Detailed Scheduling and Planning (Lesson 6)

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Detailed Scheduling and Planning

Unit2

Unit 2Detailed Scheduling and

Planning

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Copyright Leading Edge Training Institute Limited i i


Unit2

2004 e-SCP -The Centre for Excellence in Supply Chain ManagementNo portion of this publication may be reproduced in whole or in part.The Leading Edge Group will not be responsible for any statements, beliefs, or opinions expressed by theauthors of this workbook. The views expressed are solely those of the authors and do not necessarilyreflect any endorsement by The Leading Edge Training Institute Limited.

This publication has been prepared by E-SCP under the guidance of Yvonne Delaney MBA, CFPIM,CPIM. It has not been reviewed nor endorsed by APICS nor the APICS Curricula and CertificationCouncil for use as study material for the APICS CPIM certification examination.

The Leading Edge Training Institute LimitedCharter House

CobhCo CorkIreland


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Copyright Leading Edge Training Institute Limited ii i


Unit2

Preface............................................................................................................4

Course Description................................................................................................................. 4

Lesson 6 The Process of Detailed Capacity Planning....................................5 Introduction and Objectives.................................................................................................. 5Capacity Planning and Priority Planning ............................................................................ 5Manufacturing Environments............................................................................................... 8

Production Methods ............................................................................................................... 8Process-Oriented Production Structures ........................................................................... 11

Data Needed for Capacity Planning ................................................................................... 12Lead Time ............................................................................................................................. 13Distributing Lead Time ....................................................................................................... 14

Work Centers........................................................................................................................ 15Calculating Capacity............................................................................................................ 16

Capacity and Load Sources................................................................................................. 17Queuing ................................................................................................................................. 18Scheduling Strategies........................................................................................................... 19

Calculation of Load Profiles................................................................................................ 22Finite Capacity Planning Techniques................................................................................. 23

Scheduling of Manufacturing and Logistics Operations .................................................. 25Mixed Manufacturing .......................................................................................................... 29Capacity-Oriented Materials Management (Corma) ....................................................... 30

Summary............................................................................................................................... 32Further Reading ................................................................................................................... 32

Review ................................................................................................................................... 33Whats Next? ........................................................................................................................ 34

Appendix.......................................................................................................35

Answers to Review Questions.............................................................................................. 36

Glossary........................................................................................................38


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Copyright Leading Edge Training Institute Limited 4


Unit2

Preface

Course Description

This document contains the sixth lesson in the Detailed Scheduling and Planning unit, which isone of five units designed to prepare students to take the APICS CPIM examination. Before

completing the Detailed Scheduling and Planning unit, you should complete the Basics ofSupply Chain Management unit or gain equivalent knowledge. The five units that cover theCPIM syllabus are:

Basics of Supply Chain Management


Master Planning of Resources

Execution and Control of Operations

Strategic Management of Resources

Please refer to the preface of Lesson 1 for further details about the support available to youduring this course of study.

This publication has been prepared by E-SCP under the guidance of Yvonne Delaney MBA,

CFPIM, CPIM. It has not been reviewed nor endorsed by APICS nor the APICS Curricula and

Certification Council for use as study material for the APICS CPIM certification examination.


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Lesson 6 The Process of Detailed Capacity Planning

Introduction and ObjectivesThis lesson examines the characteristics and methods used to ensure sufficient capacity tosupport the material plan. The lesson also looks at how work center and routing data is used and

explains the use of efficiency and utilization ratios in the determination of rated capacity. Thebalance of demand and capacity, time availability and due dates are examined along with finiteand infinite capacity planning techniques. Finally, the lesson explains the integration of

scheduling and capacity planning with material planning for order release and control.

On completion of this lesson you will be able to:

Explain detailed capacity planning at an intermediate level

Explain the effect of the manufacturing environment on the choice of planning techniqueand information requirements

Describe the steps by which work center and routing data are used to schedule orders andidentify resource loads in each time period

Use efficiency and utilization ratios to determine the rated capacity of a work center

Identify load sources for planned and released orders

Explain the effects of queuing on job-shop production

Describe planning, scheduling, and order release preparation techniques in a variety ofproduction environments

Capacity Planning and Priority Planning

Planning for capacity takes place at severaldistinct stages in the planning and execution

hierarchy. Initial top-level resource planningoccurs alongside the sales and operations

priority plan. Once the master schedule iscomplete, a rough cut capacity plan verifies thevalidity of the master schedule. Detailed

scheduling and planning must be balanced bydetailed capacity requirements planning. Note

that the ultimate validation of the plan issuccessful execution, which is referred to asdemonstrated capacity.

Capacity Requirements Planning (CRP) takesplace at the MRP level of the overall planning

process. CRP is used to validate the material plan.

Capacity Definition

Capacity is the ability of a resource to produce output per time period. Capacity required

represents the system capability needed to make a given product mix (assuming technology,

product specification, etc.).

Sales and Operations

Plan

Master Production

Schedule

Material

Requirements

Planning (MRP)

Purchasing and

PAC

Resource Requirements

Plan (RRP)

Rough-Cut Capacity

Plan (RCCP)

Capacity

Requirements

Plan (CRP)

Input/Output Control

Operation Sequencing

Priority Planning Capacity Planning

Sales and Operations

Plan

Master Production

Schedule

Material

Requirements

Planning (MRP)

Purchasing and

PAC

Resource Requirements

Plan (RRP)

Rough-Cut Capacity

Plan (RCCP)

Capacity

Requirements

Plan (CRP)

Input/Output Control

Operation Sequencing

Priority Planning Capacity Planning


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Capacity Planning Definition

Capacity planning is the process of calculating required capacity in each workstation to

manufacture sufficient material to meet requirements. This process may be performed at an

aggregate or product-line level (resource planning) at the master schedule level (rough-cutcapacity planning) and at the detailed or work center level (capacity requirements planning).

Load

The load of a work center, production line, or plant is the amount of work scheduled for and

released to it for a specific time period. The load is usually a measure of standard hours of workor units or production. The load is also referred to as the workload.

MRP

CRP

Capacity

Requirements

Plan

Work CentersRouting

Information

MRP

CRP

Capacity

Requirements

Plan

Work CentersRouting

Information

Capacity Planning IssuesCRP receives all manufacturing orders from MRP and breaks these down into individual

operations. CRP calculates the standard hours required for each batch at each work center. Thesehours are then totalled for each work center in each time period and compared to available hoursfor each work center. For effective capacity planning and consequently efficient production,

manufacturing and service industries need to calculate:

The capacity required to implement master planning effectively

The necessity or otherwise of extra shifts, overtime, short-time work, part-time work orother capacity changing strategies, and the times and places such strategies will berequired

The areas in capacity and orders where adjustments can be made

The possibility of reducing lead times and numbers of orders

Aims and Objectives of Capacity Planning

Capacity planning, like materials planning, aims to ensure high service levels, short deliverytimes, high delivery reliability rates, and flexibility in responding to customer requests. In

addition, it aims to minimize invested capital by reducing work-in-process inventory levels andoptimizing waiting times.

To fulfil these aims, capacity planning must ensure:

Efficient use of available capacity through good capacity utilization at a constant level


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Prediction of bottlenecks

Ability to adapt to changing conditions

Minimal fixed costs in production

Minimal administration costs

To meet the aims and objectives outlined above, large bodies of data from open and planned

orders must be considered. Often, detailed capacity planning is sufficiently complex to requirecomputer software to ensure the optimal balance between conflicting objectives of high service

levels and low costs are met.

Capacity planning aims ultimately to balance the load arising through orders with the capacityavailable to process those orders. The general principles of capacity planning remain the same

despite the planning priorities and manufacturing environments. However, the manufacturingenvironment and planning priority have an effect on determining the technique used and the kind

of master data used as input data. For example, rough-cut routing data may be used for long-termplanning, whereas detailed and accurate routing data will be used in shorter term planning.

Capacity cannot be stored. Therefore, capacity or quantity and due dates must be considered and

planned together. In an ideal situation, the load will always match the available capacity. Evenwhen the capacity varies, due to holidays for example, the load must be adjusted to match.

Conversely, when the load varies, due to seasonal trends for example, capacity must match theload.

Costs of Poor Capacity Planning

Poor capacity planning can lead to an ever-worsening spiral of cause and effect

that adversely affects all aspects of production and, ultimately, customer service.If the number of customer orders increases, the number of work orders to theproduction floor will also increase, leading to an increased load on capacity.When the number of orders is higher than the available capacity, queues of work-

in-process inventory will build up behind each work center.

This leads to a lengthening lead time for each order. As a result the orders are unlikely to meet

there due date (the delivery date required by the customer). To alleviate this problem, plannersmay increase lead times, particularly queue times, to plan more realistically. This results incustomer orders being released earlier, which further increases the load on capacity. The only

way to alleviate the problem at this stage is to increase capacity.

Increased

orders

Increased

orders

11

Greater load onwork centers

Greater load on

work centers

22

longer queueslonger queues

33

Longer actuallead times

Longer actual

lead times

44

Failure to meet

due dates

Failure to meetdue dates

55

Plannersincrease

standard leadtimes

Plannersincrease

standard leadtimes

66

Orders arereleased early


77

Cycle of PoorCycle of Poor

CapacityCapacity

Increased

orders

Increased

orders

11

Greater load onwork centers

Greater load on

work centers

22

longer queueslonger queues

33

Longer actuallead times

Longer actual

lead times

44

Failure to meet

due dates

Failure to meetdue dates

55

Plannersincrease

standard leadtimes

Plannersincrease

standard leadtimes

66



77

Cycle of PoorCycle of Poor

CapacityCapacity


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By planning work center loads ahead of time, queues can be reduced, thereby resulting in shorterlead times, ensuring that orders can be released on time.

Manufacturing Environments

Although material and capacity planning is required in every type of manufacturing

environment, the need for material and capacity may be determined differently depending on thetype of environment. Each environment has the same basic requirements but the relativeimportance of each requirement differs according to the environment. This has a major effect on

the operation of MRP and CRP.

Make-to-Order

Either of the following approaches may be implemented in this environment:

The company produces or purchases standard products which they then modify to meet

particular customer requirements. Effectively, the standard products are made to stockbut are then customized for particular orders.

The company forecast demand and stock materials such as raw material and components

from which they make their products. This shortens the lead time to the customer.

Engineer-to-Order

This type of environment has a very long lead time as all elements of production from initial

product design are part of the customer lead time. The raw materials and other requirements areordered only when a customer order is received. This approach is used for high value productssuch as large specialized machinery.

Assemble-to-Order

In this environment all sub-assemblies are manufactured and stocked as

inventories, using forecasts to determine amounts. The final assemblyinto finished goods is triggered when a customer order is received. Afinal assembly schedule is used to ensure customer orders are fulfilled on

time. Car manufacturers typically use this approach.

Make-to-Stock

A make-to-stock company uses finished goods warehouse replenishment orders or distributionrequirements planning to determine what should be produced. It maintains specified levels offinished goods to meet forecast customer demand. The products are then distributed from

finished goods warehouses. Examples include manufacturers of window frames, cereal, soap andcleaning products.

Production Methods

Many companies may employ several production methods at once. The choice of method is

influenced by the quantity required and the operating philosophy of company management.Where high quantities are needed a dedicated production facility may be set up for a particularitem. Where quantities are low, the item may be produced in a more general purpose facility

along with other items.


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Project Production

AutoCon is a typical project production company. IT employees highly

qualified engineers to design and build custom automation solutions for large

process-oriented manufacturers. AutoCons main business is with breweries.It provides the vats, pipes, valves and software control systems when a

brewery decides to expand its operations. As the product must closely matchcustomer requirements, each design is unique.

Most projects of this nature require custom design. Processes are very flexibleand can provide a broad range of product designs. In such environments, the program evaluationand review technique (PERT) or the critical path method (CPM) are used to evaluate capacity

requirements.

PERT uses an algorithm to identify the critical path of a project, in other words, the

sequence of activities that will determine the completion time. PERT time estimates are

probable figures, based on time estimates for each activity in the critical path, andoffering a range that incorporates pessimistic, most likely, and optimistic estimates.

CPM identifies each activity in a project along with its estimated completion time. Fromthis information, the critical path, or longest path to completion, can be identified. This is

the path that will constrain the overall time for the project.

Load must be planned with capacity at the level of production planning. Detailed capacityplanning is of little use here as capacities must be sufficiently flexible to adjust to the schedule

calculated by CPM.

Job-shops

Job shops are usually characterised by intermittent production. Intermittent production makesitems to match customer specifications. However, this is not typically one-of a kind production.The constraining work center may vary based on the product mix and order volumes.

Detailed planning is very important in a job shop environment where work centers must beflexible in order to adapt to continual load changes and queues. Planning and scheduling capacity

issues ahead of time helps eliminate excess lead time and provide alternative plans to avoidbottlenecks. The techniques discussed in this lesson are most useful with job shop or intermittentproduction, unless capacity is inflexible, in which case, the techniques presented in the

Execution and Control of Operations module are of use.

Kilners pottery company employs a job shop manufacturing environment

to produce customized pieces of pottery. These are based on basic designssuch as vases, urns, jugs and charger plates, but are individua l pieces intheir use of colour and surface pattern. The product mix varies

considerably depending on the time of year and the type of customer.

Batch Production

Batch production is used to produce items of similar design in varied amounts.Usually, the items ordered are a repeat of previous items. A batch manufacturer

may require some days or several weeks to produce an order. This means thatproduction cycle times may be considerably less than elapsed time from order

receipt to order shipment. CRP is useful when the product mix and volumechanges.


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Typical examples of batch manufacturing include the manufacture of soft drinks, biscuits, andvitamin tablets or over-the-counter pharmaceutical medicines.

Assembly Lines

Repetitive manufacture relies on line balancing to adjust production to a specific cycle rate.Repetitive methodologies aim for minimal setups, inventories and lead times. In repetitive

production work orders are unnecessary and production scheduling and control deals withproduction rates. Available capacity is calculated at the level of the MPS rather than to test the

validity of the material plan. The master schedule sets the productionrate, thereby determining the load. Capacity must be adjusted along theassembly line to maintain that rate. Beyond rough cut capacity planning,

there may be no further need of capacity planning in repetitivemanufacture.

Many car manufacturers employ assembly lines to build their products,

as do manufacturers of other mass-produced electronic goods such askettles, CD players, televisions, etc.

JIT Production

As with repetitive manufacture, capacity planning in a JIT environment is mainly complete at

MPS level. It involves determining the type and number of Kanban cards needed for eachKanban feedback loop. However, the principles of infinite loading apply to JIT-Kanbanproduction. The Toyota factory is the ultimate example of a JIT production environment. Toyota

was the originators of the Just-in-Time philosophy.

Continuous Process or Flow ProductionThe physical design of many process facilities mayitself be a constraining factor in planning. Capacitywill mainly depend on the construction of the plant

as there are minimal interruptions in the actualprocessing. The choice of materials often tends to be

limited. Both material and detailed capacity planningmust consider specific data structures and schedulingtechniques compared to those suitable for job shops.

In this type of industry Execution and Control of Operations is probably more important than

capacity requirements planning. Oil refineries and electricity generating plants are examples ofcontinuous process manufacturing environments.

Combinations

Some companies incorporate several different manufacturing

environments under one roof. For example, a manufacturer ofconfectionary products may have continuous production of chocolate and

candy which are the components of batch-produced items such as boxesof soft centers or chocolate-covered toffees.

It is unlikely that a single system would satisfy the planning needs in such an environment. The

best approach is to choose the most appropriate tools for each production environment althoughthis may necessitate maintenance of several different systems.


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1. Which of the following statements about CRP are correct?

A. It balances and validates detailed scheduling and planning at the MRP levelB. It provides a detailed plan of scheduled operations

C. It aims to ensure good capacity utilization at a constant levelReview Q

D. Poor CRP leads to increased queues and lead times

Process-Oriented Production Structures

Some of the typical characteristics of the process industry are by-products, production structures

with cycles, and continuous flow production. Material and capacity are equally valuable in

production processes. Process-oriented production sheets (also called process structures, processtrains, or production models) are often used in process-oriented industry. The following diagramis an example of a process-oriented production structure.

Process 1

Step 1 Flow resources Step 2 Flow resources Step 3

Flow resources

Process 2


Primary

Product

Raw Material

Energy

Capacity

Equipment

By-product

By-product

Stage 1

Stage 2

Process 1

Process 2

Stage 3

Final Product

Components Waste

Process 1


Flow resources

Process 2


Primary

Product

Raw Material

Energy

Capacity

Equipment

Raw Material

Energy

Capacity

Equipment

By-product

By-product

Stage 1

Stage 2

Process 1

Process 2

Stage 3

Final Product

Components Waste

An item in production goes through several stages and each stage often produces by-products. As

it may not be possible to stock intermediate products during the stage, flow resources must bedefined.

A production stage can be split into individual processes. Items, capacity and production

equipment are allocated to a process, which is divided into steps or unit operations. Each stepcorresponds to an individual operation in a routing sheet.

For example, ABC Beverages produce fruit smoothies. This involves 3 production stages:squeezing and crushing fruits, combining and treating the ingredients, and finally, packaging.


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In the first stage, each individual fruit is prepared as a smoothieingredient. This may involve a combination of washing, peeling,

crushing or squeezing depending on the type of fruit. This stageinvolves manual labour, machinery, and power to transform the

raw materials into fruit juice. The by-products at this stage arepeels and pulp.

In stage 2, these fruit juices are mixed with the aid of machinery

and then pasteurised. There is little waste at this stage.

The final stage of production involves filling bottles, sealingbottles, and labelling them. Although mostly automated, it

requires manual supervision. Some waste can occur due tomachine unreliability. Usable resources include fruit, capacity

and equipment.

Data Needed for Capacity Planning

Routing

A products routing information is the data detailing the specific method of manufacture for thatitem, including:

The operations to be performed

The sequence of those operations

The work centres used to perform the operations

The standards required to set up and run the operationsPossibly information on tooling, operator skills, inspection and testing.

Each part, assembly, or product has its own routing information. Products may follow differentpaths through the work centers. Often the number of possible routes is large. For example, apharmaceutical company has four tablet rooms, three blister packing stations, 2 bottling stations,

and 1 final packaging room. Any item produced there could follow one of 20 routes.

Routing Data

Routing data includes information on the sequence of operations needed to complete amanufacturing order.

The routing data includes:

An operation identification code (often numbered in units of 10 to allow for extraoperations)

Operation description (identifies work to be done)

Planned work center (usually along with the operation description)

Standard setup and tear-down time

Standard run time per unit

Tooling requirements.


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2. At the MRP/CRP level, which of these techniques are used in job shop

production?

A. CPM

B. PERT

C. Backward schedulingReview Q

D. Level production planning

Lead Time

In materials management, lead time is a basic part of manufactured and purchased products. The

Bill of material and routing sheet for each item generally contain all the information required toestablish lead times.

Definition

Lead tie is the span of time required to perform a process or series of operations. In this section,

we are looking at lead time as it relates to the total time needed to produce an item. Lower-levelpurchasing lead time is not considered.

Elements of Manufacturing Lead Time

Manufacturing lead time comprises several elements, some of which are more flexible and

subject to change than others. Each element is discussed below.

Queue time Setup Run Wait MoveQueue time Setup Run Wait Move

Queue Time

Queue time refers to the amount of time which is spent waiting at a work center before work isactually performed. This element of manufacturing lead time is particularly prone to increasewhen efficiency of production is lost. Queue time is often assumed to account for 90% of total

manufacturing lead time. In many job shop environments, great efforts are made, employing JITtechniques, to reduce queue time.

Queue times can vary greatly and are therefore difficult to estimate. Queue time is affected bythe balance between load and capacity, unplanned downtime, absenteeism and rework. Atdetailed capacity planning, an approximate estimate of load between time periods is attempted. It

is unnecessary to go any further than that.

Queues can be reduced by reducing setup times, leading to reduced batch sizes. It can also be

reduced by ensuring that a work center is not working to complete capacity so that it can speedup to reduce any queues. Sometimes extra employees are sent to work centers where queuesbegin to build.

Queue management aims to control lead time and fully utilize bottlenecks. The first step is to

examine the nature of the queues at the work center and then apply techniques such as operationoverlapping and operation splitting where required.


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The following diagrams show the types of queue that may be encountered.

Excessive Queues

0

20

40

60

80

10 0

1 2 3 4 5 6 7 8 9 1 0

Days

Queueleng

th(hours)

Managed Queues

0

2 0

4 0

6 0

8 0

1 0 0

1 2 3 4 5 6 7 8 9 10

Days

Queueleng

th(hours)

Uncontrolled Queues

0

20

40

60

80

10 0

1 2 3 4 5 6 7 8 9 1 0

Days

Queuelength(hour

Excessive Idle Time

0

2 0

4 0

6 0

8 0

1 0 0

1 2 3 4 5 6 7 8 9 10

Days

Queuelength(hour

Excessive Queues

0

20

40

60

80

10 0

1 2 3 4 5 6 7 8 9 1 0

Days

Queueleng

th(hours)

Managed Queues

0

2 0

4 0

6 0

8 0

1 0 0

1 2 3 4 5 6 7 8 9 10

Days

Queueleng

th(hours)

Uncontrolled Queues

0

20

40

60

80

10 0

1 2 3 4 5 6 7 8 9 1 0

Days

Queuelength(hour

Excessive Idle Time

0

2 0

4 0

6 0

8 0

1 0 0

1 2 3 4 5 6 7 8 9 10

Days

Queuelength(hour

Setup Time

The time needed to prepare a machine or other resource for the operation it is to perform is

called set up time. It is measured from the time of production of the last good piece of one itemuntil the time of production of the first good piece of the next item.

The activities involved in setup may include:

Preparation of equipment

Assembling a work stations

Tear-down of previous operation

Internal elements while the machine is switched off, for example, rethreading labels on alabelling machine.

External elements: activities performed while the machine is running, for example,calibrating the fill level on a bottling machine.

Run Time

Run time is the amount of time needed to perform an operation on a specific piece or lot oncesetup has been completed.

Wait Time

This is also called idle time and refers to the amount of time a job remains at a work center after

an operation has been completed but before it has been moved onto the next operation.

Move TimeMove time is the amount of time spent in transit from one operation to another.

Distributing Lead Time

Some of these elements of lead time represent a load on work centers while others do not. Queue

time and wait time for example, do not impose a load on any equipment or resources but setuptime and runtime do.

The total lead time for a manufacturing order is calculated by adding together all the lead time

elements across all the operations detailed in the routing. As the order progresses through theroute, the operation times in each work center can be recorded. The routing guides the detailed

capacity planning process in the same way as the BOM guides the MRP process.


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Operation and Interoperation times

Operation time is used to denote time that is used in setup and run of operations on a work

station making it unavailable for other use. Interoperation time includes wait time, move time,

and queue times. These use up space and transport facilities, but not work center facilities, andtherefore do not constitute load.

Sources of Lead Time Element Data

The different elements of manufacturing lead time can be found or measured in various ways.

Some of the typical sources of lead times are displayed in the following table:

Lead Time Element Source of Data

Queue time Average demonstrated queue time

Setup time An engineering standard value

Run time Engineering standard value

Wait time Estimation based on experience

Move time Distance to travel multiplied by the move rate

Note that the runtime and often the setup time create a load on the work centers. The other lead

time elements do not: they constitute interoperation time. Notably, only one of the elements ofmanufacturing lead time actually adds any value to the product: that is run time. The other

elements are of no value whatsoever to the customer.

Work Centers

A work center, or load center is a production area, usually comprising several people and

machines with identical capabilities, which counts as a single unit in capacity requirementsplanning. A more detailed definition of the term work center may be found in the APICS

Dictionary. In job shop environments, work centers are often separate departments.

A work center may be physical or virtual. For example, a company that employs tele-workers toprovide design documents for various publications will have a team of designers scattered across

the country or even internationally. However, a group of designers on a similar project will becounted as one work center.

Data on Work Centers

Detailed information on capacity and lead times related to each work center is crucial foreffective capacity planning. The information available on work centers usually includes the

following:

Work center identification code

Description of work center

Number of scheduled shifts

Number of machines, work stations, and/or operators, depending on which of these limits

capacity

Hours scheduled per shift

Workdays per period


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Utilization and efficiency factors

Planned queue time (a timing factor used to calculate lead time)

Calculating CapacityCapacity may be defined and calculated in a variety of ways, usually involving measures such as

theoretical capacity, demonstrated capacity, rated capacity, utilization or efficiency quotients.Rated capacity is used when deciding on the load to be scheduled as it allows for setup and runtime.

Theoretical Capacity

Theoretical capacity is a simple calculation based on the amount of time a work station is

available. For example, if there are 4 machines available for one 8 hour shift on five days of theweek, the overall hours available will be 320 machine hours. Dividing figure this by the standardhours per unit (.2) gives a theoretical capacity of 1600 units.

Theoretical capacity = no. machines x no. hours available x standard hours per unit

Demonstrated Capacity

Demonstrated capacity is derived from historical records of the work station capacity to date. Itis usually an average figure based on several months worth of data.

Demonstrated Capacity = sum of output in last n periods

Number of periods (n)

For example, if the output of a unit in the months of January through June was 280, 220, 270,275, 290, and 265, the average output would be equal to 1600 divided by 6, or just under 267.

Rated Capacity

To find the rated capacity involves the use of utilization and efficiency quotients, which are

explained in more detail below. The basic principle behind rated capacity is that it considers theamount of time that a work station is actually used and its operating efficiency as well astheoretical capacity and standard hours per unit.

Rated Capacity = hours available x utilization x efficiency x standard hours per unit

Utilization

The utilization quotient is a measure of the amount of total hours available that were actuallyworked. This cuts out time spent on setup or repair during the production run. Only time whenthe machine is running productively is counted in this measure.

Utilization = Actual hours worked

Total hours available

Efficiency

The efficiency quotient measures the actual rate of production for a work center against thetheoretical measurement of standard hours produced. If an operation is running very efficiently it

may produce more units per hour than the rate recorded as standard for that work center.

Efficiency = Standard hours producedActual hours worked


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3. What data is required for capacity requirements planning?

A. Forecast demand, lead times and work center capacity

B. MPS data, BOM information, utilization and efficiency ratings

C. Type of production environment, routing, BOM and MPS dataReview Q

D. Lead times, work center capacity, utilization, efficiency, and routing data

Capacity and Load Sources

Detailed capacity planning must take into

account all possible sources of load thatcan be predicted in advance. These include

items such as open and planned orders,rates of rework, scrap and yield, scheduleddowntime, testing time, and production of

extra material needed for testing.

Open Orders or Scheduled Receipts

Information on open orders is maintainedin an order status file in production control.

The information will include the due date,order quantity, and the number of

operations completed / outstanding for theorder.

Planned Orders

Planned order releases and firm planned orders may be directly taken from MRP to help in thecapacity requirements planning process. The information required includes the release date,

receipt date and order quantity for each planned order.

Other Load Sources

Although not always easy to predict, it is important to include allowances for other sources of

load such as rework, scrap, yield, downtime, production of samples, test material, or other non-saleable items.

Load

Input Rate

Orders

Capacity

Output

Manufacturing

Lead Time

Load

Input Rate

Orders

Capacity

Output

Manufacturing

Lead Time


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Queuing

The primary objective of detailed capacity planning is to show a comparison between the loadimposed on a work center and the capacity of each work center over a period of time. In each

time period capacity overload or underload may be identified and, if necessary, replanning cantake place to redress the balance.

Capacity is the rate at which work can be accomplished. Therefore, the rate of flow into a work

center, which constitutes the load on that work center, must be determined so that it closelymatches the capacity of the work center. If the flow or orders exceeds available capacity, queues

will form at the beginning of the work center. If the flow of orders reduces or capacity isincreased, the load will then become stable or even decline.

Detailed capacity planning is an attempt to regulated the arrival of work orders and the capacity

of the work center in order to achieve a steady flow without buildup of queues. Queues lengthenwork center lead time and are to be avoided as this will contribute to the overall manufacturing

lead time for the item.

Job shops and Queues

In a job shop environment, good utilization of

capacity and short queue times are impossible toachieve simultaneously. If capacity utilization isclose to 100%, queue times increase

dramatically. For this reason, most job shops are

planned with capacity utilization significantlybelow 100%.

While it is often necessary to build up queues atbottleneck work centers in a process to ensure

high utilization, in a job shop where no one workcenter creates a bottle-neck or constraint on the

process, it is more important to reduce queuesthan to achieve high utilization.

Reasons for Queues before Work Centers

At any point where the rhythm of operation in a particular work center fails to correspond to therhythm in which orders are received, a waiting queue begins to build up. To minimize lead times,

excessive queues should be avoided, although there are certain valid reasons for maintainingqueues between workstations such as those listed below.

To guard against disturbance on a workstation such as scrap, rework, material shortage,

or absence of operator

To improve utilization of a constraining work center

To guard against imbalances in process time

To cushion disturbances around workflow, such as replenishment of materials or on-the

run maintenance of machineryTo balance flow around bottleneck work centers

100%

MeanQueue

Times

10

40

60

Utilization100%

MeanQueue

Times

10

40

60

Utilization


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Unit2

Queues to reduce production costs, for example, to save on setup time

To motivate workers as high queue levels tend to increase speed of work, although it is

important to ensure the queue is not big enough to demoralize workers

Queues may be deliberately planned to address some of the issues listed above. However, thoseplanning or tolerating queues must remain aware that queues result in increased lead times and

increased work-in-process (WIP) inventory. Both of these mean fewer inventory turns andtherefore a greater amount of money is tied up in WIP inventory. These disadvantages must be

weighed against the possible advantages of maintaining queues.

Scheduling Strategies

Using techniques such as scheduling strategies, load profile calculations, finite and infiniteloading, the capacity of a plant can be evaluated. By comparing and contrasting the results of thedifferent techniques, much can be learned about current operations and possible methods of

optimizing the operation.The method of scheduling used in an organization will depend on the following factors:

The volume of orders

The nature and complexity of operations

The need to minimize completion time

The need to maximize utilization

The need to minimize WIP

The need to minimize customer wait time

Backward Scheduling

With backward scheduling, the latest due date for an order is calculated. Then the lead time is

applied to determine the latest start date for the production of that order.

Forward Scheduling

Forward scheduling begins with the order start date (the earliest start date for the order) and

calculates the earliest due date for each operation and subsequently the earliest completion datefor the order.

OP 10 OP 20 OP 30 OP 40

Backward Schedul ing

OP 10 OP 20 OP 30 OP 40

Forward Scheduling

Earliest

possiblestart date

Latestpossibledue date

Time

OP 10 OP 20 OP 30 OP 40

Backward Schedul ing

OP 10 OP 20 OP 30 OP 40

Forward Scheduling

Earliest

possiblestart date

Latestpossibledue date

Time

It is a good idea to perform backward scheduling from a customers requested date to determine

a start date. If the start date has already passed, then it will be necessary to forward schedule


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from the current date to provide an accurate due date, which can then be communicated to thecustomer.

Capacity requirements planning usually uses backward scheduling as this is the most efficient

use of time and resources while ensuring that the customers requested due date is met.

Central Point Scheduling

This technique combines both forward and backward scheduling. The central point date is thestart date of a critical operation, for example, one that is performed at a constraining work center.

This critical operation determines the rest of the lead time and therefore both the start and duedates. In other words, the start and due dates for the order are dependent on when the order canbe processed on the constraining work station.

Earliestpossible

start date

Latest

possible

due date

Time

OP 30 OP 40

Forward Scheduling

OP 10 OP 20

Backward Scheduling

Critical PointEarliestpossible

start date

Latest

possible

due date

Time

OP 30 OP 40

Forward Scheduling

OP 10 OP 20

Backward Scheduling

Critical Point

OP 30 OP 40

Forward Scheduling

OP 10 OP 20

Backward Scheduling

OP 10 OP 20

Backward Scheduling

Critical Point

From the central point, which marks the beginning of the critical operation, forward schedulingis used to set subsequent operation times and due dates, while backward scheduling is used todetermine the timing of all operations that must occur before the central point.

Forward scheduling tends to have all operations completed as soon as possible, thereby bringingforward the due date. Backward scheduling has the opposite effect, where operations are timed

to ensure that the order will be complete just in time for the latest possible due date. Datesdetermined by central point scheduling usually fall somewhere in between.

Central Point Scheduling and Theory of Constraints (TOC)

Central point scheduling is useful for constraint-oriented finite loading. The theory of constraintsinvolves drum-buffer and rope scheduling, where the drum is the constraining operation in the

process and therefore sets the tempo of the entire process. The buffers are queues in the processto guard against the constraining workstation operating at less than full capacity, and the rope isthe Kanban or other mechanism that moves work along the process. Performance measurement

of throughput, inventory and operating expense is important to ensure the process is running

smoothly, and thinking process tools are used to identify the root causes of any problems andpotential process improvements.

Optimized production technology (OPT) is a practical application of the theory of constraintswith which central point scheduling can be very effective.

Quite often the earliest start date is the current date, particularly for urgent customer productionorders or early released orders. In such cases, probably scheduling may be used.

Probable Scheduling

Like central point scheduling, dates determined by probable scheduling fall somewhere inbetween the extremes of first possible starting date and last possible due date as determined by

forward and backward scheduling respectively. Probably scheduling builds in slack time. Inbackward scheduling, slack time is the difference between the latest possible start date and the


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earliest possible start date. In forward scheduling it is the difference between the earliest possibledue date and the latest due date.

Slack time provides for flexibility in planning. Positive slack time (where extra time is built in

between operations on top of expected wait, move, and queue times) leads to longer lead times.Negative slack time (where time periods between operations are shortened) requires that lead

times be shortened. The example below is of probable scheduling using positive slack time incomparison with forward and backward scheduling.

OP 10 OP 20 OP 30 OP 40

Backward Scheduling

OP 10 OP 20 OP 30 OP 40

Forward Scheduling

Earliest

possiblestart date

Latestpossible

due date

Time

OP 10 OP 20 OP 30 OP 40

Probable Scheduling

OP 10 OP 20 OP 30 OP 40

Backward Scheduling

OP 10 OP 20 OP 30 OP 40

Forward Scheduling

Earliest

possiblestart date

Latestpossible

due date

Time

OP 10 OP 20 OP 30 OP 40

Probable Scheduling

The technical process itself determines the duration of operations and the technical and

interoperation time. Slack time can only be gained by increasing or reducing non-technicalinteroperation times or administration times. Probable scheduling determines the lead time

stretching factor, a numerical factor by which the non-technical interoperation and administrativetimes are multiplied.

By combining several strategies, it is possible to build a powerful simulation of the capacity

scheduling process.

4. Which of the following is NOT a load source that must be accounted for inCRP?

A. Open orders and scheduled receipts

B. Planned orders from MRP

C. Rework, yield or downtimeReview Q

D. Sub-contracted orders


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Calculation of Load Profiles

The load profile, as described in the APICSdictionary, is the future capacity requirements

based on released orders, planned orders, or bothover a specified time period. Often, the load profileis displayed as a bar chart, which helps to quickly

identify overload and underload. Detailed capacityplanning usually involves the development of load

profiles for each work center.

The next lesson in this module will demonstrate the mechanics and logic of lead timecalculation, forward scheduling, load calculation, and resulting load profiles.

Infinite and Finite Loading

Unless there is flexibility available in capacity and order due dates, it is not possible to resolve

planning problems through balancing load and capacity. By ensuring flexibility in either or both,capacity planning techniques may be employed to resolve planning problems. The techniquesused are based on either modifying times or modifying capacity. They can be classified as either

infinite loading (without regard for capacity) or finite loading techniques.

Both approaches are based on the fact that:

If enough overall flexibility is available, all orders can be planned using batch procedure without

the planner. Once planning is complete, the planner may intervene daily or weekly to resolve

unusual situations.

If there is little or no flexibility, planning takes place order for order with each new order addedto already planned orders. The planner may, at any point, change due dates or capacity levels.

Capacity

Finite Loading

Capacity

Infinite Loading

Capacity

Finite Loading

Capacity

Infinite Loading

Infinite Loading

Infinite loading calculates work center loads by time period but does not take into considerationthe capacity of each work center. The main aim of infinite loading is to ensure scheduled due

dates are met with the optimal control of fluctuation in capacity requirements. It is useful whenmeeting due dates are prioritized over other factors as would be the case with customer order

production in a job-shop environment.

In many cases, where it is possible to modify capacity significantly on a day to day basis, infiniteloading techniques, which plan load by time period without regard to capacity, are the best

techniques for production activity control (PAC). Short-term flexibility of capacity is animportant principle in JIT manufacturing.


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Finite Loading

Finite loading does not allow any work station to be loaded beyond its capacity. To prevent this

occurring it may be necessary to change start or due dates. In finite loading, time rather than

capacity is the variable parameter. Finite loading aims to optimize capacity utilization over time.It is useful in continuous flow production and other environments where limited capacity is the

most pressing planning issue.

Finite Capacity Planning Techniques

Manufacturing environments that employ assembly line or process-flow production are oftensubject to inflexible capacity. In addition, many companies although flexible with regard to

capacity over the longer term, must firm up capacity levels in the short term. In these cases,finite loading techniques must be used at the detailed capacity planning level and often at higherlevels also, such as rough-cut capacity planning and resource planning. This is particularly true

of continuous flow production environments.

Finite capacity planning, where load never exceeds capacity, is most effectively illustrated by

portraying load as a horizontal bar, as in Gantt charts. This makes it easier to visualize the loadon each workstation and to identify problems of operation planning. For example, the diagrambelow shows how two operations for a new order are slotted into the existing planning

arrangements. Notice how, when accommodating earliest start date and the need forinteroperation time between the two operations required to complete the order, the secondoperation must be completed in two lots, before and after a previously scheduled operation.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

WS 1

WS 2

WS 3WS 4

WS 5

previously scheduled operationsoperation 232.20

operation 232.40

A key input in this type of scheduling is the priority of the order. Priority rules for operations andorder sequencing are important aspects of finite loading techniques. Many of them also providefor the rescheduling of previously scheduled orders. Most finite loading techniques are based on

the following methods.

Process-oriented finite loading

This approach aims to minimize delays suffered by individual operations and thereby reduces thepotential delay of the entire production order. Each operation is planned by time period on thebasis of order beginning with the start date determined by lead-time scheduling. This involves

determining order priority rules to ensure operations are scheduled, using sequencing rules, toachieve maximum throughput. Queues upstream of work centers must be monitored and

adjusted. This type of planning results in an actual working program for the duration of theplanning horizon.


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Order-oriented finite loading

The goal of order-oriented finite loading is to enable the completion of as many orders as

possible. Those orders that cannot be scheduled must be assigned new start and due dates and

then monitored. This technique is the most commonly used finite loading technique. It isexplained in more detail in the next lesson.

Constraint-oriented finite loading

This approach plans orders around bottleneck capacities. It uses optimized production

technology (OPT) to link scheduling dates and available capacity. To begin with, only orderswith a minimum batch size are generated. These lots come together at bottleneck capacities butare kept apart in other operations. After this, all operations at the bottleneck work stations are

scheduled. When this is complete, backward scheduling is used to schedule operations prior tothe bottleneck and forward scheduling is used to schedule those occurring after the schedule. The

backward and forward planning assumes normal lead times. This is a similar approach to the

central point scheduling theory explained earlier in this lesson.

To prevent overloading any workstation, finite loading techniques evaluate latest start dates,

earliest completion dates and various other combinations of start and end dates usingmathematical modelling techniques.

Rule-based and constraint-based finite schedulers are used for rapid problem-solving, usuallywith the aid of supply chain management software. Such software can maintain a description ofthe nature of a production and logistics network in a company along with constraints at any

point. Another module of the software will make use of this detailed description to performadvanced planning and scheduling within feasible planning time. The algorithms used by APS

software include mathematical modelling techniques such as branch and bound, linearprogramming, simulated annealing, and genetic algorithms, and newer techniques such asconstraint-based scheduling and case-based reasoning.

5. How is the utilization factor for a work center calculated?

A. Dividing the standard hours produced by the actual hours worked

B. Dividing the output over several periods by the number of periods

C. Dividing the actual hours worked by the total hours availableReview QD. Multiplying the number of hours worked by the standard hours per unit


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Scheduling of Manufacturing and Logistics Operations

Its important that material planning, scheduling and capacity planning are all closely linked withthe common aim of optimizing costs and order delivery times. To ensure this happens, shop floor

control must be able to optimally distribute the amount of work to be completed within aparticular time period. Detailed capacity planning techniques such as finite loading techniques ormixed manufacturing techniques can help to achieve this outcome.

Load Levelling

Load leveling is important in shop floor control. This means that the

amount of work to be completed in a particular time period should beevenly distributed and readily achievable. Load leveling or capacity

smoothing as it is also called, is defined more comprehensively in theAPICS dictionary.

Order Oriented Finite Loading

Order-oriented finite loading achieves maximum capacity utilization or ensures that as manyorders as possible are executed on time with low levels of goods in process. Complete orders arescheduled one after the other in each time period. If a time period begins with an empty load, any

orders that have already started are scheduled first, and only those operations that have not yetbeen carried out are considered.

Strategy

Priority rules are determined that will enable the completion of as many orders as possible.Orders that cannot be scheduled must have their start and due dates modified and must be closely

monitored.

Process

There are seven main stages in the order-oriented finite loading decision process. Several of the

stages form decision points that loop back to previous process stages. Initially, orders areplanned and handled according to priority. The next stage involves handling, in the correct

sequence, the operations planned for a specific order, and loading each operation to theappropriate work center. At this point, if the capacity limit has been reached, an exception rule

must be applied.

This process repeats until all the operations for a specific order have been planned. The nextorder in the priority list must be determined and planned in the same way as before.

When all orders have been planned, or unloaded if sufficient capacity did not exist to plan themall, then the exceptions raised at earlier stages must be dealt with, either by raising capacities orshifting due dates or start dates. The following diagram illustrates the process, which is

explained in more depth below.


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Unit2

2. Load workstation

4. Apply exception rule

1. Identify orders

and priorities

3. Capacity limit

reached?

5. All ops planned?No

No

Yes

Yes

6. All orders planned

or unloaded?

Yes

7. Are there

exceptions to deal

with?

Deal with

Exceptions

No

Start

Finish

2. Load workstation

4. Apply exception rule

1. Identify orders

and priorities

3. Capacity limit

reached?

5. All ops planned?No

No

Yes

Yes

6. All orders planned

or unloaded?

Yes

7. Are there

exceptions to deal

with?

Deal with

Exceptions

No

Start

Finish

1. Identify and Prioritise Planned Orders

The first step is to ensure that all necessary orders to be planned within the planning horizonhave been identified in the system. Once that is complete, the orders must be treated according todefined priorities. Generally orders already begun and all orders with start dates within the

chosen time limit will be planned. Orders might then be sequenced according to:

The proximity of the order start date, with fixed start date orders loaded first

Proximity of the order due date, using the earliest due date available

The ratio of order lead time divided by the time still available for the order. In otherwords, orders that will require a high level of operation time and little slack within the

available time must be scheduled first.

The ratio of remaining lead time for the order divided by the number of remainingoperations


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Order priorities originating from external factors, such as a rush order for a key customer

Any combination of the above priority rules.

2. Handle and load operations in order

Once the orders have been identified and listed in order of priority, the operations are loaded towork centers, working wither from start date forward, or from due date backward. Interoperation

times such as setup and move time are factored in but queues are not considered.

3. Apply Exceptions

When an operation must be started on a work center that has already reached full capacity for theperiod in question there are three exception rules that can be applied:

Load without considering available capacity, which may be useful if the operation to be

performed is quite short or the order has already begun.

Defer the operation until the next period where the work center has available capacityUnload the entire order and demote it down the list or priorities.

5, 6, and 7. Check the planning status

At step 5, an operation has been loaded and the system must check for any outstanding

operations for that order. If there are further operations to be planned for the order, the nextoperation is selected and steps 2 and 3 are repeated. When all operations for an order have been

completed the system moves on to the next check.

The second check is performed when the operations for an order have been planned. The systemmust now check to see if all orders have been planned or otherwise dealt with. When there are

more orders to plan, step 1 is completed to identify the next order in the priority list. Steps 2 and3 are completed for each operation in that order. Only when all orders are planned or unloaded,

does the system finally break out of the loop and perform the final check.

The last check is for any outstanding exceptions that have not already been dealt with. If these donot exist, the planning process is complete. Where they do exist, contingency plans must be

applied.

Apply Contingency Plans

Some of the contingency plans that may be adopted include the following:

For every capacity that is overloaded in a particular time period, either provide morecapacity, or unload orders.

For orders that will not be completed on time defer the order of deliberately increasecritical capacity in order first to unload the order.

For every unloaded order, bring forward the start date or, if the due date is flexible, deferthe order. It may also be possible to increase critical capacities so that the order can beloaded again.

Any unloaded orders remaining after such contingencies have been applied will then berescheduled. This can either be performed at the end of the planning process or in

conjunction with the process each time an order is unloaded.


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Limitations of Order-Oriented Finite Loading

The technique of order-oriented finite loading requires that capacity and load figures are reliable

so that planned schedules and reported progress of work will closely tally. Otherwise, calculated

due dates will quickly become invalid.There must be some flexibility with due dates, particularly if operations are to be deferred each

time maximum capacity is reached on a work center. Occasionally, by random chance, one ortwo orders will be delayed way beyond their expected lead times when such an approach is used.

With these requirements in mind, the limitations of order-oriented finite loading are:

The further into the future plans extend, the higher the chance that the planning forecastwill be in error. Therefore, the technique should be used for short planning horizons and

regularly repeated.

Regular and efficient replanning is needed

Depending on the exception rules used, the technique does not always allow for localreactive replanning to ensure that all scheduled operations are completed during thespecified period.

By deferring operations either forward or backward until the next period with availablecapacity is found, the best use of capacity is achieved. However, this may be at the

expense of long queues, leading to an increase in tied capital.

By unloading entire orders where it is found that one of the operations in the order cannotbe performed on the designated work station due to capacity issues, the plan that results

will definitely be within capacity. However, this approach may lead to lower utilizationof capacity because the load that would have been caused by other operations in the

dropped order will be taken away. Where no other orders are entered, this is wastedcapacity. In addition, deferred orders will be subject to long delays and it may beimpossible to accept new orders, even though the system is not working to full capacity.

Applications of Order-Oriented Finite Loading

When order-oriented finite loading defers operations that create an overload to periods of

available capacity, it is suitable for serial production over a long period or in a monopoly orsellers market where the customer due date is of reduced importance as they are unlikely to goelsewhere for the product.

When the technique overloads work stations where necessary and defers orders where necessary,

it is suitable for any manufacturing industry capable of meeting the requirements of quantitativeflexibility in capacity and due dates.

In shop floor control, the technique provides either an actual work program for the next fewdays, or an acceptable work program that allows a degree of flexibility, depending on the

exception rules that are implemented. Individual orders can often be replanned very efficientlyon a Gantt chart that shows available space on each work center.

The technique is a highly visible and easily manipulated tool, which lends itself to long termplanning of a few high-value added orders so long as regular planning and replanning iscompleted.


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6. Which scheduling technique results in scheduling toward the earliestpossible due date for an item?

A. Forward Scheduling

B. Backward Scheduling

C. Critical point schedulingReview Q

D. Probable Scheduling

Mixed Manufacturing

Mixed manufacturing organizations produce products with a variety of market strategies and

logistics objectives. Some may produce and sell mass-produced goods, holding WIP and finished

goods inventories. The goal of such organizations is to ensure maximum capacity utilizationwhile at the same time producing a wide variety of products to meet customer demand. Shortlead times are very important in mixed manufacturing.

Load-Oriented Order Release (LOOR)

LOOR is a type of rough-cut order-oriented finite loading method that aims to adapt the load tothe available capacity. The matching of load to capacity can be limited to one time period. A

single time period is multiplied by the loading percentage. This is then balanced against the loadswhich will arise in this and later periods. A conversion factor is then applied to progressivelyconvert the loads of all subsequent operations as these will not be loaded with full work contents.

The main aim of LOOR is to maintain high loads. Apart from this, it also aims to minimizework-in-process, shorten lead times, and improve reliability of delivery.

Steps Involved in LOOR

Step 1.

The first step is the scheduling of orders. For example, the planner for a clothing manufacturer

must add five new orders to the existing workload. Initially, each of the five orders are showntogether with their operations on a time axis. Each operation is labelled with the work center

where it should be executed. Each order has a scheduled start date. LOOR uses a time filter, ortime limit to eliminate all orders with a start date later than the time limit. In the example givenbelow, 2 of the orders are eliminated using this time filter and are set as not urgent. The rest of

the orders are designated urgent are passed to the next step.

Order 1

Order 2

Order 3

Order 4

Order 5

WC100 WC300 WC210 WC400

WC100 WC300 WC210 WC400

WC100 WC300 WC210 WC400

WC100 WC300 WC210

WC100 WC300

Time LimitTime

Urgent

Not

Urgent

Order 1

Order 2

Order 3

Order 4

Order 5

WC100 WC300 WC210 WC400WC100 WC300 WC210 WC400

WC100 WC300 WC210 WC400WC100 WC300 WC210 WC400

WC100 WC300 WC210 WC400

WC100 WC300 WC210

WC100 WC300

Time LimitTime

Urgent

Not

Urgent

Step 2.


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In this step, the load of each operation in each of the urgent orders is converted by a factor. Thefactor is used in an attempt to account for the fact that the further out you try to plan, the less

certain the planned load of a job will consume the planned capacity. The greater the number ofoperations before a particular operation, the greater the chance that the operation will not be

completed on time. In the example shown, the factor is 50%. This means that the load of the firstoperation is taken fully into account. With the second operation, only 50% is taken intoconsideration. The graph below shows the load profile of one of the orders, both original and

converted, on each work center. Note that the operations are shown in work center order ratherthan in the order that they are performed. This is done in preparation for the final LOOR step.

0

2

4

6

8

10

12

14

100 210 300 400

converted

Order

Step 3.

In step 3, the existing preload for each workstation and the additional load of the new orders arecombined. The preload stems from different periods on the time axis and may be greater than the

scheduled output capacity for any one time period. A loading percentage for each workstation is

chosen, for example 200%. This sets the load limit for each work center. The orders are thenloaded in start date sequence. When the addition of a new order results in an excessive load on

the work center the entire order is unloaded. The load limit in step 3 is therefore acting as afurther load filter. So, for example, due to the preload on workstation 100 and the load limit set

for that workstation, it is not possible to load order 3, even though it passed through the filter instep 1.

Having worked through the LOOR steps, only orders 1 and 2 of the original set of orders have

passed and can be released. Order 3 must be dealt with as an exception and orders 4 and 5 will bedealt with in the next LOOR period.

Calculating Conversion Factors and Loading Percentages in LOOR

The conversion factors and loading percentages are key aspects of the LOOR method. They havebeen arbitrarily set in the example above. In most situations, the conversion factors and loading

percentages would be derived from historical data.

Capacity-Oriented Materials Management (Corma)

Corma is an operations management principle that enables mixed manufacturers to balance workin process against limited capacity and short deliveries. Corma comprises three parts:

Criterion for order release

Probable scheduling

Coupling of shop floor scheduling and materials planning.


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The Criterion for Order Release

Corma releases stock replenishment orders earlier than needed, that is before inventory levels hit

the order point. An early order release is considered as soon as there is available capacity in

work centers.

Probable Scheduling

This is required for shop floor control and gives priority to early released orders as needed. Thepriority is calculated by continually monitoring the lead-time-stretching factor of each order.

Coupling of Shop Floor Scheduling and Materials Planning

Stock replenishment orders are constantly rescheduled according to actual usage on the shopfloor. The current physical inventory is converted into an appropriate latest due date for open

replenishment orders. Stock replenishment orders of make-to-stock materials are treated as filler

loadings. They fill in capacity not required by other orders. However, this may mean productionearlier than required. Therefore the trade-off for improved capacity utilization is a higher level ofwork in process.

Corma aims to minimize capacity costs, work in process and warehouse stock levels by

performing continual balancing acts between material requirements and stock replenishmentorder production.

Effects of Corma

Orders that are released early are scheduled without priority. They are performed whenthere is available capacity on the required work centers and there are no more urgent

orders to process.

When unplanned customer orders are added to the schedule they take precedence over

stock replenishment orders in process. This may mean that these stock replenishmentorders will not be started until later.

Continual order rescheduling occurs and as the waiting orders are left closer and closer to

their latest due date, they are assigned smaller lead-time-stretching factors. This in turngives them higher priority in the order list.

If inventory stocks fall faster than expected the latest due date of some of the stockreplenishment orders may be advanced. This again reduces the lead-time-stretching factorand the order may be expedited. Alternatively, if stocks fall more slowly than expected

the latest due date will be postponed. This has the effect of increasing the lead-time-stretching factor and delaying the order as it is therefore lower in the priority list.

The Corma technique is useful for mixed production and manufacturing environments where on-the-spot planning is required.

Corma uses critical capacity available short-term to achieve balanced loading and reduce

queuing and lead times. Orders are generated periodically, providing for optimal sequencing andreducing setup times. They are released prior to inventory falling below order point levels, as

soon as there is available capacity to handle them. Replenishment orders take a lower prioritythan customer orders and are continually rescheduled according to the actual usage levels of thematerial to be replenished. They are therefore tightly coupled to the material plan.


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Summary

In this lesson, the characteristics and methods used to ensure sufficient capacity to support the

material plan were examined. The lesson also looked at the use of work center and routing data,

and explained the calculation of rated capacity using efficiency and utilization ratios. Thebalance of demand and capacity, time availability and due dates were examined along with finiteand infinite capacity planning techniques. Finally, the lesson explained the integration ofscheduling and capacity planning with material planning for order release and control.

You should be able to:

Explain detailed capacity planning at an intermediate level

Explain the effect of the manufacturing environment on the choice of planning techniqueand information requirements

Describe the steps by which work center and routing data are used to schedule orders and

identify resource loads in each time periodUse efficiency and utilization ratios to determine the rated capacity of a work center

Identify load sources for planned and released orders

Explain the effects of queuing on job-shop production

Describe planning, scheduling, and order release preparation techniques in a variety of

production environments

Further Reading

Introduction to Materials Management,

JR Tony Arnold, CFPIM, CIRM and Stephen Chapman CFPIM5th edition, 2004, Prentice Hall

APICS Dictionary

10th edition, 2002

Manufacturing Planning and Control Systems,

Vollmann, T.E.; W.L. Berry; and D.C. Whybark

5th

edition, 2004, McGraw-Hill

Production & Inventory Management,

Fogarty, Donald W. CFPIM; Blackstone, John H. JR. CFPIM; andHoffmann, Thomas R. CFPIM2nd edition, 1991, South-Western Publishing Co., Cincinnati, Ohio


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Review

The following questions are designed to test your recall of the material covered in

lesson 6. The answers are available in the appendix of this workbook.

7. Using which loading method are orders that are released early scheduled withoutpriority?

A. Order-oriented finite loading

B. LOOR

C. CORMA

D. Infinite Loading

8. Which scheduling technique builds in slack time and works within the time frame ofearliest possible start date and latest possible due date?

A. Forward Scheduling

B. Backward Scheduling

C. Probable Scheduling

D. Critical Point Scheduling

9. How is the efficiency of a work station calculated?

A. Dividing the sum of output over a number of periods by the number of periods

B. Multiplying the hours available by the standard hours per unit and the utilization quotient

C. Dividing standard hours produced by actual hours worked

D. Dividing actual hours worked by the total hours available

10. Calculate the rated capacity of a work center where there are 3 eight hour shiftsavailable, the work center is in use for 7 out of 8 hours. The work center produces 7 hours

of work against 6.5 standard hours.

A. 2637B. 19

C. 144

D. 8050


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Whats Next?

This lesson introduced some concepts and techniques required in detailed capacity planning. At

this point you have completed 6 of the 9 lessons in the Detailed Scheduling and Planning unit.

You should review your work before progressing to the next lesson which is:

Detailed Scheduling and Planning Lesson 7 Detailed Capacity Planning Continued


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Appendix


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Answers to Review Questions

1. All except B

CRP is performed on the material plan to ensure that it is feasible. CRP is a detailed process that

calculates the work load for each work center during each MRP time bucket, taking into accountall operations required to fulfill the MPS. It is concerned with load balancing rather thanscheduling operations.

2. B

PERT and CPM are often used in project-based production. Level production planning is

completed at the master planning level. Backward scheduling, forward scheduling, or probablescheduling are suitable for job shop environments.

3. D

Capacity requirements planning requires information on work centers, particularly work centercapacity, utilization and efficiency levels, planned queue time and load sources. It also requires

item lead times and routing information. Although the type of production environment influencesthe choice of capacity planning technique, it does not affect the capacity planning activitysubsequently.

4. D

CRP must take into account all potential loads on production. This involves examining the orderstatus file in production control for details of open orders and scheduled receipts, the MRP for

information on planned orders, and examining historical records and other sources for likely

rework, yield, downtime and other factors affecting throughput.5. C

The utilization quotient is a measure of the amount of total hours available that were actuallyworked. This cuts out time spent on setup or repair during the production run. Only time when

the machine is running productively is counted in this measure. Utilization is used in thecalculation of rated capacity.

Utilization = Actual hours workedTotal hours available


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6. A

Forward scheduling assumes that an order will start as soon as possible. It then works forward,

calculating operations and lead times to estimate the earliest due date for the order.

7. C

The order-oriented finite loading method achieves maximum capacity utilization or

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Detailed Scheduling and Planning (Lesson 6)