Detailed Scheduling and Planning (Lesson 6)

Detailed Scheduling and Planning
Unit 2
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Lesson 6
The Process of Detailed Capacity Planning
Unit 2
© 2004 e - SCP -The Centre for Excellence in Supply Chain Management
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The Leading Edge Group will not be responsible for any statements, beliefs, or opinions expressed by the
authors of this workbook. The views expressed are solely those of the authors and do not necessarily
reflect any endorsement by The Leading Edge Training Institute Limited.
This publication has been prepared by E-SCP under the guidance of Yvonne Delaney MBA, CFPIM,
CPIM. It has not been reviewed nor endorsed by APICS nor the APICS Curricula and Certification
Council for use as study material for the APICS CPIM certification examination.
The Leading Edge Training Institute Limited

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© Copyright Leading Edge Training Institute Limited ii

Unit 2
Preface............................................................................................................4
Course Description................................................................................................................. 4
Lesson 6 – The Process of Detailed Capacity Planning....................................5
Introduction and Objectives.................................................................................................. 5
Capacity Planning and Priority Planning ............................................................................ 5
Manufacturing Environments............................................................................................... 8
Production Methods ............................................................................................................... 8
Process-Oriented Production Structures ........................................................................... 11
Data Needed for Capacity Planning ................................................................................... 12
Lead Time ............................................................................................................................. 13
Distributing Lead Time ....................................................................................................... 14
Work Centers ........................................................................................................................ 15
Calculating Capacity............................................................................................................ 16
Capacity and Load Sources................................................................................................. 17
Queuing ................................................................................................................................. 18
Scheduling Strategies........................................................................................................... 19
Calculation of Load Profiles................................................................................................ 22
Finite Capa city Planning Techniques................................................................................. 23
Scheduling of Manufacturing and Logistics Operations .................................................. 25
Mixed Manufacturing .......................................................................................................... 29
Capacity-Oriented Materials Management (Corma) ....................................................... 30
Summary ............................................................................................................................... 32
Further Reading ................................................................................................................... 32
Review ................................................................................................................................... 33
What’s Next? ........................................................................................................................ 34
Appendix.......................................................................................................35
Answers to Review Questions .............................................................................................. 36
Glossary ........................................................................................................38
© Copyright Leading Edge Training Institute Limited iii

Unit 2
Preface
Course Description
This document contains the sixth lesson in the Detailed Scheduling and Planning unit, which is
one of five units designed to prepare students to take the APICS CPIM examination. Before
completing the Detailed Scheduling and Planning unit, you should complete the Basics of
Supply Chain Management unit or gain equivalent knowledge. The five units that cover the
CPIM syllabus are:
Basics of Supply Chain Management
Master Planning of Resources
Execution and Control of Operations
Strategic Management of Resources
Please refer to the preface of Lesson 1 for further details about the support available to you
during this course of study.
This publication has been prepared by E-SCP under the guidance of Yvonne Delaney MBA,
CFPIM, CPIM. It has not been reviewed nor endorsed by APICS nor the APICS Curricula and
Certification Council for use as study material for the APICS CPIM certification examination.
© Copyright Leading Edge Training Institute Limited 4

Unit 2
Lesson 6 – The Process of Detailed Capacity Planning
Introduction and Objectives
This lesson examines the characteristics and methods used to ensure sufficient capacity to
support the material plan. The lesson also looks at how work center and routing data is used and
explains the use of efficiency and utilization ratios in the determination of rated capacity. The
balance of demand and capacity, time availability and due dates are examined along with finite
and infinite capacity planning techniques. Finally, the lesson explains the integration of
scheduling and capacity planning with material planning for order release and control.
On completion of this lesson you will be able to:
Explain detailed capacity planning at an intermediate level
Explain the effect of the manufacturing environment on the choice of planning technique
and information requirements
Describe the steps by which work center and routing data are used to schedule orders and
identify resource loads in each time period
Use efficiency and utilization ratios to determine the rated capacity of a work center
Identify load sources for planned and released orders
Explain the effects of queuing on job-shop production
Describe planning, scheduling, and order release preparation techniques in a variety of
production environments
Capacity Planning and Priority Planning

Planning for capacity takes place at several
distinct stages in the planning and execution Priority Planning Capacity Planning
hierarchy. Initial top- level resource planning Sales and Operations Resource Requirements
occurs alongside the sales and operations Plan Plan (RRP)
priority plan. Once the master schedule is

complete, a rough cut capacity plan verifies the Master Production Rough-Cut Capacity
validity of the master schedule. Detailed Schedule Plan (RCCP)
scheduling and planning must be balanced by
detailed capacity requirements planning. Note Material Capacity
that the ultimate validation of the plan is Requirements Requirements
Planning (MRP) Plan (CRP)
successful execution, which is referred to as
demonstrated capacity.
Purchasing and Input/Output Control
Capacity Requirements Planning (CRP) takes PAC
Operation Sequencing
place at the MRP level of the overall planning
process. CRP is used to validate the material plan.
Capacity Definition
Capacity is the ability of a resource to produce output per time period. Capacity required
represents the system capability needed to make a given product mix (assuming technology,
product specification, etc.).

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Capacity Planning Definition
Capacity planning is the process of calculating required capacity in each workstation to
manufacture sufficient material to meet requirements. This process may be performed at an
aggregate or product- line level (resource planning) at the master schedule level (rough-cut
capacity planning) and at the detailed or work center level (capacity requirements planning).
Load
The load of a work center, production line, or plant is the amount of work scheduled for and
released to it for a specific time period. The load is usually a measure of standard hours of work
or units or production. The load is also referred to as the workload.
MRP
Routing
Work Centers CRP
Information
Capacity
Requirements
Plan
Capacity Planning Issues

CRP receives all manufacturing orders from MRP and breaks these down into individual
operations. CRP calculates the standard hours required for each batch at each work center. These
hours are then totalled for each work center in each time period and compared to available hours
for each work center. For effective capacity planning and consequently efficient production,
manufacturing and service industries need to calculate:
The capacity required to implement master planning effectively
The necessity or otherwise of extra shifts, overtime, short-time work, part-time work or
other capacity changing strategies, and the times and places such strategies will be
required
The areas in capacity and orders where adjustments can be made
The possibility of reducing lead times and numbers of orders
Aims and Objectives of Capacity Planning

Capacity planning, like materials planning, aims to ensure high service levels, short delivery
times, high delivery reliability rates, and flexibility in responding to customer requests. In
addition, it aims to minimize invested capital by reducing work-in-process inventory levels and
optimizing waiting times.
To fulfil these aims, capacity planning must ensure:
Efficient use of available capacity through good capacity utilization at a constant level

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Prediction of bottlenecks
Ability to adapt to changing conditions
Minimal fixed costs in production
Minimal administration costs
To meet the aims and objectives outlined above, large bodies of data from open and planned
orders must be considered. Often, detailed capacity planning is sufficiently complex to require
computer software to ensure the optimal balance between conflicting objectives of high service
levels and low costs are met.
Capacity planning aims ultimately to balance the load arising through orders with the capacity
available to process those orders. The general principles of capacity planning remain the same
despite the planning priorities and manufacturing environments. However, the manufacturing
environment and planning priority have an effect on determining the technique used and the kind
of master data used as input data. For example, rough-cut routing data may be used for long-term
planning, whereas detailed and accurate routing data will be used in shorter term planning.
Capacity cannot be stored. Therefore, capacity or quantity and due dates must be considered and
planned together. In an ideal situation, the load will always match the available capacity. Even
when the capacity varies, due to holidays for example, the load must be adjusted to match.
Conversely, when the load varies, due to seasonal trends for example, capacity must match the
load.
Costs of Poor Capacity Planning

Poor capacity planning can lead to an ever-worsening spiral of cause and effect
that adversely affects all aspects of production and, ultimately, customer service.
If the number of customer orders increases, the number of work orders to the
production floor will also increase, leading to an increased load on capacity.
When the number of orders is higher than the available capacity, queues of work-
in-process inventory will build up behind each work center.
This leads to a lengthening lead time for each order. As a result the orders are unlikely to meet
there due date (the delivery date required by the customer). To alleviate this problem, planners
may increase lead times, particularly queue times, to plan more realistically. This results in
customer orders being released earlier, which further increases the load on capacity. The only
way to alleviate the problem at this stage is to increase capacity.
1
Increased
Increased
orders
orders
7 22
Orders
Orders are Greater
Greaterload
loadon
on
released
released early
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6 Planners
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increase
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Failure
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Unit 2
By planning work center loads ahead of time, queues can be reduced, thereby resulting in shorter
lead times, ensuring that orders can be released on time.
Manufacturing Environments
Although material and capacity planning is required in every type of manufacturing
environment, the need for material and capacity may be determined differently depending on the
type of environment. Each environment has the same basic requirements but the relative
importance of each requirement differs according to the environment. This has a major effect on
the operation of MRP and CRP.
Make -to-Order
Either of the following approaches may be implemented in this environment:
The company produces or purchases standard products which they then modify to meet
particular customer requirements. Effectively, the standard products are made to stock
but are then customized for particular orders.
The company forecast demand and stock materials such as raw material and components
from which they make their products. This shortens the lead time to the customer.
Engineer-to-Order
This type of environment has a very long lead time as all elements of production from initial
product design are part of the customer lead time. The raw materials and other requirement s are
ordered only when a customer order is received. This approach is used for high value products
such as large specialized machinery.
Assemble-to-Order
In this environment all sub-assemblies are manufactured and stocked as
inventories, using forecasts to determine amounts. The final assembly
into finished goods is triggered when a customer order is received. A
final assembly schedule is used to ensure customer orders are fulfilled on
time. Car manufacturers typically use this approach.
Make -to-Stock
A make-to-stock company uses finished goods warehouse replenishment orders or distribution
requirements planning to determine what should be produced. It maintains specified levels of
finished goods to meet forecast customer demand. The products are then distributed from
finished goods warehouses. Examples include manufacturers of window frames, cereal, soap and
cleaning products.
Production Methods
Many companies may employ several production methods at once. The choice of method is
influenced by the quantity required and the operating philosophy of company management.
Where high quantities are needed a dedicated production facility may be set up for a particular
item. Where quantities are low, the item may be produced in a more general purpose facility
along with other items.

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Project Production
AutoCon is a typical project production company. IT employees highly
qualified engineers to design and build custom automation solutions for large
process-oriented manufacturers. AutoCon’s main business is with breweries.
It provides the vats, pipes, valves and software control systems when a
brewery decides to expand its operations. As the product must closely match
customer requirements, each design is unique.
Most projects of this nature require custom design. Processes are very flexible
and can provide a broad range of product designs. In such environments, the program evaluation
and review technique (PERT) or the critical path method (CPM) are used to evaluate capacity
requirements.
PERT uses an algorithm to identify the critical path of a project, in other words, the
sequence of activities that will determine the completion time. PERT time estimates are
probable figures, based on time estimates for each activity in the critical path, and
offering a range that incorporates pessimistic, most likely, and optimistic estimates.
CPM identifies each activity in a project along with its estimated completion time. From
this information, the critical path, or longest path to completion, can be identified. This is
the path that will constrain the overall time for the project.
Load must be planned with capacity at the level of production planning. Detailed capacity
planning is of little use here as capacities must be sufficiently flexible to adjust to the schedule
calculated by CPM.
Job-shops
Job shops are usually characterised by intermittent production. Intermittent production makes
items to match customer specifications. However, this is not typically one-of a kind produc tion.
The constraining work center may vary based on the product mix and order volumes.
Detailed planning is very important in a job shop environment where work centers must be
flexible in order to adapt to continual load changes and queues. Planning and scheduling capacity
issues ahead of time helps eliminate excess lead time and provide alternative plans to avoid
bottlenecks. The techniques discussed in this lesson are most useful with job shop or intermittent
production, unless capacity is inflexible, in which case, the techniques presented in the
Execution and Control of Operations module are of use.
Kilner’s pottery company employs a job shop manufacturing environment
to produce customized pieces of pottery. These are based on basic designs
such as vases, urns, jugs and charger plates, but are individua l pieces in
their use of colour and surface pattern. The product mix varies
considerably depending on the time of year and the type of customer.
Batch Production
Batch production is used to produce items of similar design in varied amounts.
Usually, the items ordered are a repeat of previous items. A batch manufacturer
may require some days or several weeks to produce an order. This means that
production cycle times may be considerably less than elapsed time from order
receipt to order shipment. CRP is useful when the product mix and volume
changes.

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Typical examples of batch manufacturing include the manufacture of soft drinks, biscuits, and
vitamin tablets or over-the-counter pharmaceutical medicines.
Assembly Lines
Repetitive manufacture relies on line balancing to adjust production to a specific cycle rate.
Repetitive methodologies aim for minimal setups, inventories and lead times. In repetitive
production work orders are unnecessary and production scheduling and control deals with
production rates. Ava ilable capacity is calculated at the level of the MPS rather than to test the
validity of the material plan. The master schedule sets the production
rate, thereby determining the load. Capacity must be adjusted along the
assembly line to maintain that rate. Beyond rough cut capacity planning,
there may be no further need of capacity planning in repetitive
manufacture.
Many car manufacturers employ assembly lines to build their products,
as do manufacturers of other mass-produced electronic goods such as
kettles, CD players, televisions, etc.
JIT Production
As with repetitive manufacture, capacity planning in a JIT environment is mainly complete at
MPS level. It involves determining the type and number of Kanban cards needed for each
Kanban feedback loop. However, the principles of infinite loading apply to JIT-Kanban
production. The Toyota factory is the ultimate example of a JIT production environment. Toyota
was the originators of the Just-in- Time philosophy.
Continuous Process or Flow Production

The physical design of many process facilities may
itself be a constraining factor in planning. Capacity
will mainly depend on the construction of the plant
as there are minimal interruptions in the actual
processing. The choice of materials often tends to be
limited. Both material and detailed capacity planning
must consider specific data structures and scheduling
techniques compared to those suitable for job shops.
In this type of industry Execution and Control of Operations is probably more important than
capacity requirements planning. Oil refineries and electricity generating plants are examples of
continuous process manufacturing environments.
Combinations
Some companies incorporate several different manufacturing
environments under one roof. For example, a manufacturer of
confectionary products may have continuous production of chocolate and
candy which are the components of batch-produced items such as boxes
of soft centers or chocolate-covered toffees.
It is unlikely that a single system would satisfy the planning needs in such an environment. The
best approach is to choose the most appropriate tools for each production environment although
this may necessitate maintenance of several different systems.

Unit 2
1. Which of the following statements about CRP are correct?
A. It balances and validates detailed scheduling and planning at the MRP level
B. It provides a detailed plan of scheduled operations
Review Q C. It aims to ensure good capacity utilization at a constant level

D. Poor CRP leads to increased queues and lead times
Process-Oriented Production Structures

Some of the typical characteristics of the process industry are by-products, production structures
with cycles, and continuous flow production. Material and capacity are equally valuable in
productio n processes. Process-oriented production sheets (also called process structures, process
trains, or production models) are often used in process-oriented industry. The following diagram
is an example of a process-oriented production structure.
Raw Material
Stage 1
Energy
Process 1 By-product
Capacity Step 1 Flow resources Step 2 Flow resources Step 3
Equipment
Flow resources
Process 2 By-product
Components Step 1 Flow resources Step 2 Flow resources Step 3 Waste
Primary
Product
Stage 2
Process 1
Process 2
Stage 3
Final Product
An item in production goes through several stages and each stage often produces by-products. As
it may not be possible to stock intermediate products during the stage, flow resources must be
defined.
A production stage can be split into individual processes. Items, capacity and production
equipment are allocated to a process, which is divided into steps or unit operations. Each step
corresponds to an individual operation in a routing sheet.
For example, ABC Beverages produce fruit smoothies. This involves 3 produc tion stages:
squeezing and crushing fruits, combining and treating the ingredients, and finally, packaging.

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In the first stage, each individual fruit is prepared as a smoothie
ingredient. This may involve a combination of washing, peeling,
crushing or squeezing depending on the type of fruit. This stage
involves manual labour, machinery, and power to transform the
raw materials into fruit juice. The by-products at this stage are
peels and pulp.
In stage 2, these fruit juices are mixed with the aid of machinery
and then pasteurised. There is little waste at this stage.
The final stage of production involves filling bottles, sealing
bottles, and labelling them. Although mostly automated, it
requires manual supervision. Some waste can occur due to
machine unreliability. Usable resources include fruit, capacity
and equipment.
Data Needed for Capacity Planning

Routing
A product’s routing information is the data detailing the specific method of manufacture for that
item, including:
The operations to be performed
The sequence of those operations
The work centres used to perform the operations
The standards required to set up and run the operations
Possibly information on tooling, operator skills, inspection and testing.
Each part, assembly, or product has its own routing information. Products may follow different
paths through the work centers. Often the number of possible routes is large. For example, a
pharmaceutical company has four tablet rooms, three blister packing stations, 2 bottling stations,
and 1 final packaging room. Any item produced there could follow one of 20 routes.
Routing Data
Routing data includes information on the sequence of operations needed to complete a
manufacturing order.
The routing data includes:
An operation identification code (often numbered in units of 10 to allow for extra
operations)
Operation description (identifies work to be done)
Planned work center (usually along with the operation description)
Standard setup and tear-down time
Standard run time per unit
Tooling requirements.

Unit 2
2. At the MRP/CRP level, which of these techniques are used in job shop
production?
A. CPM
B. PERT
Review Q
C. Backward scheduling
D. Level production planning
Lead Time
In materials management, lead time is a basic part of manufactured and purchased products. The
Bill of material and routing sheet for each item generally contain all the information required to
establish lead times.
Definition
Lead tie is the span of time required to perform a process or series of operations. In this section,
we are looking at lead time as it relates to the total time needed to produce an item. Lower-level
purchasing lead time is not considered.
Elements of Manufacturing Lead Time

Manufacturing lead time comprises several elements, some of which are more flexible and
subject to change than others. Each element is discussed below.
Queue time Setup Run Wait Move
Queue Time
Queue time refers to the amount of time which is spent waiting at a work center before work is
actually performed. This element of manufacturing lead time is particularly prone to increase
when efficiency of production is lost. Queue time is often assumed to account for 90% of total
manufacturing lead time. In many job shop environments, great efforts are made, employing JIT
techniques, to reduce queue time.
Queue times can vary greatly and are therefore difficult to estimate. Queue time is affected by
the balance between load and capacity, unplanned downtime, absenteeism and rework. At
detailed capacity planning, an approximate estimate of load between time periods is attempted. It
is unnecessary to go any further than that.
Queues can be reduced by reducing setup times, leading to reduced batch sizes. It can also be
reduced by ensuring that a work center is not working to complete capacity so that it can speed
up to reduce any queues. Sometimes extra employees are sent to work centers where queues
begin to build.
Queue management aims to control lead time and fully utilize bottlenecks. The first step is to
examine the nature of the queues at the work center and then apply techniques such as operation
overlapping and operation splitting where required.

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The following diagrams show the types of queue that may be encountered.
Excessive Queues Managed Queues
100 100
80 80
Queue length (hours)
Queuelength(hours)
60 60
40 40
20 20
0 0
1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10
Days Days
Uncontrolled Queues Excessive Idle Time
100 100

80 80
60 60
40 40
20 20
0 0
1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10
Days Days
Setup Time
The time needed to prepare a machine or other resource for the operation it is to perform is
called set up time. It is measured from the time of production of the last good piece of one item
until the time of production of the first good piece of the next item.
The activities involved in setup may include:
Preparation of equipment
Assembling a work stations
Tear-down of previous operation
Internal elements while the machine is switched off, for example, rethreading labels on a
labelling machine.
External elements: activities performed while the machine is running, for example,
calibrating the fill level on a bottling machine.
Run Time
Run time is the amount of time needed to perform an operation on a specific piece or lot once
setup has been completed.
Wait Time
This is also called idle time and refers to the amount of time a job remains at a work center after
an operation has been completed but before it has been moved onto the next operation.
Move Time
Move time is the amount of time spent in transit from one operation to another.
Distributing Lead Time

Some of these elements of lead time represent a load on work centers while others do not. Queue
time and wait time for example, do not impose a load on any equipment or resources but setup
time and runtime do.
The total lead time for a manufacturing order is calculated by adding together all the lead time
elements across all the operations detailed in the routing. As the order progresses through the
route, the operation times in each work center can be recorded. The routing guides the detailed
capacity planning process in the same way as the BOM guides the MRP process.

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Operation and Interoperation times
Operation time is used to denote time that is used in setup and run of operations on a work
station making it unavailable for other use. Interoperation time includes wait time, move time,
and queue times. These use up space and transport facilities, but not work center facilities, and
therefore do not constitute load.
Sources of Lead Time Element Data

The different elements of manufacturing lead time can be found or measured in various ways.
Some of the typical sources of lead times are displayed in the following table:
Lead Time Element Source of Data

Queue time Average demonstrated queue time
Setup time An engineering standard value
Run time Engineering standard value
Wait time Estimation based on experience
Move time Distance to travel multiplied by the move rate
Note that the runtime and often the setup time create a load on the work centers. The other lead
time elements do not: they constitute interoperation time. Notably, only one of the elements of
manufacturing lead time actually adds any value to the product: that is run time. The other
elements are of no value whatsoever to the customer.
Work Centers
A work center, or load center is a production area, usually comprising several people and
machines with identical capabilities, which counts as a single unit in capacity requirements
planning. A more detailed definition of the term work center may be found in the APICS
Dictionary. In job shop environments, work centers are often separate departments.
A work center may be physical or virtual. For example, a company that employs tele-workers to
provide design documents for various publications will have a team of designers scattered across
the country or even internationally. However, a group of designers on a similar project will be
counted as one work center.
Data on Work Centers

Detailed information on capacity and lead times related to each work center is crucial for
effective capacity planning. The information available on work centers usually includes the
following:
Work center identification code
Description of work center
Number of scheduled shifts
Number of machines, work stations, and/or operators, depending on which of these limits
capacity
Hours scheduled per shift
Workdays per period
Unit 2
Utilization and efficiency factors
Planned queue time (a timing factor used to calculate lead time)
Calculating Capacity
Capacity may be defined and calculated in a variety of ways, usually involving measures such as
theoretical capacity, demonstrated capacity, rated capacity, utilization or efficiency quotients.
Rated capacity is used when deciding on the load to be scheduled as it allows for setup and run
time.
Theoretical Capacity
Theoretical capacity is a simple calculation based on the amount of time a work station is
available. For example, if there are 4 machines available for one 8 hour shift on five days of the
week, the overall hours available will be 320 machine hours. Dividing figure this by the standard
hours per unit (.2) gives a theoretical capacity of 1600 units.
Theoretical capacity = no. machines x no. hours available x standard hours per unit
Demonstrated Capacity
Demonstrated capacity is derived from historical records of the work station capacity to date. It
is usually an average figure based on several months worth of data.
Demonstrated Capacity = sum of output in last n periods
Number of periods (n)
For example, if the output of a unit in the months of January through June was 280, 220, 270,
275, 290, and 265, the average output would be equal to 1600 divided by 6, or just under 267.
Rated Capacity
To find the rated capacity involves the use of utilization and efficiency quotients, which are
explained in more detail below. The basic principle behind rated capacity is that it considers the
amount of time that a work station is actually used and its operating efficiency as well as
theoretical capacity and standard hours per unit.
Rated Capacity = hours available x utilization x efficiency x standard hours per unit
Utilization
The utilization quotient is a measure of the amount of total hours available that were actually
worked. This cuts out time spent on setup or repair during the production run. Only time when
the machine is running productively is counted in this measure.
Utilization = Actual hours worked
Total hours available
Efficiency
The efficiency quotient measures the actual rate of production for a work center against the
theoretical measurement of standard hours produced. If an operation is running very efficiently it
may produce more units per hour than the rate recorded as standard for that work center.
Efficiency = Standard hours produced
Actual hours worked

Unit 2
3. What data is required for capacity requirements planning?
A. Forecast demand, lead times and work center capacity
B. MPS data, BOM information, utilization and efficiency ratings
Review Q C. Type of production environment, routing, BOM and MPS data

D. Lead times, work center capacity, utilization, efficiency, and routing data
Capacity and Load Sources

Detailed capacity planning must take into Orders
account all possible sources of load that
can be predicted in advance. These include
items such as open and planned orders, Input Rate
rates of rework, scrap and yield, scheduled
downtime, testing time, and production of
extra material needed for testing.
Open Orders or Scheduled Receipts

Information on open orders is maintained Load Manufacturing
in an order status file in production control. Lead Time
Capacity
The information will include the due date,
order quantity, and the number of Output
operations completed / outstanding for the
order.
Planned Orders
Planned order releases and firm planned orders may be directly taken from MRP to help in the
capacity requirements planning process. The information required includes the release date,
receipt date and order quantity for each planned order.
Other Load Sources

Although not always easy to predict, it is important to include allowances for other sources of
load such as rework, scrap, yield, downtime, production of samples, test material, or other non-
saleable items.

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Queuing
The primary objective of detailed capacity planning is to show a comparison between the load
imposed on a work center and the capacity of each work center over a period of time. In each
time period capacity overload or underload may be identified and, if necessary, replanning can
take place to redress the balance.
Capacity is the rate at which work can be accomplished. Therefore, the rate of flow into a work
center, which constitutes the load on that work center, must be determined so that it closely
matches the capacity of the work center. If the flow or orders exceeds available capacity, queues
will form at the beginning of the work center. If the flow of orders reduces or capacity is
increased, the load will then become stable or even decline.
Detailed capacity planning is an attempt to regulated the arrival of work orders and the capacity
of the work center in order to achieve a steady flow without buildup of queues. Queues lengthen
work center lead time and are to be avoided as this will contribute to the overall manufacturing
lead time for the item.
Job shops and Queues

In a job shop environment, good utilization of Mean
capacity and short queue times are impossible to Queue
Times
achieve simultaneously. If capacity utilization is
close to 100%, queue times increase
dramatically. For this reason, most job shops are
60
planned with capacity utilization significantly
below 100%.
While it is often necessary to build up queues at 40
bottleneck work centers in a process to ensure
high utilization, in a job shop where no one work
center creates a bottleneck or constraint on the 10
process, it is more important to reduce queues
than to achieve high utilization. Utilization
100%
Reasons for Queues before Work Centers

At any point where the rhythm of operation in a particular work center fails to correspond to the
rhythm in which orders are received, a waiting queue begins to build up. To minimize lead times,
excessive queues should be avoided, although there are certain valid reasons for maintaining
queues between workstations such as those listed below.
To guard against disturbance on a workstation such as scrap, rework, material shortage,
or absence of operator
To improve utilization of a constraining work center
To guard against imbalances in process time
To cushion disturbances around workflow, such as replenishment of materials or on-the
run maintenance of machinery
To balance flow around bottleneck work centers

Unit 2
Queues to reduce production costs, for example, to save on setup time
To motivate workers as high queue levels tend to increase speed of work, although it is
important to ensure the queue is not big enough to demoralize workers
Queues may be deliberately planned to address some of the issues listed above. However, those
planning or tolerating queues must remain aware that queues result in increased lead times and
increased work- in-process (WIP) inventory. Both of these mean fewer inventory turns and
therefore a greater amount of money is tied up in WIP inventory. These disadvantages must be
weighed against the possible advantages of maintaining queues.
Scheduling Strategies
Using techniques such as scheduling strategies, load profile calculations, finite and infinite
loading, the capacity of a plant can be evaluated. By comparing and contrasting the results of the
different techniques, much can be learned about current operations and possible methods of
optimizing the operation.
The method of scheduling used in an organization will depend on the following factors:
The volume of orders
The nature and complexity of operations
The need to minimize completion time
The need to maximize utilization
The need to minimize WIP
The need to minimize customer wait time
Backward Scheduling
With backward scheduling, the latest due date for an order is calculated. Then the lead time is
applied to determine the latest start date for the production of that order.
Forward Scheduling
Forward scheduling begins with the order start date (the earliest start date for the order) and
calculates the earliest due date for each operation and subsequently the earliest completion date
for the order.
Earliest
possible Backward Scheduling
start date
OP 10 OP 20 OP 30 OP 40
Forward Scheduling
OP 20 Latest
OP 10 OP 30 OP 40
possible
due date
Time
It is a good idea to perform backward scheduling from a customer’s requested date to determine
a start date. If the start date has already passed, then it will be necessary to forward schedule

Unit 2
from the current date to provide an accurate due date, which can then be communicated to the
customer.
Capacity requirements planning usually uses backward scheduling as this is the most efficient
use of time and resources while ensuring that the customer’s requested due date is met.
Central Point Scheduling

This technique combines both forward and backward scheduling. The central point date is the
start date of a critical operation, for example, one that is performed at a constraining work center.
This critical operation determines the rest of the lead time and therefore both the start and due
dates. In other words, the start and due dates for the order are dependent on when the order can
be processed on the constraining work station.
Earliest Critical Point Latest
possible possible
start date due date
Backward Scheduling Forward Scheduling
OP 10 OP 20 OP 30 OP 40
Time
From the central point, which marks the beginning of the critical operation, forward scheduling
is used to set subsequent operation times and due dates, while backward scheduling is used to
determine the timing of all operations that must occur before the central point.
Forward scheduling tends to have all operations completed as soon as possible, thereby bringing
forward the due date. Backward scheduling has the opposite effect, where operations are timed
to ensure that the order will be complete just in time for the latest possible due date. Dates
determined by central point scheduling usually fall somewhere in between.
Central Point Scheduling and Theory of Constraints (TOC)

Central point scheduling is useful for constraint-oriented finite loading. The theory of constraints
involves drum-buffer and rope scheduling, where the drum is the constraining operation in the
process and therefore sets the tempo of the entire process. The buffers are queues in the process
to guard against the constraining workstation operating at less than full capacity, and the rope is
the Kanban or other mechanism that moves work along the process. Performance measurement
of throughput, inventory and operating expense is important to ensure the process is running
smoothly, and thinking process tools are used to identify the root causes of any problems and
potential process improvements.
Optimized production technology (OPT) is a practical application of the theory of constraints
with which central point scheduling can be very effective.
Quite often the earliest start date is the current date, particularly for urgent customer production
orders or early released orders. In such cases, probably scheduling may be used.
Probable Scheduling
Like central point scheduling, dates determined by probable scheduling fall somewhere in
between the extremes of first possible starting date and last possible due date as determined by
forward and backward scheduling respectively. Probably scheduling builds in slack time. In
backward scheduling, slack time is the difference between the latest possible start date and the
Unit 2
earliest possible start date. In forward scheduling it is the difference between the earliest possible
due date and the latest due date.
Slack time provides for flexibility in planning. Positive slack time (where extra time is built in
between operations on top of expected wait, move, and queue times) leads to longer lead times.
Negative slack time (where time periods between operations are shortened) requires that lead
times be shortened. The example below is of probable scheduling using positive slack time in
comparison with forward and backward scheduling.
Earliest
possible Backward Scheduling
start date
OP 10 OP 20 OP 30 OP 40
Probable Scheduling
OP 10 OP 20 OP 30 OP 40
Forward Scheduling
Latest
OP 10 OP 20 OP 30 OP 40
possible
due date
Time
The technical process itself determines the duration of operations and the technical and
interoperation time. Slack time can only be gained by increasing or reduc ing non-technic al
interoperation times or administration times. Probable scheduling determines the lead time
stretching factor, a numerical factor by which the non-technical interoperation and administrative
times are multiplied.
By combining several strategies, it is possible to build a powerful simulation of the capacity
scheduling process.
4. Which of the following is NOT a load source that must be accounted for in
CRP?
A. Open orders and scheduled receipts
B. Planned orders from MRP
Review Q
C. Rework, yield or downtime
D. Sub-contracted orders

Unit 2
Calculation of Load Profiles
The load profile, as described in the APICS
dictionary, is the future capacity requirements
based on released orders, planned orders, or both
over a specified time period. Often, the load profile
is displayed as a bar chart, which helps to quickly
identify overload and underload. Detailed capacity
planning usually involves the development of load
profiles for each work center.
The next lesson in this module will demonstrate the mechanics and logic of lead time
calculation, forward scheduling, load calculation, and resulting load profiles.
Infinite and Finite Loading

Unless there is flexibility available in capacity and order due dates, it is not possible to resolve
planning proble ms through balancing load and capacity. By ensuring flexibility in either or both,
capacity planning techniques may be employed to resolve planning problems. The techniques
used are based on either modifying times or modifying capacity. They can be classified as either
infinite loading (without regard for capacity) or finite loading techniques.
Both approaches are based on the fact that:
If enough overall flexibility is available, all orders can be planned using batch procedure without
the planner. Once planning is complete, the planner may intervene daily or weekly to resolve
unusual situations.
If there is little or no flexibility, planning takes place order for order with each new order added
to already planned orders. The planner may, at any point, change due dates or capacity levels.
Infinite Loading Finite Loading
Capacity Capacity
Infinite Loading
Infinite loading calculates work center loads by time period but does not take into consideration
the capacity of each work center. The main aim of infinite loading is to ensure scheduled due
dates are met with the optimal control of fluctuation in capacity requirements. It is useful when
meeting due dates are prioritized over other factors as would be the case with customer order
production in a job-shop environment.
In many cases, where it is possible to modify capacity significantly on a day to day basis, infinite
loading techniques, which plan load by time period without regard to capacity, are the best
techniques for production activity control (PAC). Short-term flexibility of capacity is an
important principle in JIT manufacturing.

Unit 2
Finite Loading
Finite loading does not allow any work station to be loaded beyond its capacity. To prevent this
occurring it may be necessary to change start or due dates. In finite loading, time rather than
capacity is the variable parameter. Finite loading aims to optimize capacity utilization over time.
It is useful in continuous flow production and other environments where limited capacity is the
most pressing planning issue.
Finite Capacity Planning Techniques

Manufacturing environments that employ assembly line or process- flow production are often
subject to inflexible capacity. In addition, many companies although flexible with regard to
capacity over the longer term, must firm up capacity levels in the short term. In these cases,
finite loading techniques must be used at the detailed capacity planning level and often at higher
levels also, such as rough-cut capacity planning and resource planning. This is particularly true
of continuous flow production environments.
Finite capacity planning, where load never exceeds capacity, is most effectively illustrated by
portraying load as a horizontal bar, as in Gantt charts. This makes it easier to visualize the load
on each workstation and to identify problems of operation planning. For example, the diagram
below shows how two operations for a new order are slotted into the existing planning
arrangements. Notice how, when accommodating earliest start date and the need for
interoperation time between the two operations required to complete the order, the second
operation must be completed in two lots, before and after a previously scheduled operation.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
WS 1
WS 2
WS 3
WS 4
WS 5
previously scheduled operations

operation 232.20
operation 232.40
A key input in this type of scheduling is the priority of the order. Priority rules for operations and
order sequencing are important aspects of finite loading techniques. Many of them also provide
for the rescheduling of previously scheduled orders. Most finite loading techniques are based on
the following methods.
Process-oriented finite loading

This approach aims to minimize delays suffered by individual operations and thereby reduces the
potential delay of the entire production order. Each operation is planned by time period on the
basis of order beginning with the start date determined by lead-time scheduling. This involves
determining order priority rules to ensure operations are scheduled, using sequencing rules, to
achieve maximum throughput. Queues upstream of work centers must be monitored and
adjusted. This type of planning results in an actual working program for the duration of the
planning horizon.

Unit 2
Order-oriented finite loading
The goal of order-oriented finite loading is to enable the completion of as many orders as
possible. Those orders that cannot be scheduled must be assigned new start and due dates and
then monitored. This technique is the most commonly used finite loading technique. It is
explained in more detail in the next lesson.
Constraint-oriented finite loading

This approach plans orders around bottleneck capacities. It uses optimized production
technolo gy (OPT) to link scheduling dates and available capacity. To begin with, only orders
with a minimum batch size are generated. These lots come together at bottleneck capacities but
are kept apart in other operations. After this, all operations at the bottle neck work stations are
scheduled. When this is complete, backward scheduling is used to schedule operations prior to
the bottleneck and forward scheduling is used to schedule those occurring after the schedule. The
backward and forward planning assumes normal lead times. This is a similar approach to the
central point scheduling theory explained earlier in this lesson.
To prevent overloading any workstation, finite loading techniques evaluate latest start dates,
earliest completion dates and various other combinations of start and end dates using
mathematical modelling techniques.
Rule-based and constraint-based finite schedulers are used for rapid problem-solving, usually
with the aid of supply chain management software. Such software can maintain a description of
the nature of a production and logistics network in a company along with constraints at any
point. Another module of the software will make use of this detailed description to perform
advanced planning and scheduling within feasible planning time. The algorithms used by APS
software include mathematical modelling techniques such as branch and bound, linear
programming, simulated annealing, and genetic algorithms, and newer techniques such as
constraint-based scheduling and case-based reasoning.
5. How is the utilization factor for a work center calculated?

A. Dividing the standard hours produced by the actual hours worked
B. Dividing the output over several periods by the number of periods
Review Q C. Dividing the actual hours worked by the total hours available
D. Multiplying the number of hours worked by the standard hours per unit

Unit 2
Scheduling of Manufacturing and Logistics Operations
It’s important that material planning, scheduling and capacity planning are all closely linked with
the common aim of optimizing costs and order delivery times. To ensure this happens, shop floor
control must be able to optimally distribute the amount of work to be completed within a
particular time period. Detailed capacity planning techniques such as finite loading techniques or
mixed manufacturing techniques can help to achieve this outcome.
Load Levelling
Load leveling is important in shop floor control. This means that the
amount of work to be completed in a particular time period should be
evenly distributed and readily achievable. Load leveling or capacity
smoothing as it is also called, is defined more comprehensively in the
APICS dictionary.
Order Oriented Finite Loading

Order-oriented finite loading achieves maximum capacity utilization or ensures that as many
orders as possible are executed on time with low levels of goods in process. Complete orders are
scheduled one after the other in each time period. If a time period begins with an empty load, any
orders that have already started are scheduled first, and only those operations that have not yet
been carried out are considered.
Strategy
Priority rules are determined that will enable the completion of as many orders as possible.
Orders that cannot be scheduled must have their start and due dates modified and must be closely
monitored.
Process
There are seven main stages in the order-oriented finite loading decision process. Several of the
stages form decision points that loop back to previous process stages. Initially, orders are
planned and handled according to priority. The next stage involves handling, in the correct
sequence, the operations planned for a specific order, and loading each operation to the
appropriate work center. At this point, if the capacity limit has been reached, an exception rule
must be applied.
This process repeats until all the operations for a specific order have been planned. The next
order in the priority list must be determined and planned in the same way as before.
When all orders have been planned, or unloaded if sufficient capacity did not exist to plan them
all, then the exceptions raised at earlier stages must be dealt with, either by raising capacities or
shifting due dates or start dates. The following diagram illustrates the process, which is
explained in more depth below.

Unit 2
Start 1. Identify orders
and priorities
2. Load workstation
3. Capacity limit No
reached?
Yes
4. Apply exception rule
No
5. All ops planned?
Yes
6. All orders planned

or unloaded?
Yes
7. Are there Deal with

exceptions to deal
Exceptions
with?
No
Finish
1. Identify and Prioritise Planned Orders

The first step is to ensure that all necessary orders to be planned within the planning horizon
have been identified in the system. Once that is complete, the orders must be treated according to
defined priorities. Generally orders already begun and all orders with start dates within the
chosen time limit will be planned. Orders might then be sequenced according to:
The proximity of the order start date, with fixed start date orders loaded first
Proximity of the order due date, using the earliest due date available
The ratio of order lead time divided by the time still available for the order. In other
words, orders that will require a high level of operation time and little slack within the
available time must be scheduled first.
The ratio of remaining lead time for the order divided by the number of remaining
operations

Unit 2
Order priorities originating from external factors, such as a rush order for a key customer
Any combination of the above priority rules.
2. Handle and load operations in order
Once the orders have been identified and listed in order of priority, the operations are loaded to
work centers, working wither from start date forward, or from due date backward. Interoperation
times such as setup and move time are factored in but queues are not considered.
3. Apply Exceptions
When an operation must be started on a work center that has already reached full capacity for the
period in question there are three exception rules that can be applied:
Load without considering available capacity, which may be useful if the operation to be
performed is quite short or the order has already begun.
Defer the operation until the next period where the work center has available capacity
Unload the entire order and demote it down the list or priorities.
5, 6, and 7. Check the planning status
At step 5, an operation has been loaded and the system must check for any outstanding
operations for that order. If there are further operations to be planned for the order, the next
operation is selected and steps 2 and 3 are repeated. When all operations for an order have been
completed the system moves on to the next check.
The second check is performed when the operations for an order have been planned. The system
must now che ck to see if all orders have been planned or otherwise dealt with. When there are
more orders to plan, step 1 is completed to identify the next order in the priority list. Steps 2 and
3 are completed for each operation in that order. Only when all orders are planned or unloaded,
does the system finally break out of the loop and perform the final check.
The last check is for any outstanding exceptions that have not already been dealt with. If these do
not exist, the planning process is complete. Where they do exist, contingency plans must be
applied.
Apply Contingency Plans
Some of the contingency plans that may be adopted include the following:
For every capacity that is overloaded in a particular time period, either provide more
capacity, or unload orders.
For orders that will not be completed on time defer the order of deliberately increase
critical capacity in order first to unload the order.
For every unloaded order, bring forward the start date or, if the due date is flexible, defer
the order. It may also be possible to increase critical capacities so that the order can be
loaded again.
Any unloaded orders remaining after such contingencies have been applied will then be
rescheduled. This can either be performed at the end of the planning process or in
conjunction with the process each time an order is unloaded.

Unit 2
Limitations of Order-Oriented Finite Loading
The technique of order-oriented finite loading requires that capacity and load figures are reliable
so that planned schedules and reported progress of work will closely tally. Otherwise, calculated
due dates will quickly become invalid.
There must be some flexibility with due dates, particularly if operations are to be deferred each
time maximum capacity is reached on a work center. Occasionally, by random chance, one or
two orders will be delayed way beyond their expected lead times when such an approach is used.
With these requirements in mind, the limitations of order-oriented finite loading are:
The further into the future plans extend, the higher the chance that the planning forecast
will be in error. Therefore, the technique should be used for short planning horizons and
regularly repeated.
Regular and efficient replanning is needed
Depending on the exception rules used, the technique does not always allow for local
reactive replanning to ensure that all scheduled operations are completed during the
specified period.
By deferring operations either forward or backward until the next period with available
capacity is found, the best use of capacity is achieved. However, this may be at the
expense of long queues, leading to an increase in tied capital.
By unloading entire orders where it is found that one of the operations in the order cannot
be performed on the designated work station due to capacity issues, the plan that results
will definitely be within capacity. However, this approach may lead to lower utilization
of capacity because the load that would have been caused by other operations in the
dropped order will be taken away. Where no other orders are entered, this is wasted
capacity. In addition, deferred orders will be subject to long delays and it may be
impossible to accept new orders, even though the system is not working to full capacity.
Applications of Order-Oriented Finite Loading

When order-oriented finite loading defers operations that create an overload to periods of
available capacity, it is suitable for serial production over a long period or in a monopoly or
seller’s market where the customer due date is of reduced importance as they are unlikely to go
elsewhere for the product.
When the technique overloads work stations where necessary and defers orders where necessary,
it is suitable for any manufacturing industry capable of meeting the requirements of quantitative
flexibility in capacity and due dates.
In shop floor control, the technique provides either an actual work program for the next few
days, or an acceptable work program that allows a degree of flexibility, depending on the
exception rules that are implemented. Individual orders can often be replanned very efficiently
on a Gantt chart that shows available space on each work center.
The technique is a highly visible and easily manipulated tool, which lends itself to long term
planning of a few high- value added orders so long as regular planning and replanning is
completed.

Unit 2
6. Which scheduling technique results in scheduling toward the earliest
possible due date for an item?
A. Forward Scheduling
B. Backward Scheduling
Review Q
C. Critical point scheduling
D. Probable Scheduling
Mixed Manufacturing
Mixed manufacturing organizations produce products with a variety of market strategies and
logistics objectives. Some may produce and sell mass-produced goods, holding WIP and finished
goods inventories. The goal of such organizations is to ensure maximum capacity utilization
while at the same time producing a wide variety of products to meet customer demand. Short
lead times are very important in mixed manufacturing.
Load-Oriented Order Release (LOOR)

LOOR is a type of rough-cut order-oriented finite loading method that aims to adapt the load to
the available capacity. The matching of load to capacity can be limited to one time period. A
single time period is multiplied by the loading percentage. This is then balanced against the loads
which will arise in this and later periods. A conversion factor is then applied to progressively
convert the loads of all subsequent operations as these will not be loaded with full work contents.
The main aim of LOOR is to maintain high loads. Apart from this, it also aims to minimize
work- in-process, shorten lead times, and improve reliability of delivery.
Steps Involved in LOOR
Step 1.
The first step is the scheduling of orders. For example, the planner for a clothing manufacturer
must add five new orders to the existing workload. Initially, each of the five orders are shown
together with their operations on a time axis. Each operation is labelled with the work center
where it should be executed. Each order has a scheduled start date. LOOR us es a time filter, or
time limit to eliminate all orders with a start date later than the time limit. In the example given
below, 2 of the orders are eliminated using this time filter and are set as not urgent. The rest of
the orders are designated ‘urgent’ are passed to the next step.
Order 5 WC100 WC300

Not
Urgent Order 4 WC100 WC300 WC210
Order 3 WC100 WC300 WC210 WC400
Urgent Order 2 WC100 WC300 WC210 WC400
Order 1 WC100 WC300 WC210 WC400
Time Limit Time
Step 2.

Unit 2
In this step, the load of each operation in each of the urgent orders is converted by a factor. The
factor is used in an attempt to account for the fact that the further out you try to plan, the less
certain the pla nned load of a job will consume the planned capacity. The greater the number of
operations before a particular operation, the greater the chance that the operation will not be
completed on time. In the example shown, the factor is 50%. This means that the load of the first
operation is taken fully into account. With the second operation, only 50% is taken into
consideration. The graph below shows the load profile of one of the orders, both original and
converted, on each work center. Note that the operations are shown in work center order rather
than in the order that they are performed. This is done in preparation for the final LOOR step.
14
12
10
8 converted
6 Order
4
2
0
100 210 300 400
Step 3.
In step 3, the existing preload for each workstation and the additional load of the new orders are
combined. The preload stems from different periods on the time axis and may be greater than the
scheduled output capacity for any one time period. A loading percentage for each workstation is
chosen, for example 200%. This sets the load limit for each work center. The orders are then
loaded in start date sequence. When the addition of a new order results in an excessive load on
the work center the entire order is unloaded. The load limit in step 3 is therefore acting as a
further load filter. So, for example, due to the preload on workstation 100 and the load limit set
for that workstation, it is not possible to load order 3, even though it passed through the filter in
step 1.
Having worked through the LOOR steps, only orders 1 and 2 of the original set of orders ha ve
passed and can be released. Order 3 must be dealt with as an exception and orders 4 and 5 will be
dealt with in the next LOOR period.
Calculating Conversion Factors and Loading Percentages in LOOR
The conversion factors and loading percentages are key aspects of the LOOR method. They have
been arbitrarily set in the example above. In most situations, the conversion factors and loading
percentages would be derived from historical data.
Capacity-Oriented Materials Management (Corma)

Corma is an operations management principle that enables mixed manufacturers to balance work
in process against limited capacity and short deliveries. Corma comprises three parts:
Criterion for order release
Probable scheduling
Coupling of shop floor scheduling and materials planning.

Unit 2
The Criterion for Order Release
Corma releases stock replenishment orders earlier than needed, that is before inventory levels hit
the order point. An early order release is considered as soon as there is available capacity in
work centers.
Proba ble Scheduling

This is required for shop floor control and gives priority to early released orders as needed. The
priority is calculated by continually monitoring the lead-time-stretching factor of each order.
Coupling of Shop Floor Scheduling and Materials Planning

Stock replenishment orders are constantly rescheduled according to actual usage on the shop
floor. The current physical inventory is converted into an appropriate latest due date for open
replenishment orders. Stock replenishment orders of make-to-stock materials are treated as filler
loadings. They fill in capacity not required by other orders. However, this may mean production
earlier than required. Therefore the trade-off for improved capacity utilization is a higher level of
work in process.
Corma aims to minimize capacity costs, work in process and warehouse stock levels by
performing continual balancing acts between material requirements and stock replenishment
order production.
Effects of Corma
Orders that are released early are scheduled without priority. They are performed when
there is available capacity on the required work centers and there are no more urgent
orders to process.
When unplanned customer orders are added to the schedule they take precedence over
stock replenishment orders in process. This may mean that these stock replenishment
orders will not be started until later.
Continual order rescheduling occurs and as the waiting orders are left closer and closer to
their latest due date, they are assigned smaller lead-time-stretching factors. This in turn
gives them higher priority in the order list.
If inventory stocks fall faster than expected the latest due date of some of the stock
replenishment orders may be advanced. This again reduces the lead-time-stretching factor
and the order may be expedited. Alternatively, if stocks fall more slowly than expected
the latest due date will be postponed. This has the effect of increasing the lead-time-
stretching factor and delaying the order as it is therefore lower in the priority list.
The Corma technique is useful for mixed production and manufacturing environments where on-
the-spot planning is required.
Corma uses critical capacity available short-term to achieve balanced loading and reduce
queuing and lead times. Orders are generated periodically, providing for optimal sequencing and
reducing setup times. They are released prior to inventory falling below order point levels, as
soon as there is available capacity to handle them. Replenishment orders take a lower priority
than customer orders and are continually rescheduled according to the actual usage levels of the
material to be replenished. They are therefore tightly coupled to the material plan.

Unit 2
Summary
In this lesson, the characteristics and methods used to ensure sufficient capacity to support the
material plan were examined. The lesson also looked at the use of work center and routing data,
and explained the calculation of rated capacity using efficie ncy and utilization ratios. The
balance of demand and capacity, time availability and due dates were examined along with finite
and infinite capacity planning techniques. Finally, the lesson explained the integration of
scheduling and capacity planning with material planning for order release and control.
You should be able to:
Explain detailed capacity planning at an intermediate level
Explain the effect of the manufacturing environment on the choice of planning technique
and information requirements
Describe the steps by which work center and routing data are used to schedule orders and
identify resource loads in each time period
Use efficiency and utilization ratios to determine the rated capacity of a work center
Identify load sources for planned and released orders
Explain the effects of queuing on job-shop production
Describe planning, scheduling, and order release preparation techniques in a variety of
production environments
Further Reading
Introduction to Materials Management,
JR Tony Arnold, CFPIM, CIRM and Stephen Chapman CFPIM
5th edition, 2004, Prentice Hall
APICS Dictionary
10th edition, 2002
Manufacturing Planning and Control Systems,

Vollmann, T.E.; W.L. Berry; and D.C. Whybark
5th edition, 2004, McGraw-Hill
Production & Inventory Management,

Fogarty, Donald W. CFPIM; Blackstone, John H. JR. CFPIM; and
Hoffmann, Thomas R. CFPIM
2nd edition, 1991, South-Western Publishing Co., Cincinnati, Ohio

Unit 2
Review
The following questions are designed to test your recall of the material covered in
lesson 6. The answers are available in the appendix of this workbook.
7. Using which loading method are orders that are released early scheduled without
priority?
A. Order-oriented finite loading
B. LOOR
C. CORMA
D. Infinite Loading
8. Which scheduling technique builds in slack time and works within the time frame of
earliest possible start date and latest possible due date?
A. Forward Scheduling
B. Backward Scheduling
C. Probable Scheduling
D. Critical Point Scheduling
9. How is the efficiency of a work station calculated?

A. Dividing the sum of output over a number of periods by the number of periods
B. Multiplying the hours available by the standard hours per unit and the utilization quotient
C. Dividing standard hours produced by actual hours worked
D. Dividing actual hours worked by the total hours available
10. Calculate the rated capacity of a work center where there are 3 eight hour shifts
available, the work center is in use for 7 out of 8 hours. The work center produces 7 hours
of work against 6.5 standard hours .
A. 2637
B. 19
C. 144
D. 8050

Unit 2
What’s Next?
This lesson introduced some concepts and techniques required in detailed capacity planning. At
this point you have completed 6 of the 9 lessons in the Detailed Scheduling and Planning unit.
You should review your work before progressing to the next lesson which is:
Detailed Scheduling and Planning – Lesson 7 Detailed Capacity Planning Continued

Unit 2
Appendix

Unit 2
Answers to Review Questions
1. All except B
CRP is performed on the material plan to ensure that it is feasible. CRP is a detailed process that
calculates the work load for each work center during each MRP time bucket, taking into account
all operations required to fulfill the MPS. It is concerned with load balancing rather than
scheduling operations.
2. B
PERT and CPM are often used in project-based production. Level production planning is
completed at the master planning level. Backward scheduling, forward scheduling, or probable
scheduling are suitable for job shop environments.
3. D
Capacity requirements planning requires information on work centers, particularly work center
capacity, utilization and efficiency levels, planned queue time and load sources. It also requires
item lead times and routing information. Although the type of production environment influences
the choice of capacity planning technique, it does not affect the capacity planning activity
subsequently.
4. D
CRP must take into account all potential loads on production. This involves examining the order
status file in production control for details of open orders and scheduled receipts, the MRP for
information on planned orders, and examining historical records and other sources for likely
rework, yield, downtime and other factors affecting throughput.
5. C
The utilization quotient is a measure of the amount of total hours available that were actually
worked. This cuts out time spent on setup or repair during the production run. Only time when
the machine is running productively is counted in this measure. Utilization is used in the
calculation of rated capacity.
Utilization = Actual hours worked
Total hours available

Unit 2
6. A
Forward scheduling assumes that an order will start as soon as possible. It then works forward,
calculating operations and lead times to estimate the earliest due date for the order.
7. C
The order-oriented finite loading method achieves maximum capacity utilization or ensures that
as many orders as possible are executed on time with low levels of goods in process. Complete
orders are scheduled one after the other in each time period but prioritization rules are applied.
LOOR aims to adapt load to capacity and maintain high loads. This involves some order
prioritization. Infinite loading is a method of loading that does not take work center capacity into
account. Orders must still be prioritized in this situation. CORMA does not apply priority rules
to orders that are released early.
8. C
Probable scheduling starts somewhere between the earliest and latest possible start date and
schedules a completion date somewhere between the earliest and latest possible due dates. It
builds in slack time and is very flexible. As order priorities change, slack times can be modified.
9. C
The efficiency quotient measures the actual rate of production for a work center against the
theoretical measurement of standard hours produced. It is used in the calculation of rated
capacity. If an operation is running very efficiently it may produce more units per hour than the
rate recorded as standard for that work center.
Efficiency = Standard hours produced
Actual hours worked
10. A
To find the rated capacity involves the use of utilization and efficiency quotients, which are
explained in more detail below. The basic principle behind rated capacity is that it considers the
amount of time that a work station is actually used and its operating efficiency as well as
theoretical capacity and standard hours per unit.
Rated Capacity = hours available x utilization x efficiency x standard hours per unit
Rated Capacity = 24 x 0.875 x 0.92 6.5

Unit 2
Glossary
Term Definition
Backward This is a technique for calculating the start dates and due dates of an
scheduling operation. The due date for the order is the starting point. The planner works
back in time to determine the necessary start and due dates for each
operation in the order
bill of material A listing of all the subassemblies, intermediates, parts, and raw materials
(BOM) needed for a parent assembly, showing the required quantity of each. It is
used with the MPS to determine items that must be ordered. Also called
formula or recipe.
Capacity The capability of a system to perform its expected function. This could be
the capability of an operator, machine, work center, plant or organization to
produce output per time period. Available and required capacity must be
measured to assist in planning.
Capacity This is the process of determining the amount of capacity needed to produce
planning the required quantities of product in the future. Resource planning, rough-cut
capacity planning, and detailed capacity planning are performed at different
levels of the planning structure.
Capacity- A scheduling principle that increases work- in-process to ensure flexibility in

oriented utilization of capacity. When used appropriately it leads to reduced total cost
materials when taking into account work in process, capacity, and finished goods
management inventory
(Corma)
Central point A scheduling method that starts at a critical point in production and uses
scheduling both backward and forward scheduling to work backward and forward from
that critical point
Constraint- This finite-loading technique is used to plan orders around bottleneck work
oriented finite centers, aiming to maximize total throughput. Small orders are aggregated
loading into one larger lot size and loaded at the constraining work center.
Operations are then backward and forward scheduled as required
Delphi method A qualitative forecasting technique where the opinions of experts are
combined in a series of iterations. The results of each iteration are used to
develop the next, so that convergence of the experts' opinion is achieved.
Demonstrated A level of capacity that is calculated from historical performance data and
capacity therefore proven to be achievable.
dependent Demand that is directly related to or derived from the bill of material
demand structure for another item or end product. Dependent demand should be
calculated rather than forecast. Some items may have both dependent and

Unit 2
independent demand at the same time.
Earliest due A priority rule used in sequencing of queued orders depending on their
date(EDD) operation or order due dates.
Efficiency A measure of actual output compared to standard output.
Exceptions Items that deviate from plan
exponential A weighted moving average forecasting technique in which past records are
smoothing geometrically discounted according to their age with the heaviest weight
assigned to most recent data. A smoothing constant is applied to avoid using
excessive historical data.
extrinsic forecast A forecast based on a correlated leading indicator, for example, estimating
furniture sales based on house builds. Extrinsic forecasts are more useful for
large aggregations like total company sales.
Finite loading A method of loading work centers that ensures the available capacity of the
work station is not exceeded.
Flow production Uninterrupted flow of material through the production process. May also be
called mass production or continuous manufacturing. The plant layout
usually facilitates the flow of the product through the plant.
Forward A scheduling technique that involves progressing from a known start date
scheduling and determining the completion date for an order.
independent Demand for an item that is unrelated to the demand for other items.
demand Examples include finished goods and service part requirements.
Infinite loading Calculation of capacity needed at work centers regardless of the maximum
capacity of the work centers in question
Interoperation The elapsed time between completion of one operation and the beginning of
time the next
intrinsic forecast A forecast based on internal factors, such as an average of past sales.
Job shop A manufacturing environment that produces items to customer specification.

Usually a wide range of product designs are possible and are performed at
fixed locations using general equipment
Just-in-Time A manufacturing philosophy that seeks to eliminate waste in all areas of

(JIT) production and to continuously improve processes.
Kanban A method of JIT production that uses bins or standard lot sizes with some
form of reple nishment signal, such as an empty bin, or by holding up a card.
Kanban is a good example of a ‘pull’ system

Unit 2
Latest start date The last day upon which a given activity may be started without jeopardizing
the project completion date.
lead time Lead time is the span of time required to perform a process.
Load The amount of work planned for a work center or other facility during a
specific period of time.
Load leveling The process of spreading out orders so that bottlenecks are ironed out where
possible
Manufacturing The type of manufacturing strategy currently implemented in a plant. For

environment example, a plant may be laid out according to functional area and covering
several small projects. It is often used to refer to whether a company is
make-to-stock, make-to-order or assemble-to-order
master The anticipated build schedule for those items assigned to the master
production scheduler. The master scheduler maintains this schedule and it drives
schedule (MPS) material requirements planning. It specifies configurations, quantities and
dates for production.
Move time The time spent moving items from one operation to the next.
moving average An arithmetic average of a certain number of the most recent records. As
each new record is added, the oldest record is dropped. The number of
periods used for the average reflects responsiveness versus stability.
Open order A released manufacturing order
Operation time The amount of setup and run time for a specific operation on a specific work
center.
Program A network analysis technique in which each activity is assigned a

Evaluation and pessimistic, most likely and optimistic estimate of duration. The critical path
Review method is applied using a weighted average of these times in order to
Technique estimate the final project duration.
(PERT)
Queue time The amount of time a job waits at a work center before the work commences
random A fluctuation in data that is caused by random or uncertain events.

variation
Rated capacity The expected output of a resource given the efficiency and utilization
parameters
Routing Information on the method of manufacture for an item, indicating the

operations to be performed, their sequence and the work centers at which

Unit 2
they are to be completed/
Run time The amount of time needed to process a specific operation
Scheduled An open order with an assigned due date.

receipts
seasonality A repetitive pattern of demand from year to year or month to month (or other
time period) showing much higher demand in some periods than in others.
Setup time The amount of time between the production of the last item of one run and
the first usable item in another production run for a different product
Theoretical The maximum output capability for a workstation without considering

capacity maintenance or other down times.
Theory of A management philosophy that incorporates logistics, performance

constraints measurement, and logical thinking
trend General upward or downward movement of a variable over time, for

example in product dema nd.
Utilization A measure of how intensively a resource is used, calculated by comparing

available time to actual time
Wait time The length of time a processed item waits at the end of an operation before
being moved to the next operation
Work in Process Work in process is material that has been released for initial processing and
(WIP) is about to or has already undergone manufacturing processes.
work order An order to the machine shop for tool manufacture or equipment
maintenance or an authorization to start work on an activity or product.

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Detailed Scheduling and Planning (Lesson 6)

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Detailed Scheduling and Planning

The Leading Edge Training Institute Limited

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Capacity Planning and Priority Planning

priority plan. Once the master schedule is

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Capacity Planning Issues

Aims and Objectives of Capacity Planning

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Costs of Poor Capacity Planning

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Continuous Process or Flow Production

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Review Q C. It aims to ensure good capacity utilization at a constant level

Process-Oriented Production Structures

Components Step 1 Flow resources Step 2 Flow resources Step 3 Waste

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Data Needed for Capacity Planning

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Elements of Manufacturing Lead Time

Queue time Setup Run Wait Move

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Queue length (hours)

Uncontrolled Queues Excessive Idle Time

Queue length (hours)

Distributing Lead Time

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Sources of Lead Time Element Data

Lead Time Element Source of Data

Data on Work Centers

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Review Q C. Type of production environment, routing, BOM and MPS data

Capacity and Load Sources

Open Orders or Scheduled Receipts

Other Load Sources

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Job shops and Queues

Reasons for Queues before Work Centers

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Central Point Scheduling

Central Point Scheduling and Theory of Constraints (TOC)

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Infinite and Finite Loading

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Finite Capacity Planning Techniques

previously scheduled operations

Process-oriented finite loading

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Constraint-oriented finite loading

5. How is the utilization factor for a work center calculated?

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Order Oriented Finite Loading

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6. All orders planned

7. Are there Deal with

1. Identify and Prioritise Planned Orders

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Applications of Order-Oriented Finite Loading

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Load-Oriented Order Release (LOOR)

Order 5 WC100 WC300