A Simple Truth About Capacity Planning

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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.

90 thoughts on “A Simple Truth About Capacity Planning”

  1. Kate Shepard

    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.

    1. Kien Leong

      @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.

  5. Don Eames

    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.

    1. Kien Leong

      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.

  6. Ryan Smith

    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.

  20. paul sun

    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.

    1. Kien Leong

      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.

  21. Donovan Thomas

    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.

  22. Mustafa Ozdemir

    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.

  23. Louis Marbel

    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.

  25. Dave Anderson

    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.

  26. Heen Ming, Phoon

    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.

  28. Gabriele T

    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.

  34. Donald W Bolt

    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.

  41. David Simmons

    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!

  49. Agus Sanusi

    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.

  51. Roger Fisher

    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.

  65. John Beaver

    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.

  66. Declan McTiernan

    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.

  67. m drew

    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.

  70. Minh Duc Bui

    Hi Kein Long,

    Thanks for sharing this article. I totally agree with you that capacity planning should do with time and not with units.
    We have a wide-range of product-mix for our production. So for each product group we need from 40 to 60 minutes to assembly one product. How can I consider it for my capacity planning. Is it a better way than average assembly time = 50 minutes?

    Thank you
    Minh Duc

  74. Howard Goman

    we are ow quantity high mix and very little repeats. engineering builds routers so we have routers at that point to build capacity planning on open work orders.
    as new orders come in and we have to respond to customers with accepting due dates, these do not have routers.
    I need both, router generator for new orders and capacity planning for open POs.
    using router generator and mixing with the capacity planning gives best result for me.
    router generator 1st though.

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