So much of what goes into running a manufacturing operation involves planning ahead. You need to be able to see what’s coming, especially when it affects revenue. One of those areas is capacity requirements planning. Proper capacity requirements planning is critical to manufacturing success, as this process determines if a company can even deliver on orders. Many manufacturers today rely on CRP systems to guarantee a smoother, more strategic planning process with fewer errors that could negatively impact their bottom line and customer satisfaction.
What is Capacity Requirements Planning?
Capacity requirements planning is the process of determining whether a company’s available production capacity can meet its production goals. Also known as CRP, capacity requirement planning first looks at the company’s planned manufacturing schedule. This method then weighs the schedule against the company’s production capabilities to see if meeting the capacity is realistic. If the company finds that its production capacity is inadequate, it may alter its production goals or take other steps to bring production capabilities in line with capacity. CRP goes hand in hand with manufacturing requirement planning, which ensures a company has the physical assets to meet production needs.
What are the Steps for Capacity Requirements Planning?
First, it’s important to note that capacity requirements planning can only be as accurate as the data used. If a company is still relying on spreadsheets and/or disparate systems, there’s a chance they won’t have the most accurate and up-to-date data to use in the planning process. A company that uses advanced, connected software will yield more valuable information to work with, since their system will provide real-time data and a thorough look into operations across the company.
Regardless, the following steps should be followed when determining capacity requirements.
Step 1: Assess Current Capacity
To determine your current capacity, you’ll need to collect information such as time studies and live data collection on equipment capabilities. You should look at the number of hours and shifts available, as well as absenteeism estimates and supply chain variables, like vendor performance, lead time and inventory.
Step 2: Develop a Strong Demand Plan
An accurate demand plan is an important next step. Supply chain planning software will provide the most accuracy, since it allows for aggregated demand forecasting, calculating work center capacity by production time, identifying bottlenecks, planning “what if” scenarios, master scheduling and more.
Step 3: Determine Capacity Modification Requirements
With an understanding of capacity and a demand plan, you’ll now need to look at where adjustments are needed to meet demand. Additional shifts or overtime may be required. You may need to outsource certain production aspects. Purchasing additional equipment may also be needed if the demand will be consistent.
How is Capacity Requirement Planning Used in Manufacturing?
Manufacturing relies on well-executed CRP. Without a capacity requirement plan, a company may commit to making goods that it doesn’t have the resources to deliver on time or at all. Having an operations team makes this process easier, as the planning team can confer with Operations to ensure there are enough of the right production staff and machines available. Using a manufacturing ERP system with a CRP analysis tool is also critical to helping a company deliver on demand.
Industries Utilizing Capacity Requirements Planning
Automating manufacturing efforts like CRP is widespread across many industries, but the following are a few examples where CRP is most prevalent.
What are Factors Affecting Capacity Requirements Planning?
The most notable factors affecting capacity requirements planning include:
- Financial investment: You must have the machinery or workforce to invest in.
- Product complexity: Production can be slowed by complex items that require a more skilled workforce.
- Staff availability: There could be a shortage of staff available or even a shortage of skill sets.
- Machine capacity: Working with aged machinery can require short-term repairs. New machinery also requires investment, however.
Benefits of Capacity Requirements Planning
CRP planning provides many benefits to manufacturers, especially when automated software is used to simplify the process and utilize more accurate data. Some benefits include:
- Cost monitoring: CRP allows a company to better monitor costs.
- Flexibility: Because CRP is linked to demand forecasting, capacity can be looked at for seasonal trends, and production requirements can be anticipated.
- Growth planning: This planning, especially when backed with accurate data from a CRP system, is valuable to company decision makers when it comes to determining if new locations are viable based on capacity and/or demand forecasting.
- Improved human capital management: Reliable demand forecasts allow companies to ensure they have not only the right number of staff but also the right skill sets for the required capacity.
- Increased customer service levels: CRP helps companies produce quality items on time, which leads to happier customers.
- Improved profitability: Capacity requirements planning and demand forecasting reduce gaps in the manufacturing process that could lead to an unwise use of resources.
- Continuous improvement opportunities: Effective CRP requires closely looking at business areas that may not have always received proper attention. This gained visibility can lead to awareness of other improvements to make.
ERP Solutions Can Help
Today’s most successful manufacturers don’t rely on spreadsheets. For capacity requirements planning that is faster, easier, and more accurate and effective, companies use ERP software that offers real-time data and a thorough look at how all of their operations are connected. QAD’s manufacturing ERP solutions provide extensive benefits when it comes to better utilizing resources. To find out how QAD’s software can support your business, learn more about our solutions.