/output control chart shown
above?
I. Lead time inflation
II. Erratic input
III. Inability to plan and control output rates

A. I only
B. II only
C. II and III only
D. I, II, and III

10. What is the change in the work center backlog, in standard hours from week 153
through 157?
A. Minus 50
B. Minus 100
C. Plus 50
D. Plus 100
E. Plus 190

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11. Determine a level of planned uniform input that will yield a cumulative deviation of
input equa l to zero.
A. 180
B. 190
C. 200
D. 210

12. Which of the following reports of shop floor activity does NOT represent a valid
transaction?
A. End of shift report
B. Team activity report
C. Change to a planned order
D. Request for tool assistance

13. Which of the following factors has the greatest affect on the actual queue time of a job
at a work center?
A. The size of the queue
B. The lot size of the job
C. The priority of the job
D. The utilization of the work center

Time remaining (excluding behind schedule work)

Work remaining
14. Which of the following statements are true of the above simplified priority rule?
I. The smaller the fraction, the higher the priority
II. Work remaining can stay constant from day to day
III. Time remaining can stay constant from day to day

A. 1I and II only
B. I and III only
C. II and III only
D. I, II, and III

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What’s Next?
Lesson 7 looked at the use of detailed capacity planning to adjust capacity or load in order to
achieve required dates, interfacing with master planning of resources, distribution planning,
detailed scheduling and planning, and execution and control of operations. At this point you have
completed 7 of the 9 lessons in Unit 2.
You should review your work before progressing to the next lesson which is:
Detailed Scheduling and Planning – Lesson 8 Supplier Relations hips

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Appendix

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Answers to Review Questions

1. B
RCCP translates the resource planning figures into capacity figures for key work centers, such as
bottleneck work centers. It takes into account the Master Production schedule and bill of
resources (BOM) requirements for each item. At this stage, only key work centers are balanced.
Resource Planning is a less detailed capacity plan. CRP is more detailed then RCCP. It looks at
scheduled and planned orders, order status, routing information and work center information in
order to balance capacity throughout the facility.

2. A
Only the first option increases capacity.
3. A
The rated capacity for any given work center is equal to the number of hours available multiplied
by the number of machines and by utilization and efficiency quotients. The first step is to work
out the total number of hours available by performing the following calculation:
Total hours = hours per shift x days per week x shifts per day
The rated capacity formula is as follows:
Rated Capacity = Total Hours available x Number of Machines x Utilization x Efficiency

4. D
See feedback for question 3.
5. B
Safety capacity is a planned amount of capacity that is reserved to protect against machine
failure, poor quality, rework, delays, and other unplanned activities. Safety capacity plus
productive capacity are equal to the total capacity for a facility. Safety stock protects against
variations in supply or demand. Safety lead time protects against unreliable lead times.
6. C – 28 days
The total time in queues is 72 hours. The total cycle time for 100 pieces is equal to 140 hours and
the total setup time requires is 12 hours.
7. C
The efficiency of the employee is determined by dividing the standard hours required to produce
the output by the actual hours worked by the employee. This is equal to 10 divided by 8 or
125%. The utilization percentage is equal to the number of hours worked divided by the total
hours available. The employee was available for work for 10 hours but was involved in direct
production for only 8 of those hours, resulting in a utilization percentage of 80%.

8. A
by adding a second shift, planned queue times should be adjusted downward and the lead time
through the shop is reduced. However, planned setup and run times will not change as a result of

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adding another shift. It will still take the same amount of time to setup machinery and to run an
operation.

9. B
Actual output is steady, averaging 200 units per week but the load imposed on the work center
varies widely from 120 to 240 units per week. Overall, the load imposed is less than the
demonstrated capacity of the work station so lead times are unlikely to be inflated.

10. B
The backlog is the amount of work still to complete beyond the targeted completion time. Due to
excess loads in week 53, this backlog is 50 units. However, by week 157 the input load has
decreased leading to an overall backlog of minus 100. This can also be though of as excess
capacity of 100 standard hours.

11. A
To ensure a uniform input over the 5 weeks in the plan, the total input can be determined and
divided by the number of weeks available, to give 180 standard hours per week.

12. B
A change to a planned order should occur at a higher level of planning, such as MRP planning.

13. C
The queue time is usually by far the greatest element of lead time. The priority of a job is most
affected by its priority. If it has a high priority, it will be processed almost as soon as it arrives at
a work center while lesser priority orders wait in the queue. The size of the queue at a work
center will have no effect on the queue time of a specific order if that order is the highest priority
order.

14. C
Both work remaining and time remaining may stay constant from day to day if sufficient slack
time has been built in.

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Glossary

Term Definition
Backward This is a technique for calculating the start dates and due dates of an
scheduling operation. The due date for the order is the starting point. The planner works
back in time to determine the necessary start and due dates for each
operation in the order

bill of material A listing of all the subassemblies, intermediates, parts, and raw materials
(BOM) needed for a parent assembly, showing the required quantity of each. It is
used with the MPS to determine items that must be ordered. Also called
formula or recipe.

Bottleneck A resource that cannot cope with the level of demand placed upon it. Such
resources can hold up entire production processes, with queues building up
before them. Effective manageme nt involves identifying and ameliorating
issues that cause bottlenecks

Capacity The capability of a system to perform its expected function. This could be
the capability of an operator, machine, work center, plant or organization to
produce output per time period. Available and required capacity must be
measured to assist in planning.

Capacity This is the process of determining the amount of capacity needed to produce
planning the required quantities of product in the future. Resource planning, rough-cut
capacity planning, and detailed capacity planning are performed at different
levels of the planning structure.

Capacity The planning activity that determines the capacity requirements for each
Requirements work center with regard to the material plan. Open shop orders and planned
Planning (CRP) orders from MRP are the main inputs to CRP along with part routings and
time standards. These inputs are converted into hours of work by work
center for each time period in MRP. CRP may highlight insufficient capacity
during some periods.

Capacity- A scheduling principle that increases work- in-process to ensure flexibility in

oriented utilization of capacity. When used appropriately it leads to reduced total cost
materials when taking into account work in process, capacity, and finished goods
management inventory
(Corma)

Central point A scheduling method that starts at a critical point in production and uses
scheduling both backward and forward scheduling to work backward and forward from
that critical point

Constraint A factor that prevents the achievement of a targeted level of performance,

such as machine center capacity, lack of raw material, inefficient policy etc.

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Constraint- This finite-loading technique is used to plan orders around bottleneck work
oriented finite centers, aiming to maximize total throughput. Small orders are aggregated
loading into one larger lot size and loaded at the constraining work center.
Operations are then backward and forward scheduled as required

Continuous line A production system involving a plant layout that closely follows the
production production process for a product. Material flow is continuous during
production, routings are fixed and setups are rarely changed.

Customer service The ability of a company to meet custome r needs. The term is also used to
refer to the measurement of product delivery to a customer within required
time constraints

Delphi method A qualitative forecasting technique where the opinions of experts are
combined in a series of iterations. The results of each iteration are used to
develop the next, so that convergence of the experts' opinion is achieved.

Demonstrated A level of capacity that is calculated from historical performance data and
capacity therefore proven to be achievable.

dependent Demand that is directly related to or derived from the bill of material
demand structure for another item or end product. Dependent demand should be
calculated rather than forecast. Some items may have both dependent and
independent demand at the same time.

Distributed A time-phased order point approach that uses MRP logic to determine
requirements warehouse requirements. This approach is useful in multilevel distribution
planning (DRP) networks.

Earliest due A priority rule used in sequencing of queued orders depending on their
date(EDD) operation or order due dates.

Efficiency A measure of actual output compared to standard output.

Exceptions Items that deviate from plan

exponential A weighted moving average forecasting technique in which past records are
smoothing geometrically discounted according to their age with the heaviest weight
assigned to most recent data. A smoothing constant is applied to avoid using
excessive historical data.

extrinsic forecast A forecast based on a correlated leading indicator, for example, estimating
furniture sales based on house builds. Extrinsic forecasts are more useful for
large aggregations like total company sales.

Finite loading A method of loading work centers that ensures the available capacity of the
work station is not exceeded.

Flow production Uninterrupted flow of material through the production process. May also be
called mass production or continuous manufacturing. The plant layout

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usually facilitates the flow of the product through the plant.

Forwa rd A scheduling technique that involves progressing from a known start date
scheduling and determining the completion date for an order.

independent Demand for an item that is unrelated to the demand for other items.
demand Examples include finished goods and service part requirements.

Infinite loading Calculation of capacity needed at work centers regardless of the maximum
capacity of the work centers in question

Interoperation The elapsed time between completion of one operation and the beginning of
time the next

intrinsic forecast A forecast based on internal factors, such as an average of past sales.

Job shop A manufacturing environment that produces items to customer specification.

Usually a wide range of product designs are possible and are perfo rmed at
fixed locations using general equipment

Just-in-Time A manufacturing philosophy that seeks to eliminate waste in all areas of

(JIT) production and to continuously improve processes.

KANBAN A method of JIT production that uses bins or standard lo t sizes with some
form of replenishment signal, such as an empty bin, or by holding up a card.
Kanban is a good example of a ‘pull’ system

Latest start date The last day upon which a given activity may be started without jeopardizing
the project completion date.

lead time Lead time is the span of time required to perform a process.

Load The amount of work planned for a work center or other facility during a
specific period of time.

Load leveling The process of spreading out orders so that bottlenecks are ironed out where
possible

Lot sizing The process of determining a lot size. There are several techniques for lot
sizing

Manufacturing The type of manufacturing strategy currently implemented in a plant. For

environment example, a plant may be laid out according to functional area and covering
several small projects. It is often used to refer to whether a company is
make-to-stock, make-to-order or assemble-to-order

Master The anticipated build schedule for those items assigned to the master
production scheduler. The master scheduler maintains this schedule and it drives
schedule (MPS) material requirements planning. It specifies configurations, quantities and

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dates for production.

Move time The time spent moving items from one operation to the next.

moving average An arithmetic average of a certain number of the most recent records. As
each new record is added, the oldest record is dropped. The number of
periods used for the average reflects responsiveness versus stability.

Open order A released manufacturing order

Operation time The amount of setup and run time for a specific operation on a specific work
center.

Overload The result of total hours of work at a work center exceeding the capacity of
the work center

Planned order A row on an MRP grid that offsets planned order receipts by the lead time
release for the item, ensuring that the order is released in sufficient time to ensure its
arrival when required

Planning horizon The amount of time a plan extends into the future. For a master schedule,
this is normally the cumulative lead time combined with lot sizing
allowances for low level components and further allowances for capacity
changes in primary work centers or important suppliers.

Program A network analysis technique in which each activity is assigned a

Evaluation and pessimistic, most likely and optimistic estimate of duration. The critical path
Review method is applied using a weighted average of these times in order to
Technique estimate the final project duration.
(PERT)

Queue time The amount of time a job waits at a work center before the work commences

random A fluctuation in data that is caused by random or uncertain events.

variation

Rated capacity The expected output of a resource given the efficiency and utilization
parameters

Repetitive Repeated production of the same products or product families. This approach
production results in minimal time on setups, reduced inventory and manufacturing lead
times and the elimination of work orders. Production scheduling and control
are based on production rates.

Resource Capacity planning at business levels, resource planning is the process of

planning establishing, measuring and adjusting long-range capacity. It is based on the
production plan but may be driven by higher level strategic plans beyond the
time frame of the production plan. Resource planning concerns itself with
planning for resources that take a long time to acquire, for example, the
necessity for a new production facility or a new strategic partner.

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Rough-cut The process of converting the master production schedule into requirements
capacity for potential bottleneck resources such as labor, machines, warehouse space,
planning (RCCP) and supplier capabilities. These requirements are compared against available
capacity. This helps ensure a feasible master production schedule.

Routing Information on the method of manufacture for an item, indicating the

operations to be performed, their sequence and the work centers at which
they are to be completed/

Run time The amount of time needed to process a specific operation

Scheduled An open order with an assigned due date.

receipts

seasonality A repetitive pattern of demand from year to year or month to month (or other
time period) showing much higher demand in some periods than in others.

Setup time The amount of time between the production of the last item of one run and
the first usable item in another production run for a different product

Theoretical The maximum output capability for a workstation without considering

capacity maintenance or other down times.

Theory of A management philosophy that incorporates logistics, performance

constraints measurement, and logical thinking

Throughput The total amount of production that flows through a production facility. In
the theory of constraints, throughput is the rate at which the company
generates money through sales. Throughput and output are not the same.

trend General upward or downward movement of a variable over time, for

example in product demand.

Utilization A measure of how intensively a resource is used, calculated by comparing

available time to actual time

Wait time The length of time a processed item waits at the end of an operation before
being moved to the next operation

Work center A specific area of production comprising people and machines/or machines.
A work center is considered a single unit for capacity requirements planning
and detailed scheduling.

Work in Process Work in process is material that has been released for initial processing and
(WIP) is about to or has already undergone manufacturing processes.

work order An order to the machine shop for tool manufacture or equipment
maintenance or an authorization to start work on an activity or product.

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