Modern Production Capacity Planning
Capacity planning involves the careful analyses of the resources held by a company to determine its maximum and optimal output. It also involves understanding that maximum output is not necessarily optimal, especially not when constant. Optimal output uses resources strategically and to the best advantage without risking burnout. Neither machines nor people are able to maintain maximum output for very long before quality becomes an issue; this is why capacity planning is so vital for any manufacturing company.
Other People Are Reading
-
Relevant Costs
-
Capacity planning has several distinct features that differentiate it from other types of production planning. First, capacity planning considers only relevant costs. This means that overhead is not an issue capacity planning is concerned with; as long as the company exists and is in production, the overhead costs are a constant cost and variation is minimal. Instead, capacity planning is considered only with the costs that are relevant to capacity: for example, set-up costs, storage costs, ordering costs, shortage costs and overtime.
Other Considerations
-
Capacity planning also takes into account available production resources. Production resources are, by their very nature, limited; examples include available machines, available labor and the maximum amount that can be stored well. Lastly, capacity planning considers specific time horizons, as in, "What is the optimal amount that can be produced in 'x' amount of time?"
-
Rolling Horizon
-
Capacity planning, and production planning in general, is typically calculated on a "rolling horizon" basis, meaning that a few decisions are implemented, and then the plan is revised. This type of "rolling" planning takes place continuously, which allows production to be flexible and adaptive. For example, capacity may be planned for the next year, but is re-evaluated bi-monthly and production is adjusted accordingly.
Aggregate Planning
-
Production planning is generally completed at the aggregate level. This means that similar products and/or actions are grouped together to reduce complexity; in other words, the basic resources, for example, machines or labor, are separated into general categories (that is, machine resources, labor resources) rather than considered individually (for example, machine A, day-shift).
Product Structure
-
While production planning is generally accomplished at an aggregate level, frequently the product structure, meaning the steps required to create the product, must also be considered. This is a primary consideration in efficient production planning and has received a great deal of attention in recent times; many production environments find significant cost savings in considering the actual product structure because the lead times are reduced. Reducing lead times means preventing bottlenecks, ensuring that machines are rarely, if ever, left idle and that works-in-progress are not sitting/waiting for the next step in production. Although planning only the end of production is sufficient, product structure must also be considered if capacity planning is to be its most effective.
-
