Capacity Planning
Capacity planning is the balancing of the capacity requirements of scheduled orders against the available capacity of machines, equipment and staff. The goal is to distribute the load across time and resources so that deadlines are met without overloading individual work centers or leaving them idle.
Capacity planning is the balancing of the capacity requirements that arise from scheduled orders against the capacity supply that machines, equipment and employees provide over a given period. It answers the question of whether the available resources are sufficient to handle the planned work volume on time – and if not, how the load can be smoothed through rescheduling, additional shifts, subcontracting or shifting orders. Capacity planning is therefore the link between quantity planning, which determines the material requirements, and the concrete shop-floor control in production.
Every capacity plan rests on two data sources: the capacity supply of the work centers – that is, available hours per shift, utilization rate and availability – and the capacity requirement, which results from the standard times of the routings multiplied by the planned lot sizes. Plotting both against the time axis produces a load profile for each resource. If demand exceeds supply, there is an overload that must be resolved; if demand stays well below it, capacity goes unused. Capacity planning ensures that both cases become visible in good time.
At a glance
- Balancing capacity requirements (orders) against capacity supply (machines, staff)
- Goal: on-time delivery with even utilization, avoiding over- or underload
- Requirements arise from routing standard times × planned lot sizes
- Split into rough-cut planning (long-term) and detailed planning (short-term)
- Part of production planning and MRP II; mapped in the ERP via load profiles
How capacity planning works
Capacity planning runs in several steps. First, the capacity requirement is determined: for each scheduled production order, the system extrapolates the standard times of the operations – setup and processing times from the routing – to the planned lot size and assigns the requirement to the affected work centers and time periods. In parallel, the capacity supply is fixed, derived from the shift model, the number of machines or employees and a utilization rate that accounts for downtime, setup and maintenance times.
In the next step, requirement and supply are compared for each resource and period. The result is the load profile: a representation that shows, for each capacity unit, how heavily it is utilized in a given week or on a given day. If the profile reveals an overload, capacity balancing takes place – the actual control task. Here, either the supply can be increased (overtime, additional shift, a second machine, contract manufacturing) or the requirement shifted (bringing orders forward or scheduling them later, splitting lot sizes). Only when requirement and supply are in balance is the plan realistic and the promised deadlines dependable.
Capacity requirement and capacity supply
The capacity supply describes how much work a resource can perform in a given period – measured in hours per shift, multiplied by the number of capacity units and a realistic utilization rate. The capacity requirement describes how much work the scheduled orders demand of that resource. Both figures are brought to the same unit – usually hours per work center and period – so that they are comparable at all. The difference between supply and requirement is the free or missing capacity, on which all further decisions are based.
Rough-cut and detailed planning
Capacity planning takes place across several time horizons. Rough-cut capacity planning looks at medium- to long-term periods – weeks, months, quarters – and works with aggregated figures, such as the load of entire cost centers or machine groups. It clarifies whether investments, new hires or shift models are needed to carry the foreseeable order volume. On this horizon the focus is on structural decisions, not on individual orders.
Detailed capacity planning, by contrast, operates in the short-term range of days to a few weeks and works at the level of individual operations and work centers. Here concrete orders are scheduled, sequences at bottleneck machines are set and overloads are resolved day by day. Detailed planning is the immediate precursor to order release and shop-floor control. Both levels interlock: rough-cut planning sets the framework, detailed planning fills it with executable detail.
Why capacity planning matters
Without capacity planning, delivery dates are estimated, not calculated. The result is either overly optimistic commitments that lead to delays, or overly cautious buffers that lose customers. Capacity planning makes the actual resilience of production visible and turns on-time delivery from a hope into a plannable quantity. It is therefore the prerequisite for a business to be able to name binding delivery dates and to realistically calculate the order lead time.
The second lever is utilization. Bottleneck machines determine the throughput of an entire plant; every unused hour at a bottleneck is lost revenue, every overload creates queues and inventory. Anyone who cleanly balances requirement and supply keeps the bottlenecks evenly utilized, reduces work-in-progress inventory and shortens lead times. Capacity planning is therefore not a mere planning ritual but a direct lever on on-time delivery, capital tie-up and productivity.
Capacity planning in the ERP and production planning system
In ERP systems with a production module, capacity planning is part of production planning and control and connects directly to material requirements planning. The process is typically staged: quantity planning (MRP) determines from the sales plan, orders and bills of materials which parts are to be produced in which quantity. The subsequent capacity planning – provided for as a separate step in the MRP II concept – checks whether the resources required for this are available. To do so, the system draws on the standard times from the routings and the capacity master data of the work centers and generates load profiles that make over- and underload visible by color or graphically.
Many systems initially work with infinite capacity, scheduling without regard to limits, and then flag the resulting overloads for manual balancing. Advanced tools plan against finite capacity and automatically load orders so that no work center is overbooked. Feeding back the actual values via shop-floor data collection (SFDC) and – in real time – via a Manufacturing Execution System (MES) closes the control loop: it shows where the plan deviates from reality and enables corrective action.
Distinction: capacity planning, MRP and procurement scheduling
Capacity planning is easily confused with neighboring terms. Material requirements planning (MRP) clarifies the quantity question – what, how much and when to procure or produce – but initially ignores capacity limits. Capacity planning picks up precisely there and checks whether the planned quantities can be produced at all with the available resources. Procurement scheduling, in turn, primarily controls material availability through orders and inventory. Only the interplay of quantity, capacity and scheduling produces an executable production plan.
Example
Example: metal processor with a bottleneck machine
A mid-sized supplier manufactures assemblies whose processing almost always runs through the same CNC milling machine – the bottleneck of the plant. It is available in a two-shift model, so around 80 hours per week less setup and maintenance times. Twelve production orders are on hand for the coming week. From the standard times of the routings and the lot sizes, the ERP calculates the capacity requirement and shows in the load profile that the mill is scheduled for 96 hours – an overload of about 20 percent.
The production manager resolves the overload during capacity balancing: two non-urgent orders are moved to the following week, another is outsourced as contract manufacturing, and a third shift is scheduled for the bottleneck machine on two days. After that the utilization is within the feasible range and the promised delivery dates remain tenable. Via shop-floor data collection, production reports back the actual times – if the mill proves permanently slower than planned, the standard times are corrected so that the next plan is more precise.
Frequently asked questions
Matching ERP systems
Related services
Questions about Capacity Planning in your ERP project?
We advise vendor-neutrally – and implement it ourselves on request.