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6|April 2020 Slippery rock GAzette
Capacity Planning
system that maintains a planned level of capacity at each opera- tional step to recover from the in- evitable attacks by Murphy. One or more natural constraints always exist within your business.
Given that one or more con- straints always exist, you already do have an unbalanced system. That is a good thing, not a bad one. Don’t fight it by constantly chasing the constraint around, embrace it instead. Manage the constraints all day, every day. Establish the necessary Protective Capacity at the appropriate loca- tions and use it to respond to the effects of Murphy.
Protective Capacity is defined as the capacity to overcome vari- ability. This additional capacity is designed to absorb the normal variabilities that exist every day. Further, the amount of Protective Capacity should be variable across the manufacturing system. More of it should be planned for those operations that experience lots of “Murphy” and less at steps that are more stable.
Two basic phenomena, depen- dency and variability, exist in all manufacturing systems which result in serious consequences. Because of dependencies, vari- ances in the product flow, caused by statistical fluctuations and ran- dom events, disrupt the planned flow of product for the plant. And because of the numerous disrup- tions, common attempts to bal- ance the capacity of a plant will end up being counterproductive. The conclusion is that the focus should be on synchronizing the flow of products through the plant and not on balancing capacities. Like water flowing down a moun- tain river, the orders should flow at a consistent rate. The boulders that interrupt that river flow are not unlike the “Murphy” events that interrupt your process flow. The water always finds a way around those boulders. Your man- agers need to do the same thing to address the “Murphy” events. To do that, they will need a planned level of Protective Capacity.
The Solution
Effective capacity planning must consider the three most im- portant elements in a business plan:
• The projected market demand in the coming months for each product line.
• The calculated daily/weekly capacity needed to produce that demand, including a planned level of Protective Capacity to overcome the normal statistical fluctuations that will inevitably occur.
• The resulting financial expectations and goals for your company over the entire planning period.
There are basically three types of capacity that should be consid- ered in your planning:
• Productive Capacity. This is the pure capacity it takes to meet the projected market demand. This is the minimum needed to satisfy orders and has no accommodation for Murphy.
• Protective Capacity. This
is the Productive Capacity plus an accommodation for Murphy. The accommodation for that variability is calculable, meaning that where there is little variability, there is little need for Protective Capacity. Where there is high variability, there is need for more Protective Capacity. With adequate records on production and variability,
this can be planned accurately. Protective Capacity does not mean higher costs. This cushion of additional capacity is essential to meeting the market demand given the known levels of
variability (aka Murphy). Business is all about creating value (Throughput), not only reducing costs.
• Excess Capacity. This is
the amount of capacity over and above the needed amount
Spring is here! For most companies, this means a dramatic increase in sales.
Homeowners are interested in upgrading both inside and out. Remodeling kitchens, baths and laundry rooms as well as install- ing outdoor kitchens are common projects in the Spring of each year. New construction builders for homes and commercial projects are ramping up again. Countertop fabricators can get really busy.
Being prepared for this increase in business volume is a smart (and essential) business manage- ment practice. Capacity planning is often done with just common sense. You may know what can be produced through the primary steps in your process. Most likely, in the countertop industry, this is an expected amount of square feet per day. You can compare that to your expected demand for square feet from your market. Then, you would plan for the number of hours needed per day to get it done. If your demand exceeds your capacity, your fallback posi- tion is lots of overtime.
That could be called a “seat- of-the-pants” approach. It might work, but it might not. The over- time need could cause distress among your people. You could experience some turnover as a result of this. Excessive over- time also increases the chance of errors and it definitely increases the chaos. Moreover, this ap- proach does not provide a plan for “Murphy” (aka stuff happens). Unexpected machine break- downs, poor quality materials, turnover of key employees, and
Ed Hill
Synchronous Solutions
myriad other issues could disrupt all your plans.
There is a better way.
First, let’s consider the reality of “Murphy” (aka statistical fluc- tuations and normal variability, also called “anything and every- thing that could go wrong”). If you design your capacity with just enough to meet the expected demand, you will always experi- ence unpleasant surprises. In fact, just enough capability is called a Balanced Capacity State and such a system will never produce to its expected result.
The balanced capacity system is one in which the capacity for each process step is planned with the necessary equipment and staff- ing to be about equal to the mar- ket demand. In such an idealistic system, there would be no bottle- necks and no attacks by Murphy. Orders would flow through the system without accumulating ex- cess inventory at any place. The problem is: That is a practical impossibility. Machines do break down, key people are sometimes not present at work due to myriad reasons like vacations, sickness, jury duty, bad weather, etc. Even through careful capacity planning, “Murphy” still exists and can appear at the most inopportune times.
While Balanced Capacity may seem to be a logical approach for an efficient operation and to make the most money, the reality is that this is simply not true. The fact is that attempting to achieve and maintain a balanced system is not only a practical impossibility, it is a guaranteed failure of man- agement philosophy. Your man- agers will spend their time trying to regain the balanced status after every visit by Murphy, while they should be managing the flow of materials and information through your plant.
The alternative to the approach is called Protective Capacity. This is an intentionally unbalanced
to meet the demand, including accommodation for Murphy. Excessive capacity, which is also calculable, means excessive costs, and should be avoided.
Synchronous Solutions has developed a tool to accomplish this objective. It is called the Protective Capacity Planner (PCP). It coordinates those three important elements of business planning (market projection, needed capacity and financial goals) into one tool. Updating it monthly to reflect the new knowledge of market demand and changes in internal capacity is all that is necessary to assure proper planning.
The PCP is a planning tool. As with anything looking into the future, it is expected to be a pro- jection, based on your best knowl- edge, of the demand in the coming months. Based on that demand, the software can project the hours per day required at the primary functional steps. The report will tell you the $T goals each month and the amount to schedule each day to meet those goals. It will also alert you to high (or low) de- mand in the coming months. With that knowledge, you can be better prepared for the needed capacity.
The following chart is a por- tion of the PCP indicating the projected hours needed per week at each process step. Red font indicates some overtime will be needed. Red background indi- cates significant overtime may be needed.
Without an appropriate amount of Protective Capacity, the ability to create Throughput ($T) value will be negatively impacted.
Please turn to page 7
Having too much business is a nice problem to have. But it is still a problem!
Protective Capacity is notacostfactor;itisa strategy to assure continued value added and profits.
Overtime might help, but...
• It’s expensive
• It has diminishing returns
• It’s usually reactive in nature • It can create a dependency • It adds to the chaos
Training & Education
The opportunity to create value ($T) is infinite. The opportunity to reduce costs is quite finite.