Capacity Planning

Capacity is the maximum possible output or use, from a system under normal design, or planned conditions, in a given time period. Measurement of capacity 1. Input rate capacity - Service Industry 2. Output rate capacity - products 3. Capacity Utilization = Actual capacity used Design Capacity 4. Capacity Cushions dd during peak season

Need for Facility Capacity Planning

To find the optimal capacity of the facility so that the total of costs of under-capacity and over-capacity is the minimum

To satisfy the future demand of products without any shortages

Need for Facility Capacity Planning

To keep the initial investment in the facility as low as possible to achieve lesser break-even volume

Investments in facility capacity are long-term and cannot be reversed easily over the period of time

Types of Capacity
Design capacity represents the maximum rate of output that can be achieved under ideal conditions. Effective capacity is the maximum rate of output which can be practically achieved under the constraints of time consumed in set-ups, oiling & cleaning, defective items, etc. Effective capacity is always lesser than the design capacity.

 Actual capacity is the maximum output rate which is actually achieved under the constraints of machine breakdowns, labor inefficiencies & absenteeism, defective products, late deliveries of materials by the supplier, and so on. Actual capacity can be equal to or less than the effective capacity.

 System Capacity is adversely affected by short range effects, which include, actual market demand, managerial effectiveness strategy and control planning & scheduling activities, labour inefficiencies, increase in scrap, machine breakdown. Potential Capacity which can be made available within the decision horizon of the top management.

 Immediate capacity which can be made available within the current budgeted period. Normal Capacity or Rated Capacity is the estimated quantity of output or production that should be usually achieved as per the estimation done by the industrial Engineering Department. Fixed Capacity Adjustable Capacity

Ways of Increasing Effective Capacity

Proper process quality control so that there are less defective items requiring rework Proper facility location, layout, and internal working conditions Good training, high motivation, less absenteeism & high turnover on part of workers

By making products & services as uniform Good coordination with suppliers as possible in design for timely & defect-free supplies so that number of and proper scheduling of products set-ups required are on machines less (batch sizes will By properly following the be large) environmental and pollution norms, which results in lesser inspections by government enforcement agencies and, thus, lesser disruption of production activities

Ways of Increasing Effective Capacity

Trends in Demand Forecasts

Demand forecast

Growth trend

Demand forecast

Decline trend

Time

Time

Demand forecast Cyclical trend

Demand forecast

Stable trend

Time

Time Products A & B

Demand forecast

Product B

Product A Time

Optimal Capacity Determination

Average cost per unit of the product

Optimal output rate

Output rate

Part a
Average cost per unit of the product
Small-sized Plant Mediumsized Plant Large-sized Plant

Output rate

Part b

Classification of Capacity Planning

Long term capacity planning Short term capacity planning Finite capacity planning Infinite capacity planning

Capacity Requirement Planning (CRP)

Identifying & finalizing the input requirement of Organizational resources to achieve a specific objective

CRP inputs
Production objectives Aggregate Planning Planned orders & orders in the pipeline Facility availability details Spare capacity information Loading patterns & information Routing details Contingency plans for alternate routings Evaluation criteria for performance measurement

CRP Outputs
Performance of the CRP using the spelt out criteria. Capacity utilization reports Load levels Details on re scheduling or re routing which requires fine tuning of the capacity or balance the production lines. Work completion reports

Example
A product is manufactured in a shop using a five-stage process. The first step in the process is to cut the sheet metal to required shapes and sizes using a shearing process. After the shearing process, the components are subjected to pressing operations to alter the shape of the flat sheet as per the design. In the third stage of the process welding is done to join the components. The next step in the process is a painting operation. After painting, the components are packed and kept ready for dispatch. The time take for each of these operations are 20, 30, 15, 12 and 6 minutes respectively. Presently, each stage has only one machine for operation.

 Map the process and analyse the capacity with respect to the following scenarios: If the shop works for an 8-hour shift with an effective available time of 450 minutes, what is the production capacity of the shop? Where is the bottleneck in the system? If we want to add one machine, where should we make the investment? Identify the additional capacity required for a daily production target of 25 units. Compute the utilisation of the machines as per the revised capacity calculations.

Solution to example
Shearing Pressing (20 minutes) (30 minutes) The production capacities are:
Shearing: 450/20 = 22.50 Welding: 450/15 = 30.00 Packing: 450/6 = 75.00

Welding (15 minutes)

Painting (12 minutes)

Packing (6 minutes)

Pressing: 450/30 = 15.00 Painting: 450/12 = 37.50

The smallest number in the above calculation limits the production capacity for the shop. Therefore, the current production capacity is 15 units per day.

Pressing (30 minutes) Shearing (20 minutes) Pressing (30 minutes) Welding (15 minutes) Painting (12 minutes) Packing (6 minutes)

Bottleneck

Solution to example
The production target is 25 per day now. Since a day has 450 minutes, the maximum time that the process can take in each stage is 18 minutes.
Packing, Painting and Welding sections have timings less than 18. Therefore, they do not need any more investment in capacity. By adding one more machine at the pressing stage, the effective time will be less than 18 minutes. Similarly, by adding one more machine at the shearing stage, the effective time will be 10 minutes.

Utilisation of Shearing =

Daily production * process time 25 * 20 55.56% number of machines * available time 2 * 450 Utilisation of Pressing =
Utilisation of Welding =
Utilisation of Painting = 66.67%
25 * 30 83.33% 2 * 450

25 * 15 83.33% 1 * 450 Utilisation of Packing = 33.33%

Bottleneck & Capacity Analysis The Wandering Bottleneck

Shearing (20 minutes) Pressing (30 minutes) Welding (15 minutes) Painting (12 minutes) Packing (6 minutes)

Pressing (30 minutes) Shearing (20 minutes) Pressing (30 minutes) Welding (15 minutes) Painting (12 minutes) Packing (6 minutes)