NITIE, Mumbai

Chap 5: Capacity
Management

Dipak Ramchandra Sutar

Chapter 5 Capacity Management

Introduction : Without the resources to achieve the priority plan, the plan will be unworkable.
Capacity management is concerned with supplying the necessary resources.

Definition of Capacity
Capacity is the amount of work that can be done in a specified time period. It is the capability of a
worker, machine, work center, plan, or organization to produce output per period of time. Capacity is a
rate of doing work, not the quantity of work done.

Capacity available is the capacity of a system or resource to produce a quantity of output in a given
time period. Capacity required is the capacity of a system or resource needed to produce a desired
output in a given time period. Load is the amount of released and planned work assigned to a

facility for a particular timer period. It is the sum of all the required capacities.
Capacity management is responsible for determining the capacity needed to achieve the priority
plans as well as providing, monitoring, and controlling that capacity so the priority plan can be met.
It is the function of establishing, measuring, monitoring, and adjusting limits or levels of capacity in
order to execute all manufacturing schedules. Capacity planning is the process of determining the
resources required to meet the priority plan and the methods needed to make that capacity available.
Capacity control is the process of monitoring production output, comparing it with capacity plans,
and taking corrective action when needed.

Capacity Planning

Capacity planning involves calculating the capacity needed to achieve the priority plan and finding
ways of making that capacity available. Priority plans are usually stated in some standard unit of
output. If there is no common unit, capacity must be stated as the hours available. The priority plan
must then be translated into hours of work required and compared to the hours available. The
process of capacity planning is as follows:

1) Determine the capacity available at each work center in each time period.
2) Determine the load at each work center in each time period.
Translate the priority plan into hours of work required at each work center in each time
National institute of industrial engineering |Chap 5: Capacity Management

Sum up the capacities required for each item on each work center to determine the load on each work
center in each time period.
3) Resolve differences between available capacity and required capacity. If possible, available capacity
should be adjusted to match the load. Otherwise, the priority plans must be changed to match the
available capacity.
Resource planning involves long-range capacity resource requirements and is directly linked to
production planning. Resource planning involves changes in manpower, capital equipment, product
design, or other facilities that take a long time to acquire and eliminate.
Rough-cut capacity planning takes capacity planning to the next level of detail. The master production
schedule is the primary information source. The purpose of rough-cut capacity planning is to check the
feasibility of the MPS, provide warnings of any bottlenecks, ensure utilization of work centers, and advise
vendors of capacity requirements.

Capacity Requirements Planning (CRP)

It is the process of determining in detail the amount of labor and machine resources needed to
achieve the required production. Planned orders from the MRP and open shop orders (scheduled
receipts) are converted into demand for time in each work center in each time period. This process
takes into consideration the lead times for operations and offsets the operations at work centers
accordingly

The inputs needed for a CRP are open shop orders, planned order releases, routings, time standards,
lead times, and work center capacities contained in the computer files. A routing is the path that work
follows from work center to work center as it is completed. A routing file should exist for every
component manufactured and contains the operations to be performed, the sequence of operations,
the work centers to be used, the possible alternate work centers, the tooling needed at each operation,
and standard times (setup and run times) per piece.

A work center file contains information on the capacity and move, wait, and queue times associated
with the center. The move time is the time normally taken to move material from one workstation to
another. The wait time is the time a job is at a work center after completion and before being
moved. The queue time is the time a job waits at a work center before being handled. Lead-time is
the sum of queue, setup, run, wait, and move times.

National institute of industrial engineering |Chap 5: Capacity Management

Another piece of information needed is the number of working days available. Understand shop
calendar.

Capacity Available

Capacity available is the capacity of a system or resource to produce a quantity of output in a

given time period (work content). It is affected by product specification changes, changes to
product mix, plant and equipment changes, and changes to work effort (speed or pace).

The unit of output common to all products is time.

The work content of a product is expressed as the time required to make the product using a given
method of manufacture. Standard time for a job is the time it would take a qualified operator
working at a normal pace to do the job.

Capacity needs to be measured on a least three levels: machine or worker, work center, and plant.

There are two ways of determining the capacity available: measurement and calculation.
Demonstrated (measured) capacity is an average figured from historical data. Calculated or
rated capacity is based on available time, utilization, and efficiency. Rated, or calculated,
capacity is the product of available time, utilization, and efficiency. Rated capacity = available
time x utilization x efficiency.

The available time is the number of hours a work center can be used and depends on the number
of machines the number of workers, and the hours of operation.

Work center utilization is the percentage of time that the work center is active compared to the
available time: Utilization = (hours actually worked / available hours) x 100% Utilization can
be determined from historical records or by a work sampling study.

Efficiency = (actual rate of production / standard rate of production) x 100%

Capacity Required (Load)

Determining the capacity required is a two-step process. First, determine the time needed for
each order at each work center; then, sum up the capacity required for individual orders to obtain

National institute of industrial engineering |Chap 5: Capacity Management

the load. The time needed for each order is the sum of the setup time and the run time. The run
time is equal to the run time per piece multiplied by the number of pieces in the order.

The load on a work center is the sum of the required times for all the planned and actual orders to
be run on the work center in a specified period. The steps in calculating load are as follows.

1) Determine the standard hours of operation time for each planned and released order for each work
center by time period.
2) Add all the standard hours together for each work center in each period. The result is the total
required capacity (load) on that work center for each timer period of the plan.

The work center load report shows future capacity requirements based on released and planned
orders for each time period of the plan. The term overcapacity means that the work center is
overloaded and the term undercapacity means the work center is under loaded

Scheduling Order

Scheduling is defined as a timetable for planned occurrences. Back scheduling is the process of
starting with the due date and, using the lead times, working back to find the start date for each
operation. The process is as follows:
1) For each work order, calculate the capacity required (time) at each work center.
2) Starting with the due date, schedule back to get the completion and start dates for each
operation.

Making the Plan

Compare the load to the available capacity to see if there are imbalances and if so, to find possible
solutions. There are two ways of balancing capacity available and load: alter the load, or change the
capacity available. Altering the load means shifting orders ahead or back so the load is leveled. In
the short run, capacity can be adjusted. Some ways that this may be done are schedule overtime or
undertime, adjust the level of the workforce by hiring or laying off workers, shift workforce from
underloaded to overloaded work centers, use alternate routings to shift some load to another work
center, and subcontract work when more capacity is needed or bring in previously subcontracted
work to increase required capacity.
National institute of industrial engineering |Chap 5: Capacity Management

Reference

1. Introduction to Material management: Fifth Edition J. R. Tony Arnold, Stephen N.

Chapman,

R.V. Ramakrishnan

National institute of industrial engineering |Chap 5: Capacity Management