ETZC 342

MATERIALS MANAGEMENT
BITS Pilani
Pilani Campus

Anil Jindal
Department of Mechanical Engineering

BITS Pilani
Pilani Campus

Capacity Management

Materials Management Processes

Order Management

Orders

PLANNING

Committed orders
Inventory
status

Bill of
Materials

1.Order
Entry
system

Production scheduling

Committed
Orders

Material
Planning

Capacity planning

Supplier
Management

2. Master
Production
Scheduling
Monthly
Build Plan
3 .Weekly
Production
Scheduling

Capacity
Plan
5. Capacity
Planning

Material
Request
7. Supplier
6. MRP
Management

Weekly
Build Plan
4. Daily
Production
Scheduling

Purchase
Orders

Suppliers

EXECUTION

Materials
Daily
Work
orders
Job dispatching
& Resource
Allocation

8. Shop
Floor
Control

Production
Process

Warehousing

Products

9. Packaging &
shipping

BITS Pilani, Pilani Campus

Introduction
So for we were concerned with planning priority, that is,
determining what is to be produced and when.
However without the resources to achieve the priority plan
will be unworkable.
So, capacity management is concerned with supplying the
necessary resources.

BITS Pilani, Pilani Campus

Introduction
Capacity: The capability of a worker, machine, work center,
plan, or organization to produce output per period of time.
It is rate of doing work, not the quantity of work done
Capacity Management: The function of establishing,
measuring, monitoring, and adjusting limits or levels of
capacity in order to execute all manufacturing schedules is
capacity management.
Capacity available, load and capacity required are important in
capacity management
Capacity Planning: The process of determining the resources
required to meet the priority plan and the methods needed to
make the capacity available
BITS Pilani, Pilani Campus

Capacity Management
Capacity is the amount of work that can be done in a
specified period of time.
Capacity Management is concerned with supplying
necessary resources.
Two kinds of capacity are important:
1. Capacity available 2. Capacity required

The capacity of the system to

produce a quantity of output
in a given period of time.

The capacity of the system

needed to produce the
desired output.
BITS Pilani, Pilani Campus

Capacity Planning
It involves calculating the capacity needed to achieve the
priority plan and finding ways of making that available
Process:
1.Determine the capacity available at each work center in
each planning period
2. Determine the load at each work center
3. Resolve difference b/w available capacity and required
capacity

BITS Pilani, Pilani Campus

Planning levels
Resource Planning

Involves long range

capacity resource
requirements
Translates monthly,
quarterly, or annual
product priorities
Involves changes in
manpower, capital
equipment, product
design, or other long
term acquiring
facilities
Concerned with
production plan

Rough-cut capacity
planning

More detailed than RP

Primary information
source
Purpose is to check the
feasibility of MPS
Provides warning of
any bottlenecks,
ensures utilization of
work centers and advise
vendors of capacity
requirements
Concerned with MPS

Capacity requirement
planning

Directly linked to
material requirements
plan
Focus on component
parts in greater detail
Concerned with
individual orders at
individual work centers
Calculates work centre
loads and labor
requirements for each
time period
Concerned with MRP

BITS Pilani, Pilani Campus

Capacity Requirements Planning (CRP):

Process of determining in detail the amount of labor and
machine resources needed to achieve the required
production
It is directly linked with the MRP.
It is concerned with individual orders at individual
work centers and calculate work center load and labor
requirements for each time period.
Inputs:
Open order file
Material requirements plan
Routing file
Work center file
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Open order file

It appears as a scheduled receipt on the material
requirement plan. It is a released order for a quantity of a
part to be manufactured and completed on a specific date.

It shows all relevant information such as quantities, due

dates, and operations. It is a record of all the active shop
orders. It can be maintained manually or as a comp. file

BITS Pilani, Pilani Campus

Planned order releases:

Planned orders are determined by the computers

MRP logic based upon the gross requirements for a
particular part.

They are inputs to the CRP process in assessing

the total capacity required in future time periods.

BITS Pilani, Pilani Campus

Routing file:
It shows the path that work follows from work center to
work center as it is completed. A routing file should exist
for every component manufactured and contain the
following information:

Operations to be performed
Sequence of operations
Work centers to be used
Possible alternate work centers
Tooling needed at each operation
Standard times: setup times and runtimes per piece.

BITS Pilani, Pilani Campus

Work center file

A work center is composed of a number of machines or
workers capable of doing the same work.
It contains information on capacity and move, wait and
queue times associated with the center.
1. Move time is the time normally taken to move material from one
workstation to other.
2. Wait time is the time a job is at a work center after completion
and before moved.
3. Queue time is the time a job waits at a work center before being
handled.
4. Lead time is the sum of queue, setup, run, wait, and move times.
BITS Pilani, Pilani Campus

Available capacity
It is the capacity of a system or resource to produce a
quantity of output in a given time period. It is affected by
the following:
Product specifications: If the product specifications change, the
work content will change, thus affecting the number of units that
can be produced.
Product mix: Each product has its own work content measured in
the time it takes to make the product. If the mix of products being
produced changes, the total work content for the mix will change.
Plant and Equipment: If the method is changed the output will
change.
Work effort: This relates to the speed or pace at which the work is
done. If the workforce changes pace the capacity will be altered.
BITS Pilani, Pilani Campus

Capacity measurement
Capacity available is the capacity of a system or resource
to produce a quantity of output in a given time period
It is affected by product specification, product mix, plant
and equipment and work effort
For common items units of output
For variety of items units of time is preferred
Capacity needs to measured a three different levels i.e.
machine or individual worker, work center and plant

BITS Pilani, Pilani Campus

Capacity measurement
Rated or calculated capacity = available time*utilization*efficiency
Utilization= hours actually worked *100
available hours

Efficiency= actual rate of production*100

standard rate of production
Capacity required = time needed for each order at each work center + capacity
required for individual orders to obtain the load

BITS Pilani, Pilani Campus

Capacity Load
Load on work center= sum of required times for all
planned and actual orders to be run on the work center in
the required period
Steps for calculating load:1. Determine the standard hours of operation time for all
the planned and released order for each work center by
time period
2. Add all the standard hours together for each work center
in each period. The result is the total required capacity
(load) on that work center for each time period
BITS Pilani, Pilani Campus

Capacity Load
Work center load report shows future capacity requirements
based on released and planned orders for each time period
of the plan
Scheduling orders is calculation of starting and completion on each
Work center so the final due date can be met.
STEPS:1.For each work order, calculate the capacity required (time) at each
work center
2.Starting with the due date, schedule back to get the completion and
start dates for each operation
BITS Pilani, Pilani Campus

FEW EXAMPLES
Example: A work center has three machines and is operated for eight
hours a day five days a week. What is the available time?
Answer: Available time = 3 x 8 x 5 =120 hours per week.
Example: A work center is available 120 hours but actually produced
goods for 100 hours. What is the utilization of the work center?

Answer:

hours actually worked

Utilization
100%
available hours

100
Utilization
100%
120
83.3%
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 Example: A work center produces 120 units in a shift.

The standard for that item is 100 units a shift. What is
the efficiency of the work center?
Answer:
actual rate of production
100%
Efficiency
standard rate of production
120
Efficiency
100%
100
120%
BITS Pilani, Pilani Campus

Example: A work center consists of four machines and is operated

eight hours per day for five days a week. Historically, the
utilization has been 85% and the efficiency 110%. What is the
rated capacity?
Answer:
Rated Capacity = available time x utilization x efficiency
Available time = 4 x 8 x 5 = 160 hours per week
Rated capacity = 160 x 0.85 x 1.10 = 149.6 std hours
BITS Pilani, Pilani Campus

Demonstrated capacity
One way to find out the capacity of a work center is
to examine the previous production records and to use
that information as the available capacity of the work
center.
Example:
Over the previous four weeks, a work center produced 120,
130, 150, and 140 standard hours of work. What is the
demonstrated capacity of the work center?

Answer:

120 130 150 140

Demonstarted Capacity

135 standard hours

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Work Center load Report

It shows future capacity requirements based on released
and planned orders for each time period of the plan
Example: A work centre has the following open orders for week 20.
Calculate the total standard time required (load) on this work centre
in week 20. Order 222 is already in progress, and there are 100
remaining to run.
Order
Quantity

Setup time
( hours)

Run time
( hours/ piece)

Released orders
222
333

100
150

0
1.5

0.2
0.2

Planned Orders
444
555

200
300

3
2.5

0.25
0.15
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Example
Answer:
Released orders 222 total time = 0 + (100 * 0.2) = 20.0 standard hours
333 total time = 1.5+(150 * 0.2) = 31.5 standard hours
Planned Orders 444 total time = 3+(200 * 0.25) =53.0 standard hours
555 total time= 2.5+(300 * 0.15) =47.5 standard hours
Total time

= 152.0 standard hours

In week 20, there is a load (requirement ) for 152 standard hours

BITS Pilani, Pilani Campus

Scheduling Orders
Scheduling: process of calculating when orders must be
started and completed on each work center so the final
date can be met
Back Scheduling: start with the due date and, using the
lead times, work back to find the start date for each
operation

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Requirements for Scheduling

The quantity and due date
Sequence of operations and work centers needed
Setup and run times for each operation
Queue, wait , and move times
Work center capacity available (rated demonstration)
This information is obtained from
Order file
Route file
Work centre file

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How to alter capacity

Schedule overtime/ under time in cases where the
load/capacity imbalance is not large
Adjust the level of the workforce by hiring or laying off
workers. The higher the skill needed more difficult it is to
vary the workforce
Shift workforce from under load to overload work centers
Use alternate routings to shift some load to another work
center
Subcontract when more capacity is needed or bring in
previously subcontracted work to increase required
capacity
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Making the plan

example
A

If component B is to rescheduled to later date, then the

priority for component C is changed , as is the MPS for A.
For these reasons, changing the loads may not be the
preferred course of action.
Next slide shows how can capacity can be adjusted in
short runs
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Adjusting capacity
Schedule overtime or under time
Adjust the level of the workforce by hiring or laying off
workers
Shift workforce from under loaded work centers
Use alternate routings to shift some load to another work
centre
Subcontract work when more capacity is needed or bring
in previously subcontracted work to increase required
capacity
BITS Pilani, Pilani Campus

MRP and CRP closed loop system

MPS

CAPACITY
OK ?

NO

Feedback

Yes

Feedback
MRP

NO
Yes

CRP
OK?

Purchsing

Yes

PAC
Performance measures
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Problem
A study under taken by materials management department
found that over the past year the work center was available
for work 20000 hours, work was actually being done for
18500 hours, and standard hours for the same was 19600.
calculate the utilization, efficiency, and demonstrated
weekly capacity. Assume a 50-week year.

BITS Pilani, Pilani Campus

Solution
Utilization = 18500/20000
= 0.925
= 92.5%
Efficiency

= 19600/18500
=1.0594
=105.94% 106%

Demonstrated Capacity = 19600/50

= 392 standard hours
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Problem
Parent W requires one of the component B and two of
component C. both B and C are run on work center 10.
Setup time for B is 2 hours and runtime is 0.1 hour per
piece. For component C, setup time is 2 hours, and run
time is 0.15 hour per piece. If the rated capacity of the
work center is 80 hours, how many Ws should be
produced in a week?

BITS Pilani, Pilani Campus

Solution
Total available capacity for B and C = 80 hours

Let x be no. of Bs.

Therefore no. of Cs is 2x.
2+0.1x+2+ (0.15*2x) = 80
x = 190 (no. of Bs)
No .of Cs =2x =380

No. of Ws that should be produced = 190

BITS Pilani, Pilani Campus