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Capacity Requirement Planning

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Capacity Requirement Planning

  1. 1. Capacity Requirement Planning Presentation by: Kesavan Fabin
  2. 2. Capacity Planning <ul><li>Determination of Plant Capacity </li></ul><ul><li>First Level Planning </li></ul><ul><li>Design Capacity </li></ul><ul><li>Based on Long Range Forecast </li></ul><ul><li>System capacity </li></ul><ul><li>Output produced by workers and equipments </li></ul><ul><li>Sys.efficiency = Actual output </li></ul><ul><li> System Capacity. </li></ul>
  3. 3. CRP Strategies <ul><li>Long term capacity strategy: </li></ul><ul><ul><ul><ul><li>Developing new product line </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Expand existing facilities </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Construct or phrase out production plants </li></ul></ul></ul></ul><ul><li>Short term Capacity strategy </li></ul>
  4. 4. Capacity Requirements Planning <ul><li>Capacity Requirements Planning is a computerized technique for projecting resource requirements for critical work stations. </li></ul><ul><ul><li>Inputs: </li></ul></ul><ul><ul><ul><li>Planned order releases </li></ul></ul></ul><ul><ul><ul><li>Routing file </li></ul></ul></ul><ul><ul><ul><li>Open orders file </li></ul></ul></ul><ul><ul><li>Outputs: </li></ul></ul><ul><ul><ul><li>Load Profile for each work center </li></ul></ul></ul>
  5. 5. What is Capacity? <ul><li>Capacity = (no. of machines or workers) x (no. shifts) x (utilization) x (efficiency) </li></ul><ul><li>(Russell & Taylor) </li></ul><ul><li>Best operating level is the percent of capacity utilization that minimizes average unit cost. </li></ul>
  6. 6. Utilization and Efficiency <ul><li>Actual Hours Charged </li></ul><ul><li>Utilization = </li></ul><ul><li>Scheduled Available Hours </li></ul><ul><li>Standard Hours Earned </li></ul><ul><li>Efficiency = </li></ul><ul><li>Actual Hours Charged </li></ul>
  7. 7. Reason to use CPR <ul><li>Bottleneck Management - </li></ul><ul><ul><li>The throughput of all products processed is controlled by bottlenecks. </li></ul></ul><ul><ul><li>Work centers need to be scheduled at a rate to prevent bottlenecks. </li></ul></ul><ul><ul><li>To eliminate bottlenecks, a time buffer inventory should be established. </li></ul></ul>
  8. 8. Economies of Scale: Best Operating System Level Diseconomies of Scale: Occurs only at a certain level of output eg: Higher Rework
  9. 9. CRP Produces Load Profile <ul><li>CRP uses the information to produce a load profile for each machine or work center. A load profile: </li></ul><ul><ul><li>Compares released orders and planned orders with the capacity of the work center. </li></ul></ul><ul><ul><li>Identifies underloads and overloads. </li></ul></ul><ul><li>Load percent is the ratio of load to capacity. </li></ul><ul><li> Load </li></ul><ul><ul><li>Load percent = x 100% </li></ul></ul><ul><ul><li> Capacity </li></ul></ul>
  10. 10. What Is Load Percent? <ul><li>Load percent is the ratio of load to capacity. </li></ul><ul><li> Load </li></ul><ul><ul><li>Load percent = x 100% </li></ul></ul><ul><ul><li> Capacity </li></ul></ul>
  11. 11. Basic Strategies for Timing Capacity <ul><li>CRP provides information to determine the timing of capacity expansion. The basic strategies in relation to a steady growth in demand are: </li></ul><ul><ul><li>Capacity Lead Strategy </li></ul></ul><ul><ul><li>Capacity Lag Strategy </li></ul></ul><ul><ul><li>Average Capacity Strategy </li></ul></ul>
  12. 12. Capacity Lead Strategy <ul><li>In anticipation of demand, capacity is increased. </li></ul><ul><li>This is an aggressive strategy and is used to lure customers away from competitors. </li></ul>
  13. 13. Capacity Planning <ul><li>How much to increase capacity demands </li></ul><ul><li>depend upon a number of factors, including: </li></ul><ul><li>Anticipated demand – volume & certainty </li></ul><ul><li>Strategic objectives </li></ul><ul><li>Costs of expansion and operation </li></ul>
  14. 14. Capacity Lag Strategy <ul><li>Increase capacity after demand has increased. </li></ul><ul><li>This is a conservative strategy and may result in lose of customers. </li></ul><ul><li>You assume customers will return after capacity has been met. </li></ul>
  15. 15. Average Capacity Strategy <ul><li>Average expected demand is calculated and capacity is increased accordingly. </li></ul><ul><li>This is the most moderate strategy. </li></ul>
  16. 16. Adjustments to Capacity <ul><li>Increase capacity by: </li></ul><ul><li>Adding extra shifts </li></ul><ul><li>Scheduling overtime or weekends </li></ul><ul><li>Adding equipment and/or personnel </li></ul><ul><li>Reduce load by: </li></ul><ul><li>Reducing lot sizes </li></ul><ul><li>Holding work in production control </li></ul><ul><li>Subcontracting work to outside suppliers </li></ul>
  17. 17. Adjustments to Capacity <ul><li>Reduce capacity by: </li></ul><ul><li>Temporarily reassigning staff </li></ul><ul><li>Reducing the length of shifts </li></ul><ul><li>Eliminating shifts </li></ul><ul><li>Increase load by: </li></ul><ul><li>Releasing orders early </li></ul><ul><li>Increasing lot sizes </li></ul><ul><li>Making items normally outsourced </li></ul>

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