It was easy to see where they were going wrong. Their system was ignoring a simple truth about capacity planning.
This is good news. We can provide the client with a fix that will transform their capacity planning process and get them quick results.
I was consulting to a company who is manufacturing industrial goods. The Operations Director invited us because he was unhappy with their planning capability. He was showing me the system that his planners were using to manage materials and production capacity.
“What are the units on this graph?” I asked.
“Well, the horizontal shows days or weeks. And the vertical tells us how many units we need to make.” He replied.
“And this yellow band? What does that represent?”
He explained that this was capacity. The capacity was indicated in a range because some products take longer to produce than others.
“So, capacity in units can be anywhere in this band, depending on product mix?”
“Exactly our problem. Our planners have to manually check the capacity with production. They try to limit the mix in any single day to make it more predictable.”
This is good news to me. It means we can solve their problem quickly simply by looking at capacity planning in a different way.
The problem here is units of measure. Customers order units of product, purchasing buys units of raw material. It is not surprising that planners think in pieces, cartons, kilos and meters. In a high-volume/ low-mix manufacturing business this is all you may need. A production line is rated in units per hour and calculating capacity is straight-forward.
In a high-mix business, you want to use the same resources to make different products. And those products will likely have a different work content. So the production rate in units per hour is changing.
The obvious point here is that production resources are not measured in units of the product they make. You hire operators, buy machines and then deploy them over time. The products that they make all have a standard time for each operation. Multiply production volume by these standard times to get the load. Compare total load-hours (run plus setup) with capacity (available hours) to get an apples-to-apples comparison.
The simple truth about capacity planning is that it is measured in time. This is a fact that many planners ignore. It is very common to find capacity planning or “level-loading” processes that try to balance production using units of product. The result is either inflexible manufacturing – using single model production lines – or unpredictable capacity.
There are two general trends in manufacturing that make this problem worse: Toward higher mix production and faster response. Customers want more choice and they want it fast.
Furthermore, outsourcing and automation can drastically change the work content in the product. The differences in production time from product to product is set to widen.
These are general trends. Each business has its own product mix, process definitions and customer requirements. I would guess that most readers are finding that product mix is getting bigger, and lead-times are getting shorter. Anyone who is seeing an opposite trend, leave a comment below and let us know!
So, moving from production volume (e.g. in pieces) to production load (in minutes) is a key component of capacity planning. The usual way to do this is with a process routing that defines the standard times for each operation and the work-center or resource type that is required to perform the work.
Some manufacturers have very detailed process routings. They meticulously update the standard times and use them for planning and cost control. Other companies have some process data that would benefit from a clean up. And some manufacturers don’t have standard products at all. They are required to calculate the production times for each and every order they receive.
For some companies, capacity planning can be done by exploding demand tables with a process routing. For others, a capacity planning project will start with a way to generate a process routing.
We have Excel tools that can help with both of these. The Fast Excel Development Template has a tutorial to exploding tables. There are plenty more examples that we can give you to download and customise to your business.
Can you give us some feedback here? We have two types of capacity planning tools that we can give to you for free. There will be an Excel workbook to download and a companion video tutorial to go with it.
What I would like you to do is leave a comment below and tell us which you would like us to release first.
- Process Routing Generator. Choose this one if you DO NOT have a process routing or standard times for each production operation. You may have highly configured products, engineer-to-order or simply not have the data in an up-to-date way.
- Capacity Planning Tool. Choose this option if you DO have a process routing and would like to use it to create capacity planning charts.
Let us know your choice in the comments or by email. Whichever gets the most votes will be developed and released for subscribers to download. The other choice will also be supported, but it will come a little later on.
In the meantime, download the Fast Excel Development Template for free and see how far these standard functions can support your capacity planning. We use this toolset for every thing we do and I hope that you also find it of value.
I look forward to hearing about your choices. Keep a look out for the results of our informal survey.