A Simple Truth About Capacity Planning

by Kien Leong

Capacity Planning Measures Apples

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.

Here is a replica of the chart they were  using to manage 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.

  1. 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.
  2. 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.

{ 74 comments… read them below or add one }

Kate Shepard January 21, 2011 at 6:49 am

Hi
Not having standard products, we need to create a routing for each order. This is time consuming and prevents us to do capacity planning in this way.
I would be interested in routing generator tool, although not sure how this would work without a lot of manual intervention.

Kien Leong January 21, 2011 at 12:23 pm

@Kate
With a routing generation tool we usually use attributes from the product family or parameters from the order. Some configured orders will always need some degree of manual intervention. Most cases are somewhere in between automatic and manual configuration. Sounds like you need an order configurator, but the routing generator can be a good first step. Let me know if you would like to discuss further.

John Ingram January 21, 2011 at 12:10 pm

Kien
capacity planning tool please. we have good routings just need to use them

Burgh January 22, 2011 at 3:25 am

Capacity planning

Gemma Nes January 22, 2011 at 5:22 am

We have customized product and do not have timings in advance. Prefer to get help with order configuration. Thanks!

Don Eames January 24, 2011 at 3:40 pm

Useful blog and I enjoy your articles on production best practices. However for capacity planning, we run lean flow lines to a takt time. No need for capacity planning is easy as we always run to a balanced pace.

Kien Leong January 25, 2011 at 2:57 am

Don
I find it helpful to think about the difference between “Produce to Takt” and “Design to Takt.”
A typical TPS style of production will produce at the same takt rate. This relies on having similar work content for all products running on the line at the same time. In this case, I agree with you that capacity planning is straight forward.
A Demand Flow style of production will design to takt and use takt to balance work across operations. However the actual production rate will change according to daily demand. In this case, particularly with mixed model flow lines capacity planning is more involved and we use tools to help with this.
I thought this might be helpful to illustrate different applications of Takt in a flow line.

Ryan Smith January 24, 2011 at 6:32 pm

I would request a routing Generator. I am currently scheduling a Hardwood mill that runs hundreds of different profiles and skews (most of them to the specific order). I have a feeling something of this nature would be more adventageous to me. Great Blog.

Kenneth Burns January 24, 2011 at 6:41 pm

Capacity Planning as we have routings and standards.

Enrique Fernández January 24, 2011 at 7:06 pm

I think tthat the second (Capacity Planning Tool) is the best in my opinion.
Regrads.
Enrique

Warren January 24, 2011 at 9:26 pm

Capacity Planning Tool. Have routings established, need an effective tool to use them.

Mike January 25, 2011 at 5:39 pm

Process Routing

yarsha January 25, 2011 at 5:52 pm

Process routing

Muhammad Riaz January 25, 2011 at 5:56 pm

Tremendious information.
I wanna get knowledge about PRODUCTION PLANNING IN PHARMACEUTICAL MANUFACTURING ORGANIZATION.

regards,

Yuko Duffy January 25, 2011 at 6:13 pm

Process Routing Generator please.

Marco Mesquita January 25, 2011 at 8:43 pm

I am working with finite capacity scheduling, so I think “process routing” is the best choice for me.

Thanks,

Marco

Will January 26, 2011 at 1:41 am

Capacity Planning

Norm January 26, 2011 at 3:41 am

Capacity planning is what I need the most.

Linda Lowney January 25, 2011 at 8:13 pm

We are a custom shop and only make one or two of any product so I would say number 1 would be better.

Tanawat January 26, 2011 at 8:23 am

Capacity Planning Tool

Mike N January 26, 2011 at 8:58 am

Process routing. We need to shorten lead times and increase productivity with the machinery and team members we have.

paul sun January 26, 2011 at 9:32 am

Hi Kien,
it seems to be good use of SOE and Process Map, isn’t it?
I can’t wait to see it! It will be fascinating!
I think we will have some cooporation chances in the future.

Kien Leong January 27, 2011 at 3:24 am

Hello Paul
You are right. In a DFT line design, the SOE would roll up to create a process map for line design and a routing for capacity planning. Thanks for sharing your view.

Donovan Thomas January 26, 2011 at 9:45 am

We would like to use the process routing generator to take our current production time data and to improve it with a better management tool. We would then like to test the capacity planning tool and see if it will work for our production needs.

Mustafa Ozdemir January 26, 2011 at 10:59 am

Firstly thanks for this article. We don’t have standard products. Also we have to calculate the production times for every order. The order quantity is over of our capacity, and to tell the truth, we don’t know what the capacity of us. Because the standard times are changed in every order. So, i think Process Routing Generator is better for us.

Louis Marbel January 26, 2011 at 3:36 pm

I am interested in the routing generator for a customer in the fast food business with over 3000+ stores that need standard times cleanup and routing to drive capacity planning in mixed (MRP/Kanban) production environment. Ease of use is paramount, and eventually ability for the generated routing to be leveraged in simulation based analysis for new products introduction, equipment upgrades, etc.

Kien Leong January 27, 2011 at 3:39 am

Louis
Thank you for the insight. I would like to get some more background into this and see if we can develop something with this in mind.

mohamed January 26, 2011 at 3:45 pm

Process Routing Generator

Dave Anderson January 27, 2011 at 2:42 am

We had routing for each product, but 10 years ago a lean consultant convinced the management at the time to get rid of them, because they were installing cellular mfg. We will be going to SAP in about 6 months and will need routings again.

Louis Marbel February 2, 2011 at 12:01 am

Dave,
What was the outcome of the LEAN initiative? If you were using Kanban control with LEAN may getting rid of routing makes sense, I don’t know though! I am curious to learn.

L

Heen Ming, Phoon January 27, 2011 at 4:48 am

We do routing first then do capacity planing in accordance to the logic of the BOM structure that management may define based on current stock, ex-stock availability and whether make or buy is cheaper and can complete the job in time to meet the demand.
I think routing generator should come first then capacity planning tools. In fact both are important tools.

Bill Flury January 27, 2011 at 5:07 pm

Process Routing Generator

Gabriele T January 30, 2011 at 2:08 pm

Hi Kien.
Once again – this is my fourth excel planning project since I got in touch with production-scheduling.com – I’m near to complete a excel planning project.This time is a three food plants integrated planning tool. Your website is always rich of suggestions and ideas helping me in my daily job as plant and supply chain manager.
I’m interested in capacity planning tool, but also the routing tool is very interesting for me.
I would like to underline that I’ve succesfully used the FEDT for a balance analisys tool, prooving that the FEDT is a powerful tool for a very wide range of applicantions.

brandon a February 1, 2011 at 11:52 pm

process routing please

Oscar DSouza February 10, 2011 at 12:15 pm

Capacity Planning Tool Please

wang sam February 11, 2011 at 7:53 am

I would like capacity planning tool.

Rich Walker February 16, 2011 at 2:17 pm

Capacity Planning Tool plesae we have routings with cycle times.

Brian February 16, 2011 at 3:43 pm

Capacity Planning Tool Please , we already have process routing system in place .

Donald W Bolt February 21, 2011 at 4:11 am

We currently have proicess routing charts for ecery product we manufacture. We custom build products based on base designs, but every order is made to order. Therefore the cycle times for each process varies. We handle many products and share resources for different product lkines. For example our paint, welding, bending, shaping, machining centers are central resources for many product lines. Each product line is etup for the next order from a new customer demand. We rarely build the same product design more than once.

Brian Hudson February 28, 2011 at 8:42 am

But its somewhat more dificult to see how to go right

tomas vigouroux March 11, 2011 at 4:01 pm

I would prefer a capacity planning tool.

Ashraf Fattah March 14, 2011 at 2:58 pm

I would prefer a capacity planning tool.

Hamidreza Zamani March 25, 2011 at 3:34 pm

Hi
Wonderful files & processes, thanks

I would like to see Capacity Planning first

Ramunas Bytautas May 26, 2011 at 6:06 am

Hello,

Process Routing Generator please.

Mark Kelly May 31, 2011 at 12:19 pm

Process Routing please

David Simmons June 23, 2011 at 5:53 pm

We have multiple cells producing partial components at irregular rates for custom to semi-custom products.
Our routing system, at it’s best,is ineffective and I would like to take a look at your process routing generator.

P.S. Great web site!

Nigel Wallbank June 29, 2011 at 8:38 am

Process routing generator please!!

André Custódio June 29, 2011 at 7:59 pm
André Custódio June 29, 2011 at 8:00 pm

Hi. Capacity planning would be usefull to me. Thanks.

Reggie Walker July 30, 2011 at 9:45 am

We make 80% custom engineer to order product so the process routing generator tool would work best for us.

Karen Caines August 11, 2011 at 10:28 am

We have routings, but no times attached, only processes, so Process Routing Generator first, then Capacity Planning Tool….Thanks – great site!!

mark harrrington September 1, 2011 at 2:08 am

Process routing generator please

Michael Brands October 6, 2011 at 3:51 am

Process Routing Generator please

Agus Sanusi October 17, 2011 at 8:27 pm

Process Routing Generator. Actually I have a routing and standard time already. But I feel it is like unperfect. Because there are so many variance related about the process and standard time. Just want to inform you that i’ve working in a company that performing repair services. There are so many handy craft skill instead of automated machine work.

Emily Huang October 31, 2011 at 5:44 am

Process Routing Generator,I’m a novice,so begin at start.

Roger Fisher November 29, 2011 at 6:43 pm

Process Routing Generator- We work in rebuilding individual electric motors and we have average time for individual process steps. This should help tremendously in planning all of the jobs in the shop.

dante mendoza December 28, 2011 at 8:03 am

Process Routing Generator

mark longstaff February 10, 2012 at 4:29 am

The capacity planning tool please. We build bespoke products and generate routings, we just need to use them properly

Adrian Mata February 11, 2012 at 1:36 pm

Hi,
I am interested in capacity planning tool . We have good routings just need to use them.

Luis Carlos Jaramillo Delgado February 15, 2012 at 7:02 am

Process Routing Generator

Ken Gouh February 28, 2012 at 11:13 pm

My company have many process but no routing data, so i hope Process Routing Generator is able to help.

Brendan Kenny May 2, 2012 at 8:22 am

Process Routing Generator please, we do mostly engineered to order / custom manufacturing.

Samuel Motghare May 28, 2012 at 4:16 am

Capacity Planning Tool.

Matt Campbell May 29, 2012 at 10:08 am

Process routing tool

Low Koon Hock August 11, 2012 at 4:59 am

Process Routing Generator please.

AMIT THAMKE August 13, 2012 at 10:54 pm

pls guide about -process routing generator

marilize October 1, 2012 at 9:16 am

I would l9’ve help wwith process routing generator please?
Thanks,
Mari-Lize

Sarah McDonald September 9, 2013 at 5:43 am

Process Routing Generator

kalikota yadagiri November 5, 2013 at 5:53 am

hi all

please help in machine load planning
calculation with best example & required inputs for manufacturing

John Beaver November 9, 2013 at 10:47 am

The second choice (Capacity Planning Tool) is the only useful for planing our manufacturing, because we do have processes and they should be tied up with the plan.

Declan McTiernan August 3, 2014 at 6:41 pm

The Process Routing Generator would be super to see, as I work for an Engineer-To-Order company and are primarily projects based with a high mix of custom products. I am responsible for the design office and a good capacity planning tool would be really beneficial.

m drew December 5, 2014 at 8:51 am

Firstly, what a fantastic set of tools set in a simplistic environment accompanied with generosity of them; thank you.
Most certainly I would have interest in the solution of a Process Routing Generator. With operations in contract manufacturing primarily with custom build to order this is a serious deficiency in sales to load management and forecasting. Thank you.

louie mok April 13, 2016 at 3:26 am

Actually, I like to look into both because I’m still learning it thanks a lot
Louie

Rick Evans January 18, 2017 at 1:44 pm

Capacity planning tool I think.

Cheers

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