 Introduction

 Input & Output

 Strategies for CRP
 Inventory Control
 Advantages of CRP
 Summary
 The work that the system is capable of doing in a period of time.

 It must be determined at different levels:

 plant

 department

 work center.

 Used to determine time frame in standard hours of work.

 Capacity = (no. of machines or workers)

x (no. shifts)

x (utilization)

x (efficiency)
 A tool for determining capacity that is available
and required.

 Verifies that you have sufficient capacity

available to meet the capacity requirements for
MRP plans.

 Helping planners make the right decisions on

scheduling before problems develop.
 Capacity Requirements Planning is a computerized
technique for projecting resource requirements for critical
work stations.

 Inputs:
 Planned order releases
 Routing file
 Open orders file

 Outputs:
 Load Profile for each work center
 MRP planned
order
releases

Capacity Open
Routing requirements orders
file planning file

Load profile for

each machine center
 Planned Order Releases: Information from the Material
Requirements Planning which tells when you should start the
order so it can be completed on time.

 Routing Files: Information that details the requirements of

equipment and labor to complete the order as needed in the
required time frame.

 Open Orders Files: Information regarding the orders that are

currently started and need to be completed.
 What is a load?
Load refers to the standard hours of work
assigned to a facility.

 CRP uses the information to produce a load

profile for each machine or work center.

 A load profile:
 Compares released orders and planned orders
with the capacity of the work center.
 Identifies underloads and overloads.
 CRP provides information to determine the
timing of capacity expansion. The basic
strategies in relation to a steady growth in
demand are:

 Capacity Lead Strategy

 Capacity Lag Strategy

 Average Capacity Strategy

Capacity Lead Strategy
 In anticipation of demand, capacity is increased.
 Aggressive strategy used to offer customers

Capacity Lag Strategy

 Increase capacity after demand has increased.
 Conservative strategy resulting in loss of customers.

Average Capacity Strategy

 Average expected demand is calculated and capacity is
increased accordingly.
 Most moderate strategy.
 Supervision of supply, storage and accessibility of items
to ensure an adequate supply without excessive
oversupply.

 Inventory control may refer to:

 In economics, the inventory control problem, which
aims to reduce overhead cost without hurting sales
 In the field of loss prevention, systems designed to
introduce technical barriers to shoplifting
 It answers the 3 basic questions of any supply chain: 1.
When? 2. Where? 3. How much?
Independent demand inventory system-

 Ensures smooth operations & allows storing-up WIP &

finished goods.
 Service firms are unable to inventory their output, but may
use appointment backlogs, labor scheduling & cross-
training to balance supply & demand.

Four broad categories of inventories-

 Unprocessed purchase inputs.

 (WIP)- partially processed materials not yet ready for
sales.
 Products ready for shipment.
 (MRO)- materials used when producing (e.g., cleaners &
brooms).
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The Economic Order Quantity (EOQ) Model-

A quantitative decision model based on the trade-off between

annual inventory holding costs and annual order costs.

The EOQ model seeks to determine an optimal order quantity,

where the sum of the annual order cost and the annual inventory
holding cost is minimized.
 is the direct variable cost associated with placing an
order.
 is the cost incurred for holding inventory in storage.

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Increase capacity by:

 Adding extra shifts

 Scheduling overtime or weekends
 Adding equipment and/or personnel

Reduce load by:

 Reducing lot sizes

 Holding work in production control
 Subcontracting work to outside suppliers
Reduce capacity by:

 Temporarily reassigning staff

 Reducing the length of shifts
 Eliminating shifts

Increase load by:

 Releasing orders early

 Increasing lot sizes
 Making items normally outsourced
 Bottleneck Management –

 The output of all products processed is controlled by

bottlenecks.

 Work centers need to be scheduled at a rate to

prevent bottlenecks.

 To eliminate bottlenecks, a time buffer inventory

should be established.
 To determine the capability of a system or resource to
produce a quantity of output in a particular time period.
For example:

 Should the hospital hire more registered nurses to care

for the projected patient load?

 Should the hospital build more rooms for patients?

 What is the projected finish time for the current

projects?
 To operate at maximum capacity, companies must use
the resources available. If resources under underutilized,
the profit margin will not be maximum.

 Using capacity requirements planning helps a company

identify potential problems, such as eliminating the
possibility of overworking the current staff, overloading
machines, losing customers because the work could not
be completed as scheduled, paying penalties for late
delivery.