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Reading 03-Rough Cut Capacity Planning - Supplement For Mps - 2011
Reading 03-Rough Cut Capacity Planning - Supplement For Mps - 2011
(RCCP)
A. WHAT IS RCCP?
Many people are familiar with the Manufacturing Planning and Control
(MPC) Systems which are driven by Material requirements planning
(MRP) engines. In such systems MRP uses a master production schedule
(MPS) of end items to determine the quantity and timing of component
parts production. MRP does not consider any capacity limitation; it strictly
assumes that, sufficient capacity is available to produce components at
the time when they are needed.
The most common problem which is encountered in operating MRP based
systems is the existence of an overstated MPS. An overstated master
production schedule is the one which orders more than the production
resources can complete. An overstated MPS causes raw materials and
WIP inventories to increase because more materials are purchased and
released to the shop than are completed and shipped. It also causes a
buildup of queues on the shop floor. Since jobs have to wait to be
processed, actual lead times increase, causing ship dates to be missed.
As lead times increase, forecast over the planning horizon becomes less
accurate. This is because of the fact that, forecasts are more accurate for
shorter periods than for longer ones. Thus, overstated master production
schedules lead to missed due dates.
Because of all the above given reasons, validating the MPS with
respect to available capacity is an extremely important step in MRP.
The term used for this validation exercise is Rough Cut Capacity
Planning (RCCP).
There is no general agreement on the level of detail that should be
incorporated in the MPS validation. An APICS monograph (Berry, Voliman,
and Whybark 1979) presents case histories of several companies,
including details on the capacity planning process. Some companies using
very crude techniques while others are using detailed, time phased,
methods.
Figure 1
Plossl and Welch (1979) describe the role played by RCCP in the overall
MPC system as follows:
a)
b)
c)
d)
e)
b)
c)
Figure 3
Table 1
As can be seen from Table 1, demand for lamps is quite seasonal (see
forecast column). The demand is at the peak during the winter holiday
season (November & December) and a minor peak at income tax return
time (May-June period). The company wishes to have stable employment
in order to produce superior quality, so it chooses to operate a level
production strategy (same regular/minimum production rate for all
months - in our case 15000 units/month), with overtime as needed.
When a level production strategy is used, finished goods inventory
must be built in advance of the seasonal peak. The minimum level of
inventory planned is the safety stock level, which provides protection
against forecast error. Since the company has little excess capacity to
permit recovery from poor forecasts, it carries a fairly substantial safety
stock of 8,000 units. The maximum level of inventory planned is the
amount needed at the end of October to meet the holiday peak season.
For the previous year, that maximum was 47,900 units.
Because the company produces a single product family and because its
strategy of stable employment, it has limited options available for
aggregate planning. So, the process of preparing the MPS is quite simple:
Figure 4
The next section discusses the determination of capacity available (RCCP
techniques) and decisions to be taken if available capacity is
inadequate. Both discussions assume a stable MPS.
RCCP TECHNIQUES
All the three techniques as defined in section A of this document (CPOF
approach, Bill of Labor approach and Resource Profile approach) serve
the same basic purpose of determining available capacity. But, each of
them has different data requirements and computational complexity.
Capacity planning using overall factors (CPOF approach) requires the
least detailed data and the least computational effort. It is also the
approach that is most affected by any changes that occur in product
volume or the level of effort required to build a product. Capacity planning
using overall factors can be performed using a calculator
The bill of labor approach uses detailed data in terms of time standards
for each product at the key resources. Here it should be remembered that,
since production processes are continuously improved, time standards
may become obsolete and hence, less reliable through out time. A time
standard which is two or three years old is probably not good for use in
these calculations. However, an adjustment factor which is known as
efficiency that may be used to correct such outdated time standards.
Resource profile approach is the most detailed technique. It also
requires standard time data. In addition, it requires the lead time
required to perform certain tasks.
Both the bill of labor approach and the resource profile approach can
be performed by using an electronic spreadsheet on a basic personal
computer.
All three techniques are designed to convert the master production
schedule from units of end items to be produced into the amount of
time required on certain key resources. In this way, the amount of time
available on existing key resources can be determined in advance and
thus, it becomes possible to plan timely expansion of these resources. In
some cases, the RCCP process reveals that expanding the inadequate
resources requires more time and/or money than the company is willing to
invest. In such cases, the MPS must be revised.
a)
Table 2
Our Lamp Manufacturing Company has only one product family, lamps.
A typical lamp requires 0.22 standard hours of labor/machine time, as
shown in Table 3. Multiplying each monthly MPS quantity which is shown
in Table 1 by 0.22 yield the Total Capacity Requirements row of Table 2.
The remaining rows of Table 2 are found by multiplying the total capacity
requirement for the month times the historical proportion for the work
center. For example, the value 1501.5 standard hours for lamp assembly
for January is found by multiplying the historical proportion, 0.455, by
January's total capacity requirement, 3300 hours. This computation can
easily be performed for all work centers for all months using a
spreadsheet program (such as ms excel) or a simple calculator.
Table 3
b)
Table 4
Although the results as shown in Table 4 can be obtained by using a
spread sheet, in todays manufacturing environment, probably all the
required data is stored somewhere within the computer network which is
composed of various manufacturing information system modules. For this
reason, subject calculations may be done by a piece of software which is
specifically designed for RCCP. Such a software can even give
labor/machine load profiles as a graphical presentation, an example of
which was given in Figure 4.
If our Lamp Company produces more than one product, the time required
for each product in each department would have to be determined. The
sum of all product times for one department gives the required capacity
for that department.
In matrix notation see that;
Table 4 is a five row by twelve column (5 x 12) matrix,
The master schedule (Table 1) is a one row by twelve
column (1 x 12) matrix and,
The bill of labor (Table 3) is a five row by one column matrix
(5 x 1).
Students who are familiar with matrix multiplication will recognize that the
process used to obtain the rough cut capacity requirements using the bill
of labor approach is a matrix multiplication (The MPS must be transposed
to enable multiplication.). The calculation routine for the first work center
for the first month will be as follows;
Multiply the time for Product 1 at Work Center 1 by the
demand quantity for Product 1,
Multiply the time for Product 2 at Work Center 1 by the
demand quantity for Product 2,
Figure 5
A numeric example which is for two products, two work centers and two
months is presented in Figure 6.
Figure 6
c)
Neither the bill of labor approach nor the CPOF approach considers
lead time offsets. Both approaches assume that all components are built
in the same time period as the end item.
The resource profile technique time phases the labor requirements.
Each bill of labor must be time phased for the resource profile approach to
be used. The resource profile technique is the most detailed rough cut
approach, but is not as detailed as capacity requirements planning.
Going back to our Lamp Company, we can develop a resource profile for
Lamp LAXX (Table 5). This table would be identical to the bill of labor
except that the time at each department is now associated with a
specific time period, reflecting the lead time of the part. Consider the
case that, our Lamp Company has a three-month lead-time. In the first
month, the bases are formed. In the second month, the bases are
processed through the oven, the socket assembly department creates
socket assemblies, and shades are created at plastic molding. In the third
month, the lamps are assembled from constituent components and
subassemblies. Note that the lead times are unrealistically long. We
created those numbers to produce a useful example.
Table 5
To create a resource profile, the lead-time had to be converted to periods
of time prior to the period in which the order is promised. Since the last
Figure 7
Lets say a resource profile for Product 1 at Work Center 1 is split into
three parts such as; the time required in Work Center 1 in the month the
order for Product 1 is due, the time required in Work Center 1 one month
before Product 1 is due, and the time required in Work Center 1 two
months before Product 1 is due. Any or all of these times may be 0 for any
given product and time until due date at any given work center, To find the
time Work Center 1 works on Product 1 during Month 1, we multiply Month
1's demand by the time required at Work Center 1 during the month the
product is due, we multiply Month 2's demand by the time required at
Work Center 1 one month before the product is due, and we multiply
Month 3's demand by the time required at Work Center 1 two months
before the product is due. This process is then repeated for Product 2.
We then add all six results (i.e., results of the multiplication process) to
obtain the final value for the time required at Work Center 1 during Month
1. See term c11 in Figure 7.
Because the end of horizon effect is unavoidable, the planning horizon
for the resource profile approach must be quite long, To provide the
same unbiased visibility as the bill of labor approach, the planning horizon
must equal the bill of labor approach's planning horizon plus the lead time
minus one period.
The results of RCCP using the resource profile approach for our Lamp
Company can be developed as in Table 6.
Table 6
Table 7
Table 8
The RCCP under bill of labor approach and under resource profile
approach would be like as in Table 9 and Table 10 respectively.
Table 9
Table 10
For an environment in which large batches lead to large week to week shifts in
product, mix, the following analysis is correct: The CPOF approach utilizes less
data than the bill of labor approach, but is insensitive to shifts in product mix.
(The historical proportions of total hours used by CPOF reflect average product
mix. They are insensitive to changes in product mix that occur because of
seasonality and/or batching of components.) This statement explains both why
CPOF has been used and why it should not be used now that computers are
available. In the era before microcomputers (that for business purposes began
about 1981) and even before inexpensive hand held calculators (that, perhaps
surprisingly, began about 1976), the process of performing all of the
multiplications required by the bill of labor approach was quite cumbersome. The
CPOF approach was much simpler, requiring only that each total labor quantity,
(i.e., one multiplication per cell) rather than several multiplications for each
proportion. For many situations, CPOF was perhaps the only practical solution.
From the viewpoint of the traditional MRP user, the bill of labor approach is
superior to capacity planning using overall factors, because it better predicts the
actual change in hours required from week to week, From the viewpoint of the
Just-in-Time philosophy discussed in a later section, there should not be such
large product mix variations from week to week. If the lot size of each product
were very small, then it would be possible to make each product every week.
Since it is likely that the product is in fact consumed every week, then there is an
advantage to matching the rate of production to the rate of sale or consumption
so that inventory need not be stored. A secondary advantage of the "level load"
philosophy of Just-in-Time is that capacity management is simplified,
The bill of labor approach captures the changing product mix since each end
product has its own bill of labor. For that reason, the bill of labor approach is
strongly recommended over the CPOF approach. Given modern electronic
spreadsheets, the bill of labor approach is just as simple to perform as CPOF.
Thus, CPOF, while a useful technique only a few years ago, is clearly outdated
and soon will be discussed only for historical interest.