An overview of the theory behind capacity planning, and tools that are available to help aid more effective manufacturing capacity planning.

Why Is Capacity Planning Important?

Effective capacity planning is essential for manufacturing businesses to balance the demands of customers and for the optimal utilisation of manufacturing resources.

However, as the manufacturing process becomes more complicated, it can be time-consuming and frustrating to manually perform capacity planning calculations. This often leads to sub-optimal capacity planning which either disappoints customers or underutilises resources. Both of these results will have a negative effect on company sales and reputation. So, in this article, we’ll take a look at some of the tools available to help perform more effective capacity planning.

Tool #1 – Excel Spreadsheets

Pretty much everyone’s first attempt at managing capacity planning will be with an Excel spreadsheet because it’s a quick way to perform complex calculations. An Excel spreadsheet will let you run a capacity calculation quickly.

Our manufacturing capacity planning excel template will help you to predict shift output and time to manufacture using the calculations outlined earlier.

Pros
– Quick to set up and adjust calculations.
– Relatively simple to understand.

Cons
– Limited to running one or a few scenarios at a time.
– Limited integration to the manufacturing process.

Tool #2 ERP Systems

Some ERP systems will come with a module that allows you to run capacity planning calculations. They can be well integrated into the company business planning systems, and enable accurate forecasting of your company’s ability to meet customer demand.

Enabling this functionality usually requires putting detailed manufacturing information into the ERP system, such as accurate cycle times. A problem we’ve sometimes come across is that the standard times in an ERP are more used for product pricing. They often do not reflect actual process times based on time and motion studies from the factory.

Pros
– Comprehensive capacity planning.
– Integrated into the business planning system.

Cons
– Can be complex to setup.
– Can be complex to implement in the factory.

Tool #3 Capacity Planning Integrated to a Manufacturing Execution System

An MES is in a prime position to handle capacity planning. This is because it already holds very detailed information about product process and cycle times, and also the staffing levels and shift times in a manufacturing business.

Click below to watch a demo video of capacity planning in an MES.

Another benefit is that the MES will hold the most accurate and up to date information about actual process times. These can be updated automatically from online process timing, so there’s no need to be performing manual time and motion studies

Pros
– Detailed capacity planning for manufacturing operations.
– Easy to deploy changes to product routings to optimize the capacity plan.
– Keep improving capacity plan with live feedback data from production times.

Cons
– Not as simple to set up as Excel.
– Not always linked to other business planning systems e.g. parts purchasing.

Capacity Planning – The Theory

There are several ways of performing the capacity calculation, depending on how you need to plan to meet demand. Firstly, we’ll look at calculating output per shift:

Output Per Shift

Output per shift = [Shift Time x Efficiency] / ( [Cycle Time x No Operations] / No Workers or Machines )

So let’s take for example a production line that creates widgets. It currently runs with 4 works performing manual assembly on a single shift.

Shift Time = 8 hours minus 45 minutes breaks = 26,100 seconds
Efficiency = 85%
Cycle Time = 30 seconds
No Operations = 5 (3 x Assembly Ops, 1 x Test, 1 x Inspection)
No Workers = 3

Output Per Shift = [26,100 x 0.85] / ( [30 x 5] / 3 ) = 443 Per Shift

Secondly, we could also calculate how long it will take to manufacture a quantity of product for an order:

Time To Manufacture

Time to Manufacture = [Cycle Time x No Operations x Quantity Required] / Efficiency

Using the example above, let’s say a customer wants to purchase 500 widgets:

Time to Manufacture = [30 x 5 x 500] / 0.85 = 88,235 seconds

It will take 88,235 seconds of manufacturing time to produce 500 widgets, so if we had 3 workers dedicated to this order, how many shifts would it take to complete?

Number of Shifts to Complete = 88,235 / [3 x 26,100] = 1.13 shifts.

So just over 1 shift to produce all 500 widgets in this scenario with 3 workers and process efficiency of 85%.

There are many other ways we could look at this calculation depending on how we wanted to plan our manufacturing process.  It would also be useful to see what would happen if we were to improve efficiency, increase the number of workers or the number of shifts.