2.1 Capacity planning
In capacity planning, the user can employ an instrument to plan limited resources at various planning levels. Planning levels refer to various planning horizons within our planning framework. For the long-term planning horizon, we can use rough-cut capacity planning to address aggregated resource requirements and ensure adherence to planned delivery dates on estimated and forecasted dates. For the medium term we can use simulative capacity planning so that a suitable demand program that lies within the available capacity profile can be activated. And finally, we plan detailed capacity in the short term with specific capacity offering profiles on individual work centers and planned orders generated by MRP.
Figure 2.2 shows the various planning tasks taking place in specific planning horizons.
Figure 2.2: Capacity planning
Detail and planning accuracy increases as we move from long-term planning to medium-term to short-term. Moving through the phases we gradually increase accuracy from work center areas to work center groups to the detail of the work center’s capacity offering—from months to weeks to days and hours, and from incomplete data to complete resource and availability profiles.
Figure 2.3 illustrates this progression.
Figure 2.3: Capacity planning levels and detail
Thus, capacity planning is about providing enough available resources to meet demand during the planning progression.
2.1.1 Some important planning parameters
In the following sections, I’ll discuss the details of some planning parameters which are essential to the planning of a leveled capacity situation. It is important to understand the basic data that supports planning functionality and to operate with a sound setup. This is instrumental for good decision making in long-term, medium-term and short-term planning horizons.
Calculating available capacity
The working hours defined in the work center record are central to planning available capacity. Available working hours are defined for each type of capacity and you can assign as many capacities to a work center as you like. This provides you with the ability to manage various capacity situations. For example, you could make sure that a machine on your shop floor does not exceed its open run time during a standard working week.
Similarly, it is advisable to ensure that workers who are available for 8 hours a day—from Monday to Friday—don’t find themselves working late hours and weekends because the order didn’t match the availability.
However, labor and machine capacities aren’t the only constraints you may have. Warehouse space, oven volume or other space restrictions on a shop floor are just a few examples of the capacities which may have units of measure other than available time. All of them, however, can be set up as a capacity in the work center and can therefore be managed by their constraints.
For each of these capacity categories you can maintain a separate available capacity and assign it to the respective work center.
Furthermore, if a capacity is allocated to several work centers, it is a pooled capacity. For example, the collective available capacity of a human workforce in an area of production can be maintained as a pooled capacity. As such, it must be maintained separately before it is allocated to various work centers.
Once the capacity category is defined, the productive operating time can be calculated, as shown in Figure 2.4.
Figure 2.4: Calculation of productive operating time
The basic work time (start of work until end of work) at a work center is reduced by break times and organizational disruptions. Work time minus break times is stored in the work center as the operating (available) time per shift. Technical and organizational disruptions are reflected in the efficiency rate.
Then come the exceptions. Maintaining basic work time as described above, you plan a standard work week and its available hours for production. The factory calendar provides a definition of how many work days in a week. Work start and end times, break times and technical and organizational disruptions define how many hours are available on each of these work days. The factory calendar also contains all the holidays that might come up to ensure, for example, that we do not plan for Thanksgiving Day.
But what happens if we would like to work an extra shift for the next two weeks? Or extend a five-day work week to six, for a certain period in October? For these exceptions, we can use shift sequences. Figure 2.5 provides an example of the definition of a shift sequence. The figure shows that you can define work start and end times that differ from the standard start and end times in a standard work week. Additionally, you can work with shifts and define start and end times specifically for a shift. In a shift sequence, you can become much more detailed, but it is important to understand that a shift sequence—defined by the standard sequence key—is valid for a very specific period of time.
Figure 2.5: Definition of a shift sequence
Consequently, shift sequences and shift definitions are used to maintain detailed available capacity for every capacity category, but only by using intervals of available capacity.
Figure 2.6: Shift sequences in the capacity screens of the work center record
Figure 2.6 contains three intervals: one before the exception, the exception itself (from August 6, 2007 to August 10, 2007) and the interval after the exception, which extends far into the future (until a new exception is maintained).
The concept becomes a bit clearer when we look at standard available capacity and how it can be overwritten by a shift sequence, as shown in Figure 2.7.
Figure 2.7: Standard available capacity
In the top graph, an interval represents a work week. The standard available capacity is a five-day work week with a set, equal number of hours available on each work day. However, we can now overlap the standard available capacity for a cycle duration, as shown in the lower graph. From the first day in Week 2 (Interval 2) and a cycle reaching the 5th day after Day 1 (Day 6), we provide a different available capacity profile. Day 1 has about 80% of the standard available capacity, whereas Day 5 shows about 70% and Day 9 again 80% of the regular standard capacity.
Note that this ‘exceptional’ capacity is only valid for the duration of the specified validity range. An interval of available capacity therefore has temporary validity.
Standard value key and formulas
In order to determine the operations’ run times in a routing, and to calculate the order’s required amount of capacity, formulas and standard value keys from the work center are employed.
The standard value key in the work center determines what specific standard values (setup, labor time, processing time, operating time, etc.) need to be maintained in a routing operation. By customizing the standard value key, you can also determine whether maintaining a standard value is optional or mandatory. Once the standard values (required through the standard value key) in the routing have been maintained and an order with a specific lot size created, the system is able to calculate the lead time and the required capacity using the formulas which are also maintained in the work center record. Figure 2.8 illustrates the process of calculating scheduling time and required capacity.
Figure 2.8: Standard value key and scheduling formulas
Standard value keys are an important object for correctly calculating available capacity and therefore need to be selected carefully.
Accumulation of capacity
Available capacity can also be accumulated into higher levels in a work center hierarchy. This enables you to plan capacity availability on an area of the shop floor, an entire plant or even a network within a supply chain. This is particularly useful in the long or medium term of the planning process when you level demand so that in the short term you aren’t faced with the impossible task of distributing an exorbitant amount of capacity load onto an available capacity profile that can’t even deal with a small part of what is required to fulfill demand.
Figure 2.9: Work center hierarchy to accumulate available capacity
As seen in Figure 2.9, available capacity can be accumulated up through a work center hierarchy so that evaluations and planning can occur on aggregated objects.
The descriptions above show that in capacity planning we must maintain and provide available capacity first. Only then can we look at required capacity and determine a utilization rate that lies within a feasible range to achieve flow.
A word on utilization
‘Utilization’ is the actual percentage load of a station compared to its maximum rate. For example: if a station has a maximum capacity (or throughput rate) of 20 parts per hour and we load it with an incoming rate of jobs with 16 parts per hour, then we load the station with a utilization of 80%. Managers with common sense know that cycle times increase exponentially with increasing utilization (especially when you get close to 100%) because of constant variability in supply and demand. It is therefore advisable to plan a utilization of less than 90%. However, over and over again we see that planners try to plan full utilization of the lines and sometimes even plan 110% or even 120%—mostly due to cost pressures from the finance department.
Planning for available capacity and making it available through well-maintained basic data in the work center and material master record are essential in our quest for effective capacity and production scheduling.
In the following sections, I’ll discuss how to plan for capacity in the various horizons of a planning system.
2.1.2 Scheduling levels
Let’s add another important thought to the concept of planning horizons and the level of detail we’re planning at: scheduling levels.
SAP ERP provides you with the ability to plan, sequence, level and schedule at three different levels. These levels correspond somewhat to the level of detail used in the horizons: long term, medium term and short term. For whatever reason, these scheduling levels are not often used to their full potential, but they provide excellent features to move your plan through the periods and fine-tune it along the way. You can, for example, use different task lists for the long term to those you use for the short term. In addition, you might decide to perform medium and long-term scheduling as period and rate-based, whereas you plan your capacity in the short term to specific dates and hours, even minutes.
This presents some interesting opportunities for your planning efficiency. As most people stick to discrete routings in all planning horizons, there is the possibility to use a rough-cut planning profile for the long term, rate routings in the medium term, and for detailed planning in the short term we can determine exact, planned execution times with a routing or recipe.
If you do this, you’re effectively planning rates and periods (such as 20 pieces for August and 5 pieces for Week 25) for when you are too far out for specific, date-based planning and you are planning your order’s capacity load to a very specific point in time, with its specific output quantity for the next, let’s say, four weeks1.
Task lists are assigned to a planning horizon in the production version of a material, as shown in Figure 2.10.
Figure 2.10: Scheduling levels in the production version
In this example, a discrete routing (with a group counter 1 out of routing group 50000002) is assigned to short-term, detailed planning. Interestingly, a rate routing has been assigned to rate-based planning which effectively describes the medium term. You often come across the notion that rate routings are only used in repetitive manufacturing. However, this is not true because rate routings provide an excellent instrument for period and rate-based planning. They describe a production process with an output rate from the operation (quantity per time) rather than a discrete routing which uses the opposite—the time it takes to produce a lot size (time per quantity). Most people would agree that period and rate-based planning in the medium term more closely reflect the actual business process and allow for better planning results and manageability.
The settings also suggest that for the long term a rough-cut planning profile be used. Rough-cut planning profiles are similar to rate routings, which are meant to plan for rates in periods. But this may be the only similarity these two task lists share.
You define your scheduling levels, and what happens to them, by customizing your planned order scheduling. This customization table has its own transaction code—OPU5. Figure 2.11 shows an example of how the scheduling levels can be set up.
Figure 2.11: Scheduling levels in customizing
In this example, planned orders (order type LA) in plant 1000, maintained with production supervisor 101 (production scheduler in the ‘work scheduling’ screen of the material master), are scheduled and loaded with capacity requirements for the short term (Detailed Scheduling) and the medium term (Rate-Based Scheduling).2
No scheduling or capacity records are generated for the long term (rough-cut scheduling).
You can see the results of these choices (settings) after you run the MRP Run with lead time scheduling. In the planned order that is generated, you can see separate tabs for each scheduling level that was planned.
These scheduling records can then be used in the respective planning horizons to plan capacity with the appropriate detail and time frame.
2.1.3 Detailed, time-based and periodic, rate-based presentation of capacity
There often seems to be confusion regarding the presentation of required and available capacity, especially when we look at short-term and long-term situations differently. Add to that the notion that rate-based planning only has its place in repetitive manufacturing, and you’re faced with a mess when it comes to implementing effective, three-tiered capacity planning. Let’s attempt to organize these thoughts and provide a reference framework.
Generally speaking, I like to associate planning in the long and medium term with periodic, rate-based planning, and in the short term, I believe we must work with detailed, time-based planning, leveling and scheduling of orders.
To better illustrate the two planning methods, let’s consider a motorcyclist and how she would plan for trips and other aspects of her hobby. First of all, I’d like to think that motorcycling makes you a better planner. The qualities of a skilled rider can easily be applied to the act of planning demand and supply. Helpful and necessary characteristics such as intuition, foresight, and caution are found in both seasoned bikers and veteran planners alike.
So, when Katy, our motorcyclist, plans ahead, she thinks about how to get the most enjoyment out of her bike. That goal can most likely be achieved by doing as many exciting and memorable trips as possible, within her capacity and the motorbike’s performance boundaries. Off she goes and plans for a number of trips over the next four to five years. Katy has heard about the marvelous mountain roads in the French Alps, the long and winding, perfectly sealed highways throughout the Pyrenees, awesome scenery in the Rocky Mountains and nostalgic rides on Route 66. Excitedly, she puts together a list of twenty trips she wants to do over the next five years. That’s four trips a year.
Katy lives in Mobile, Alabama and most of these trips (maybe not the one to the Panhandle of Florida) need to be planned very carefully. She needs to consider the time of year that she wants to ride through Colorado, motorcycle rental in Europe for the trips to the Pyrenees and French Alps, and she must watch her budget and distribute the journeys accordingly. Katy intuitively knows that for the long term a detailed plan is overkill. Yes, she’d like to know roughly where she’ll go but to plan every hotel and daily routine for a ride in June three years from now is simply not necessary.
So, she decides to put together a periodic, rate-based schedule: 4 trips per year. For every year, she plans her trips as follows:
- in February, somewhere south of the 25th parallel;
- a June trip to Europe (France, Portugal, Spain or Switzerland);
- August in the Rockies, and
- in October, a shorter ride anywhere where she can expect an Indian Summer in the US.
This would represent a leveled (capacity in budget, available time and mileage) and rate-based plan which puts required and available capacity in periodic buckets to be compared and evaluated.
To relate this to business planning, it becomes clear that periodic, rate-based planning makes a lot of sense when exact delivery and production times are not yet required. The advantage of this is demonstrated in a simplified illustration of the resulting capacity situation from a given demand, as shown in Figure 2.12.
Figure 2.12: Periodic, rate-based visualization of a capacity situation
In this figure, every period has a demand (red), a stock level (green) and a required production rate (blue) to cover the demand while considering the respective stock on hand. In periodic, rate-based planning you look at a period’s total quantities and therefore manage a quantity per time period, such as ‘50,000 pounds per week’, ‘one A380 per month’ or ‘four trips per year’. Supply (planned orders) is sometimes calculated by considering stock already available (e.g. we anticipate demand of 50,000 pounds in Week 25 and have 10,000 pounds of stock during that week—so we need to make another 40,000 pounds) and at other times it equals demand (e.g. according to our order book on A380, we need to produce at a rate of one airplane of that type every XX months).
Periodic, rate-based planning negates the need for detailed scheduling, which can be a resource strain and very complex, when dealing with large volumes.
Conversely, in the detailed, time-based planning view of capacity planning, every order has a start and end date. Demand and supply aren’t viewed or managed in buckets. Demand is shown at an exact point in time where it needs to be covered and supply is shown in the form of bars, where the beginning of the bar depicts the start of production (or procurement) and the end of the bar represents the completion and delivery of the goods. Figure 2.13 shows an example of demand and (not yet scheduled) supply in detailed planning.
Figure 2.13: Detailed, time-based visualization of a capacity situation
In detailed planning, demand is represented as a total quantity at its due date, at the beginning of the period. The idea is to fulfill the demand just before the beginning of the period so that the demanded quantity can be consumed throughout that period. That is why all the supply is lined up to deliver these demanded quantities at the end of the previous period.
It becomes obvious that we need to do something else before we can actually start fulfilling demand on time and within our capabilities; we need to sequence, level (distribute) and schedule (dispatch) the orders within the available capacity. You might be thinking that performing these tasks for large volumes over long periods of time becomes a bit complex. That’s why we recommend using periodic, rate-based planning for the medium and long term but detailed, time-based planning for the short term. After Katy has done her long-term, rate-based trip plan, she needs to set exact times, consult with her friends and make sure she’s got all the capacity in place to get on the road.
In the following sections, I’ll explore in more detail how you can set yourself up for effective planning in the various scheduling and planning horizons.
2.1.4 Rough-cut capacity planning
Capacity requirement planning for the long term can be done effectively with SAP ERP’s ‘Standard SOP’ or ‘Flexible Planning’ modules. You might have been advised and tempted to use SAP Advanced Planning and Optimizing (APO), Integrated Business Planning (IBP) or some non-SAP forecasting and planning tool, but chances are that if you are reading this book, your company is running on SAP ERP and ‘standard SOP’ and ‘flexible planning’ are at your disposal—for free, with minimum effort to activate them.
Standard SOP uses a product group hierarchy as the planning structure, whereas in flexible planning you can construct your own. For the purpose of this book, and to avoid confusion, we’ll stick with standard SOP. However, I’d like to point out that as the name implies, there is much more flexibility and functionality in flexible planning, so that anything we discuss here can be readily adapted and customized to your company’s specific requirements.
Long-term planning should always be performed with a periodic, rate-based planning table, as shown in Figure 2.14. This type of visualization allows for long planning horizons and you can see demand, supply, projected inventory levels and the resulting capacity situation all in one view.
Figure 2.14: Rough-cut capacity planning (in standard SOP) for the long term
This example shows a sales plan distributed over monthly periods and the required monthly production figures were created using a macro. The macro took into account target inventory levels after fulfilling the sales plan and generated SOP orders using a rough-cut planning profile, which acts like a routing to generate required capacity records. Because the macro generated SOP orders, it is now possible to compare a statistical work center’s available capacity with the required capacity from the SOP order. The statistical work center can represent a production line, a group of machines or even an entire manufacturing plant, and therefore the plant’s capabilities can be cross-checked with a rough production plan which is required to fulfill a forecasted sales plan.
The primary purpose of long-term planning is to check a plant’s ability to meet a sales forecast. Rough-cut capacity planning is part of SIROP (Sales, Inventory, Resource and Operations planning) and therefore the sales forecast is evaluated together with an inventory (buffering) strategy and a long-term production program, which should fit into an existing capacity profile. If there is not enough machine or labor capacity available, the planner can make adjustments by either requesting capital investments for more capacity or shifting production overloads into underutilized periods.
2.1.5 Rate-based capacity planning for the medium term
A capacity and demand leveled long-term plan can be handed over to the medium-term planning horizon through the transfer of the figures of a specific demand program (or programs). Ideally, a planner can simulate a number of possible demand programs, so that the one which best fits into a more detailed capacity profile can be selected and activated in the short term.
Opinions differ widely on whether medium-term planning should be done using detailed or rate-based scheduling. Whereas long-term planning most often uses months as the planning periods, a medium-term planner often uses weeks. Most SAP installations I have seen go with Long-Term Planning (LTP) and its simulative planned orders to perform detailed capacity planning.
LTP is a great choice for medium-term capacity planning. Many companies in different manufacturing areas can use transaction MF50 (planning table) for medium-term planning. Contrary to current belief that MF50 can only be used for repetitive manufacturing, it is a great way to simulate various demand programs until the most feasible one is found and can be transferred into operative planning. MF50 has tabular and graphical views of resulting capacity and can be called up either for detailed or rate-based scheduling. It therefore provides an excellent choice for medium-term scheduling but unfortunately is only rarely used for that purpose.
Better yet, we can use the planning table in connection with a planning scenario and simulative planned orders from LTP. There is another transaction code, MFS0, which allows a specific demand program (planning version of planned independent requirements) to be selected via a planning scenario. This enables a specific demand program to be planned, sequenced, leveled and scheduled within its available capacity. Figure 2.15 shows an example of the planning table.
To the left, we can see the products to be planned and their planned quantities per period. Periods might be months, weeks, days or even shifts. For each period, we can see the resulting capacity requirement (in this case in hours). As the work center has a specific capacity availability in the same period, the system is able to calculate the resulting utilization of the work center for that period.
Figure 2.15: Planning table for rate-based, periodic planning
In this example, we can see that 20 pylons are planned for Week 3 in 2016 and 13 pylons are planned for Week 4. The buckets for the months of March, April and May 2016 have not yet been planned. However, we have distributed Weeks 1 and 2 into more granular buckets of daily periods. This was possible using the distribution function in the planning table. Now you can see the specific capacity situations for any given day, week or month, depending on your choice of planning level.
A graphical representation of this situation is also possible. This is shown in Figure 2.16 where every order is represented as a red bar. So far, no order has been scheduled or dispatched and, as a result of rate-based, periodic planning, orders from the same period are scheduled according to their latest end date.
Figure 2.16: Graphical representation of the planning situation in transaction MFS0
Unlike the tabular view of the planning table—which is rate-based because it shows total quantities for periods—the graphical view is time-based. Each order ‘sits’ at a very specific point in time.
Going back to the tabular view, as shown in Figure 2.17, we can distribute quantities from weekly buckets into daily buckets, for example.
Figure 2.17: Weekly distribution of planned orders
By using the distribution function in the planning table, weekly numbers can be distributed evenly throughout the week into available working days. The result is shown in Figure 2.18.
Figure 2.18: Graphical view after distribution to daily rates
In fact, this should be sufficient planning for the medium term. Up to this point, we have looked at demand and supply without focusing on specific start or end dates for the delivery of particular quantities. These precise points in time and quantities become much more important when we move into the short term and start planning with detailed capacity, as will be discussed in the next section.
2.1.6 Detailed capacity planning
Picking up on the previous example of pylon manufacturing, the planned rates from long-term and medium-term capacity planning must now be distributed into a short-term (e.g. a week) production schedule. Because an executable production schedule must have specific start dates, rate-based planning is no longer sufficient3. We now have to employ detailed, time-based planning. This is best executed in a graphical planning table where orders are represented as bars—with specific start and end times. Transactions CM21 or CM25 are provided mainly for that purpose. However, you can also stay within the planning table for repetitive manufacturing4. So far, we have been using transaction MFS0 for capacity planning. This is because MFS0 allows the selection of a planning scenario in Long-Term Planning (SAP LTP). Because we are now within the boundaries of short-term planning, we no longer work with simulative orders and can therefore use the ‘operative’ planning table, by using transaction code MF50.
Figure 2.19 shows the result of dispatching Week 2’s orders. As you can see, all these orders are now sequenced and distributed within the available capacity of the work center.
Figure 2.19: Detailed scheduling of 1 week’s orders from the pool
In Figure 2.20, we can see the resulting schedule from selecting two weeks’ worth of orders and distributing these in sequence starting from Monday of the second week and forward scheduling into Friday of the third week.
Figure 2.20: Detailed scheduling for two weeks
Detailed scheduling of orders can also be executed in transactions CM25 or CM29 (which both are essentially allowing for the same functions to be carried out), the graphical planning table for discrete orders. There are a wide variety of profiles available in these transactions. Using profiles, you can customize the layout, time periods, even color codes and much more.
No matter what transactions are used for detailed capacity planning, they should be used for planned orders, not production orders. This is because detailed scheduling happens in the short-term planning horizon and not in the ‘frozen zone’. The transition from short-term planning into the frozen zone happens after checking collective material availability on scheduled planned orders and then performing collective conversion into released production orders.
Any other process flow could result in production orders blocking valuable available capacity on work centers because the order can’t be completed while waiting for missing parts.
Figure 2.21 shows an example of detailed capacity planning with CM25. Orders from the pool (lower part of the screen) can be distributed or dispatched to the work centers within the work center’s available capacity (upper part of the screen).
Figure 2.21: Capacity planning screen in transaction CM25
I’ve now explained what needs to be set up for capacity planning. In the next section, I will address the options for how you can sequence the orders before dispatching them on the line.
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