Table of Contents
- What Are Resource Constraints?
- Are You Using Finite Capacity Planning?
- MRP Does Not Use Finite Capacity Planning
- Finite Capacity Planning Is Not Pull Production
- What’s the Fastest Way to Implement Finite Capacity Planning?
In competitive markets, meeting customer commitments is critical. If resources like inventory, people, and equipment were always readily available, consistently delivering on time wouldn’t be such a challenge. The difficulty is that nearly all manufacturing operations have constraints. In this post, I will drill down into finite capacity planning, how it helps manufacturers live up to their promises, and how to get started.
What Are Resource Constraints?
As the name suggests, finite capacity planning considers resource constraints when scheduling production to meet customer demand. Work centers, machines, and labor can all be defined as the “resources” necessary to perform a manufacturing operation on an item’s routing. Because these operations take time and the number of resources is not unlimited, each resource has a finite capacity (ability to do work) that constrains its throughput.
However, for a given mix of demand, there is always one resource that limits the throughput of the entire factory. This is referred to as the constraint. When the capacity of the constraint resource exceeds the demand, we say the constraint is the market (or the sales team). As positive as that sounds, idle resources do not make for profitable operations. On the other hand, if demand exceeds capacity, the business is vulnerable to supply chain variability and other unforeseen events.
Ideally, demand and capacity would be relatively equal, but since we don’t live in an ideal world, planners need visibility into constraints so they can optimize plant performance. They also need to be able to share this information easily with those who interface with customers so they can avoid overpromising and underdelivering. It’s stressful enough when demand exceeds capacity. Promising unrealistic delivery dates to customers makes it so much worse!
Are You Using Finite Capacity Planning?
It’s not a question of whether you’re using finite capacity planning – it’s a question of at what levels you’re making capacity-planning decisions. Operations know if a schedule is achievable and will make adjustments if it is not realistic.
However, if finite capacity planning is only happening at the operational level, you’re bound to disappoint either your customers or your executives (or both). In manual systems with low visibility, floor personnel often make decisions about what to work on based on what seems important to them, because they don’t have visibility into what is most important to the business. Furthermore, their decisions can alter resource capacity. When that information does not automatically flow through the organization, planners and customer-facing teams are often left in the dark about changes to timelines and available resource capacity.
Here’s the bottom line for operational finite capacity planning: When demand is greater than your capacity, on-time delivery performance will be at risk. When capacity is greater than demand, you’re leaving profit on the table. In that sense, the goal of finite capacity planning is to maximize profit by balancing demand with capacity.
MRP Does Not Use Finite Capacity Planning
Plenty of salespeople talk about MRP as though it is a finite capacity planning tool, so this needs to be said: MRP does not use finite capacity planning. MRP calculations provide start dates for manufacturing orders, assuming they will be completed according to each item’s lead time. However, Little’s Law (throughput = WIP / lead time) says that for a fixed capacity (throughput), lead time changes depending on the WIP level, and MRP does nothing to keep WIP stable. When lead time is assumed to be constant regardless of the WIP level, that is infinite capacity planning.
Finite Capacity Planning Is Not Pull Production
This is another common misconception. While finite capacity planning provides dynamic start and completion dates for manufacturing operations based on resource capacity, it is not the same as pull production! Pull production is a technique for releasing manufacturing orders to the shop floor that aims to stabilize WIP, achieve maximum throughput, and increase lead time confidence. Common pull production methods include kanban, CONWIP, and Synchrono’s patented CONLOAD™. Although they are distinct, combining finite capacity planning and pull production results in a more stable schedule than using either method alone.
What’s the Fastest Way to Implement Finite Capacity Planning?
At its simplest, finite capacity planning means setting start and end times that do not overlap for each manufacturing operation at a resource. The different strategies of finite capacity planning all set the sequence of work differently. Some options include ordering by due date, prioritizing by shortest processing time, or by whichever customer or salesperson is most vocal on a given day. (Unfortunately, the last method is the most common in our experience!)
One way to quickly implement finite capacity planning is choosing a software that supports finite capacity planning strategies. SyncManufacturing enriches these strategies by integrating with your ERP system and having finite capacity planning capabilities such as Detailed Sequencing. Detailed Sequencing creates finite schedules for factory resources and calculates a “cycle consumption percentage” for each operation, indicating how past-due or ahead of schedule it is. For example, if Item A has a lead time of two weeks and Item B has a lead time of four weeks, but both items start work at the same resource, the first operation at Item B will have a higher cycle consumption percentage than Item A and will be prioritized first. SyncManufacturing combines this with the operation’s expected availability date to generate the finite schedule, which can be manually adjusted if desired.
Advanced planning and scheduling (APS) systems, such as SyncManufacturing, include and expand on finite capacity scheduling by including an order release algorithm to implement pull production and modules to manage material constraints and shortages. Through dashboards and alerts, other areas of the business have visibility into the schedule, e.g., sales can immediately give realistic delivery dates to their customers. To learn more about the impact of Advanced Planning and Scheduling software (APS) on the rest of the organization, read: The Ripple Effect of Implementing APS.
If this sounds like something that would help streamline your operations and increase profitability, you’re in good company! Contact us and request a demo to learn more about how SyncManufacturing can assist you with finite capacity planning and much more.