Business Processes to Consider When Choosing a Production Capacity Planning System

By combining variable data from raw materials supply, available labor resources, and equipment availability, production capacity planning can provide manufacturers the insight necessary to drive better business decisions.

Manufacturing executives are generally more apprehensive than excited about accepting new company contracts when sales staff continue to deliver new business. Can we fulfill these additional orders with our current production capacity? Or do we need to spend money and grow the production lines? Given the all-too-often complex ERP environment of process manufacturers, with different systems and manual processes, you may be one of the many who try to find answers to these production capacity questions by sifting through complex spreadsheets and pivot tables.

As the last two years have demonstrated, supply chains are more dynamic than ever before and businesses must respond quickly to changes in customer demand. As a manufacturer, how can you properly plan your production with the backdrop of supply chain disruptions, and how do you keep things moving until things improve? Toss in a labor shortage, and you have a perfect storm of variables that make production capacity planning quite difficult.

A customer may announce changes in forecasting at any time, or a new client may offer an opportunity to increase production volume. There is little confidence in determining how the increased volume can be achieved without a modern system in place to quickly review production capacity.

Having the right production capacity planning system in place, as part of your overall ERP solution, can provide you the concrete data necessary to make manufacturing decisions.

When approaching the evaluation process, here are five areas of focus when considering a new solution:

Labor constraint requirements

Historically speaking, labor has not always been regarded as a capacity limitation for manufacturers because it can be quickly scaled in response to demand. However, given the disruptions of the past two years and the current labor shortages affecting many industries, it has become even more imperative to factor in labor restrictions when capacity planning. You may be fortunate enough to get the raw materials you need to meet your production needs, but what happens if you don’t have the labor available to perform the work? Some manufacturers, for example, and especially those in regulated industries, require specially qualified workers to run various manufacturing equipment. Labor restrictions should be taken into consideration by the system’s capacity planning tools for these organizations.

Forecasting

Contract manufacturers are often provided a demand forecast by customers for each of their product lines. Make sure the system allows for the ability to input these forecasts for generating accurate capacity calculations. The forecasts will typically include the customer’s part number, and the estimated daily, weekly, or monthly sales volume. Forecasting your production must be based on the anticipated availability of that product to the end customer. This of course depends on the industry, for example if you are dependent on shipping containers coming in from China your forecasts may be 3 to 4 months out. However, if you’re talking about the current state of the baby formula shortage for example, you’re maxing out your production and finished goods are going right out the door.

Production routings

Production routing calculations can get tricky, especially if trying to do them manually in spreadsheets. While forecasts generate the expected volume, process manufacturers need to establish calculations that determine how long it takes to manufacture a product based on the batch size. This will often be established through production routings that define the production line and time required to make a specific batch size. When reviewing a new system, be sure to run through a few scenarios of these routing calculations while applying various routing sequences unique to your business to make sure the system can handle it.

Purchase planning

Purchasing is an important part of your entire inventory and production strategy, and manually dealing with this is extremely difficult, especially in the case of large multi-level Bill of Materials (BOMs). The system that drives this is intended to do calculations and alert planners and schedulers when it is time to acquire material. The system should provide suggestions based on demand, lead time, and “on-hand” inventories. The solution you choose should help you make better informed purchasing decisions that impact inventory accuracy and control, optimized production flow, quality and safety stock, and even your vendor relationships.

Maintenance

A capacity system is incomplete unless maintenance requirements of equipment are factored into the plan. The system should allow planners to build in scheduled downtime and provide reporting capabilities for unanticipated downtime. This type of report is crucial in identifying the need for production line expansion or more efficient maintenance uptime.

Now more than ever manufactures are in the midst of a supply chain crisis when it comes to managing their production capacity planning. Take steps to avoid assumptions made in spreadsheets from serving as the basis for your production decisions.

A solid grasp of production capacity is crucial, especially when determining whether present production lines can handle new business or whether more expenditures in equipment are required. Supply chain managers may drive revenue growth and position the manufacturing business for solid future development by committing to a solution that can deliver on the five competencies listed above.

If you’re interested in learning more about managing production capacity with Deacom ERP, contact us today.

About the author

Demand Generation Manager - Deacom at

Domenick Naccarato has been a featured writer on the Deacom blog for the past 7 years sharing his insight into manufacturing best practice techniques, conversations with customers, and videos of Deacom ERP experts and users.