CAPACITY PLANNING

1. MASTER PRODUCTION SCHEDULE (MPS)

MPS is a series of time phased quantities for each item that a company produces, indicating how many

are to be produced and when. MPS is initially developed from firm customer orders or from forecasts

of demand before MRP system begins to operate. The MRP system whatever the master schedule

demands and translates MPS end items into specific component requirements. Many systems make

a simulated trial run to determine whether the proposed master can be satisfied.

2. INVENTORY STATUS FILE

Every inventory item being planned must have an inventory status file which gives complete and

up to date information on the on-hand quantities, gross requirements, scheduled receipts and

planned order releases for an item. It also includes planning information such as lot sizes, lead

times, safety stock levels and scrap allowances.

3. BILL OF MATERIALS (BOM)

BOM identifies how each end product is manufactured, specifying all subcomponents items, their

sequence of build up, their quantity in each finished unit and the work centres performing the build

up sequence. This information is obtained from product design documents, workflow analysis and

other standard manufacturing information

The capacity of the manufacturing unit can be expressed in number of units of output per period.

In some situations measuring capacity is more complicated when they manufacture multiple

products. In such situations, the capacity is expressed as man-hours or machine hours. The

relationship between capacity and output is shown in Fig. 5.6.

1. Design capacity: Designed capacity of a facility is the planned or engineered rate of

output of goods or services under normal or full scale operating conditions.

For example, the designed capacity of the cement plant is 100 TPD (Tonnes per day).

Capacity of the sugar factory is 150 tonnes of sugarcane crushing per day.

2. System capacity: System capacity is the maximum output of the specific product or

product mix the system of workers and machines is capable of producing as an integrated whole.

System capacity is less than design capacity or at the most equal, because of the limitation of

product mix, quality specification, breakdowns. The actual is even less because of many factors

affecting the output such as actual demand, downtime due to machine/equipment failure,

unauthorised absenteeism

Capacity planning is concerned with defining the long-term and the short-term capacity needs of

an organization and determining how those needs will be satisfied. Capacity planning decisions

are taken based upon the consumer demand and this is merged with the human, material and

financial resources of the organization.

Capacity requirements can be evaluated from two perspectives—long-term capacity strategies

and short-term capacity strategies.

1. LONG-TERM CAPACITY STRATEGIES

Long-term capacity requirements are more difficult to determine because the future demand and

technology are uncertain. Forecasting for five or ten years into the future is more risky and

difficult. Even sometimes company’s today’s products may not be existing in the future. Long

range capacity requirements are dependent on marketing plans, product development and lifecycle of the product. Long-term capacity planning is concerned with accommodating major

changes that affect overall level of the output in long-term. Marketing environmental assessment

and implementing the long-term capacity plans in a systematic manner are the major responsibilities

of management. Following parameters will affect long range capacity decisions.

1. Multiple products: Company’s produce more than one product using the same facilities

in order to increase the profit. The manufacturing of multiple products will reduce the risk of

failure. Having more than one product helps the capacity planners to do a better job. Because

products are in different stages of their life-cycles, it is easy to schedule them to get maximum

capacity utilisation.

2. Phasing in capacity: In high technology industries, and in industries where technology

developments are very fast, the rate of obsolescence is high. The products should be brought into

the market quickly. The time to construct the facilities will be long and there is no much time as

the products should be introduced into the market quickly. Here the solution is phase in capacity

on modular basis. Some commitment is made for building funds and men towards facilities over a

period of 3–5 years. This is an effective way of capitalising on technological breakthrough.