Capacity Planning

Module 6

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

Capacity Requirements
Planning
Capacity Requirements Planning is a
computerized technique for projecting
resource requirements for critical work
stations.
Inputs:
Planned order releases
Routing file
Open orders file
Outputs:
Load Profile for each work center

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.

Utilization and Efficiency

Utilization is the percent of available time
spent working.
Efficiency is how well a machine or worker
performs compared to a standard output
level.

Russell and Taylor

Utilization and Efficiency

Actual Hours Charged
Utilization =
Hours

Scheduled Available
Standard Hours Earned

Efficiency =
Actual Hours Charged

What is CRP Used For?

To determine the capability of a system or
resource to produce a quantity of output in
a particular time period. For example:
Should the hospital hire more registered
nurses to care for the projected patient
load?
Should the hospital build more rooms for
patients?
What is the projected finish time for the
current projects?

 MRP - Material Requirement

Planning
Planning and scheduling technique
used for batch production of
assembled items.

MRP II - Manufacturing
Resource Planning

Independent vs.
Dependent Demand
Independent demand: Demand of
finished goods.
Dependent demand: Demand for
items that are subassemblies or
component parts to be used in the
production of finished goods.
The amount of dependent demand is
the function of the amount of
independent demand.

Material Requirement
Planning (MRP)
Material requirements planning
(MRP): Computer-based
information system for ordering
and scheduling of dependent
demand inventories.
What to order
When to order
How much to order

MRP Inputs

MRP Processing

MRP Outputs

Changes
Order releases
Master
schedule

Planned-order
schedules
Primary
reports

Bill of
materials

Inventory
records

MRP computer
programs

Exception reports

Planning reports

Secondary
reports

Performancecontrol
reports

Inventory
transaction

MPR Inputs: Master

Schedule
Master Production Schedule
which end items are to be
produced,
when they are needed, and
in what quantities.

Sources of quantities: customer

orders, forecasts, orders from
warehouses, and external
demand.

MPR Inputs: Master

Schedule

Assembly
Subassembly

Fabrication
Procurement

10

MRP Inputs: Bill-ofMaterials

Bill of materials:

A listing of all of
the raw materials, parts,
subassemblies, and assemblies
needed to produce one unit of a
product.

Product structure tree:

Visual
depiction of the requirements in a
bill of materials, where all
components are listed by levels.

MRP Inputs: Bill-of-Materials

MRP Inputs: Bill-of-Materials, Example

Example: Use the information

presented in the following
figure to do the following:
Component
Determine the quantities of B,
B
C, D, E, and F needed to
assemble one X.
C
Determine the quantities of
D
these components that will be
required to assemble 10 Xs,
E
taking into account the
quantities on hand (i.e., in
inventory) of various
components.

On Hand
4
10
8
60

MRP Inputs: Inventory Records

Inventory records refer to standard
information on the status of each
item by time period.
Gross requirements, scheduled receipts,
and expected amount on hand.
Supplier, lead time, and lot size.
Changes due to stock receipts and
withdrawals, canceled orders, and
similar events.

Like the bill of materials, inventory

records must be accurate.

MRP Processing: Pegging

Pegging is the process of

identifying the parent items that
have generated a given set of
material requirements for an
item.

MRP Primary Outputs

Planned orders - schedule
indicating the amount and timing of
future orders.
Order releases - Authorization for
the execution of planned orders.
Changes to planned orders revisions of due dates or order
quantities, or cancellations of
orders.