Presented by:

Prakash Agrawal

13ME07IND020

CAPACITY REQUIREMENT PLANNING

Submitted to:

Prof. Dr. Y.M. Puri

Mech Engg Dept

VNIT Nagpur

What is Capacity?

Capacity is the maximum output or volume a system can produce, the maximum work that a system is capable of doing in a given period of time.

By calculating the capacity, the company can determine whether they are capable of completing the project within the timeframe required.

It must be determined at different levels:plant departmentwork center.

Capacity = (no. of machines or workers) x (no. shifts) x (utilization) x (efficiency)

Best operating level is the percent of capacity utilization that minimizes average unit cost.

Difference Between Difference Between Capacity Planning & Capacity Planning &

Capacity Requirement PlanningCapacity Requirement Planning

Capacity Planning:Capacity Planning:Capacity planning is the process of determining the production capacity needed by an organization to meet changing demands for its products.

Capacity Requirement Planning:Capacity Requirement Planning:Capacity requirement planning is the process of determining the amount of labour and machine resources needed to achieve the required production.

Capacity Requirements PlanningA Computerized tool for:

determining capacity that is available and required.Alleviating bottleneck work centers.

Helping planners make the right decisions on scheduling before problems develop.

Verifies that you have sufficient capacity available to meet the capacity requirements for MRP plans.

To identify potential problems before they occur.

Importance of Capacity Decisions

1. Impacts ability to meet future demands2. Affects operating costs3. Major determinant of initial costs4. Involves long-term commitment5. Affects competitiveness6. Affects ease of management7. Impacts long range planning

Types of Capacity

Design capacitymaximum output rate or service capacity an operation,

process, or facility is designed forEffective capacity

Design capacity minus allowances such as personal time, maintenance, and scrap

Actual outputrate of output actually achieved--cannot

exceed effective capacity.

Utilization is the percent of available time spent working.

Efficiency is how well a machine or worker performs compared to a standard output level.

Efficiency and Utilization

Actual outputEfficiency =

Effective capacity

Actual outputUtilization =

Design capacity

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Steps for Capacity Planning

1. Estimate future capacity requirements

2. Evaluate existing capacity

3. Identify alternatives

4. Conduct financial analysis

5. Assess key qualitative issues

6. Select one alternative

7. Implement alternative chosen

8. Monitor results

Reason to use CRP

Bottleneck Management - To prevent bottlenecks, the work centers need to consider

the work that is to be produced at each work center and the time it takes to do the work, then schedule the inventory and time accordingly.

To keep the initial investment of facility as low as possible.

To satisfy future demand of product without shortage.

Basic Strategies for Capacity Planning

The broad classes of capacity planning are:Capacity Lead StrategyCapacity Lag Strategy Average Capacity Strategy

Capacity Lead StrategyLead strategy is adding capacity in anticipation of an

increase in demand. Lead strategy is an aggressive strategy with the goal of

luring customers away from the company's competitors by improving the service level and reducing leadtime.

It is also a strategy aimed at reducing stockout costs.

Capacity Lag Strategy Lag strategy refers to adding capacity only after the

organization is running at full capacity or beyond due to increase in demand

This is a conservative strategy. It decreases the risk of waste, but it may result in the

loss of possible customers either by stockout or low service levels.

Match/ Average Capacity Strategy

Match strategy is adding capacity in small amounts in response to changing demand in the market.

This is a more moderate strategy

Adjustments to Capacity

Increase capacity by:Adding extra shiftsScheduling overtime or weekendsAdding equipment and/or personnel

Reduce load by:Reducing lot sizesHolding work in production controlSubcontracting work to outside suppliers

Adjustments to CapacityReduce capacity by:Temporarily reassigning staffReducing the length of shiftsEliminating shifts

Increase load by:Releasing orders earlyIncreasing lot sizes

CRP Produces Load Profile

CRP uses the information to produce a load profile for each machine or work center.

A load profile:Compares released orders and planned orders with the

capacity of the work center.Identifies under loads and overloads.

Load?Load refers to the standard hours of work assigned to a

facility.

What is the load percent?

Load percent is the ratio of load to capacity

Load percent= loadCapacity

Capacity CalculationsNumbers of hours = 40 Shifts = 1Efficiency = 100%Utilization = 4/5 = 80%Capacity = 40 x 1 x 0.8 x 1.00 = 32 hours

Project 1 capacity = 4 (weeks) x 32 = 128Project 2 capacity = 2 (weeks) x 32 = 64Project 3 capacity = 4 (weeks) x 32 = 128Project 4 capacity = 3 (weeks) x 32 = 96

Load Calculations

Project 1 = 30 x 4 hours per unit = 120 hours

(start by February 15th – must be completed by March 15th)

Project 2 = 20 x 4 hours per unit = 80 hours

(start March 16th – must be completed by April 1st)

Project 3 = 5 x 4 hours per unit = 20 hours

(start April 2nd – must be completed by May 1st)

Project 4 = 15 x 4 hours per unit = 60 hours

(start by May 2nd – must be completed by May 23rd)

Load % CalculationsProject 1 = 120/128 = 94%

Can be completed Project 2 = 80/64 = 125%

Can not be completedProject 3 = 20/128 = 16%

Can be completedProject 4 = 60/96 = 63%

Can be completed

SummaryCRP is an important tool for a company to use in its

strategic planning. It enables a company to determine the resources available to operate at maximum capacity. By operating at maximum capacity, a company will be able to do strategic planning to optimize their profit.

CRP also allows a company to identify potential problems and prevent them before their occurence. Therefore, many problems can be eliminated with the use of the CRP.