During the current economic times, it is difficult to conceive of constrained capacity. Companies are overflowing with inventory and plants are downsizing or shutting down manufacturing. With cautious optimism we expect that the economy will turn around. The question is when and how quickly. Those that are adequately prepared will be the leaders. This turns the discussion to capacity planning.  Take a look at the first picture of Venice. The Grand Canal is large enough such that there is far more capacity than load in this picture. The Grand Canal can accommodate gondola’s, vaporetta’s and water taxis. When you first think of Venice you might think that it must be very relaxing to do all of your travel by boat. No freeways, no speed limits, lots of flexibility and capacity.  In fact it isn’t really the case.

The canals are a vital part of Venice and a dependent source of transportation for numerous purposes. What if you were in a water taxi rushing to get to the airport and you were behind 10 gondola’s in this narrow canal? Yes, depending on where your hotel or residence is, even the water taxis have to navigate the narrow passages.

So how does the Venice taxi service manage this? They focus on their bottlenecks in the routing to the airport. If it is a busy time of day and depending on the season, they adjust their start time; meaning the pick-up time for the passenger.  If you have an early flight the water taxi is your only option.

Just like the Venice canals, your operation has specific capacity bottlenecks. Risk management processes need to be put in place to respond to capacity changes within these bottlenecks. The bottlenecks may not only be within your own manufacturing operations. If you have contract manufacturing the bottleneck may be with your contract manufacturing partner or a direct material supplier. Capacity planning may involve:

• Ensuring that a second source supplier is qualified
• Continually confirming current lead-times
• Empower your supplier or contract manufacturer with the responsibility of updating their lead-times for you, ideally directly into your systems
• Design your product such that it can run on multiple manufacturing lines, at least to a certain stage of manufacturing
• Analyze your projected demand and supply balances against your current inventory policies. Early warning signals, as described in Kerry Zuber’s blog entitled: Supply chain thoughts from the edge: do you have an early warning system? clearly confirm the value of having the right amount of inventory at the right place.
• Understanding how a constrained bottleneck will affect your customer. Often companies are so focused on maximizing productivity in a workcenter that they lose sight of the impact on the customer.
• Calculate the tradeoffs involved in capacity planning. Too much inventory to support ‘just in case’ orders versus the inventory cost or the cost of an overtime shift versus the revenue opportunity for the quarter. Understanding the tradeoffs will lead to better decision making.

Keep it simple. Tribal knowledge tells you what your bottlenecks are. Focus on proactive measures that will ensure that you are ready when the capacity crunch comes.

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Tags: Advanced planning & scheduling (APS)
Posted in Best practices
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