Capacity requirement planning sure 12mt07ind019

crp

1. CAPACITY REQUIREMENT
PLANNING


By
Sure ravikumar

2. 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

3. 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.

4. Capacity Requirements Planning
•A tool for:
–determining capacity that is available and required.
–Alleviating bottleneck work centers.
•Helping planners make the right decisions on
scheduling before problems develop.
•Verifies that you have sufficient capacity available to
meet the capacity requirements for MRP plans.

5. 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.

6. What is Capacity?
•Capacity = (no. of machines or workers) x (no. shifts)
x (utilization) x (efficiency)
•Best operating level is the percent of capacity
utilization that minimizes average unit cost.
–Usually 80% with a 20% cushion

7. 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.

8. Utilization and capacity

•Utilization=Actual Charged/
Schedule Available Hours
• Efficiency= Standard Hours Earned/
Actual Hours Charged

9. Reason to use CPR
•Bottleneck Management -
–The throughput of all products processed is
controlled by bottlenecks.
–Work centers need to be scheduled at a rate to
prevent bottlenecks.
–To eliminate bottlenecks, a time buffer inventory
should be established.

10. Basic Strategies for Timing Capacity
•CRP provides information to determine the timing of
capacity expansion. The basic strategies in relation
to a steady growth in demand are:
–Capacity Lead Strategy
–Capacity Lag Strategy
–Average Capacity Strategy

11. Capacity Lead Strategy
•In anticipation of demand, capacity is increased.
•This is an aggressive strategy and is used to lure
customers away from competitors.

12. Average Capacity Strategy
•Average expected demand is calucated
and capacity is increased accordingly
•This is the most moderate strategy

13. Capacity Lag Strategy
•Increased capacity after demand has
increased
•This is a conservative strategy and may result
in loss of customers
•You assume customers will return after
capacity has been met

14. Capacity Planning
How much to increase capacity demands
depend upon a number of factors, including:
•Anticipated demand – volume & certainty
•Strategic objectives
•Costs of expansion and operation

15. Adjustments to Capacity
Increase capacity by:
•Adding extra shifts
•Scheduling overtime or weekends
•Adding equipment and/or personnel
Reduce load by:
•Reducing lot sizes
•Holding work in production control
•Subcontracting work to outside suppliers

16. Adjustments to Capacity
Reduce capacity by:
•Temporarily reassigning staff
•Reducing the length of shifts
•Eliminating shifts
Increase load by:
•Releasing orders early
•Increasing lot sizes
•Making items normally outsourced

17. Capacity Planning
•Best operating is seldom at 100% and varies with
industry.
–In industries where demand is highly variable,
large capacity cushions are common.
–Companies with less flexibility and higher costs
maintain small cushions – under 10%.
–Overbooking is common with some industries
such as airlines.

18. Economies of Scale
•Economies of scale is the best operating level.
•Economies of scale is the point where it costs less per
unit to produce high levels of output.
–Occurs when fixed costs are spread over large
number of units

19. Diseconomies of Scale
•Occurs at a certain level of output.
–When fixed costs increase with number of units
being produced, examples:
•Higher rework
•More equipment breakdown

20. 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?

21. CRP Produces Load Profile
•CRP uses the information to produce a load profile
for each machine or work center. A load profile:
–Compares released orders and planned orders with
the capacity of the work center.
–Identifies under loads and overloads.

22. What is a load?
•Load refers to the standard hours of work
assigned to a facility.

23. What is the load percent?
Load percent is the ratio of load to capacity
Load percent=load/capacity

24. Engineering Calculations (Capacity)
Numbers of hours = 40
Shifts = 1
Efficiency = 100%
Utilization = 4/5 = 80%
Capacity = 40 x 1 x 0.8 x 1.00 = 32 hours
Project 1 capacity = 4 (weeks) x 32 = 128
Project 2 capacity = 2 (weeks) x 32 = 64
Project 3 capacity = 4 (weeks) x 32 = 128
Project 4 capacity = 3 (weeks) x 32 = 96

25. Engineering Calculations (Load)
Project 1 = 30 x 4 hours per mile = 120 hours
(start by February 15
th
– must be completed by March
15
th
)
Project 2 = 20 x 4 hours per mile = 80 hours
(start March 16
th
– must be completed by April 1
st
)
Project 3 = 5 x 4 hours per mile = 20 hours
(start April 2
nd
– must be completed by May 1
st
)
Project 4 = 15 x 4 hours per mile = 60 hours
(start by May 2
nd
– must be completed by May 23
rd
)

26. Engineering Calculations (Load %)
•Project 1 = 120/128 = 94%
–Can be completed
•Project 2 = 80/64 = 125%
–Can not be completed
•Project 3 = 20/128 = 16%
–Can be completed
•Project 4 = 60/96 = 63%
–Can be completed

27. Summary
•To operate at maximum capacity, companies
must use the resources available. If resources
under underutilized, the profit margin will not
be maximum.
•Using capacity requirements planning helps a
company identify potential problems, such as
eliminating the possibility of overworking the
current staff, overloading machines, losing
customers because the work could not be
completed as scheduled, paying penalties for
late delivery.

28. •
Thank you