Capacity planning is a critical tool in well-functioning manufacturing firms. It defines the needed capacity to fulfill demand and, as such, is necessary for improved manufacturing scheduling, inventory management, supply chain planning, and any other facet of the business.
Using quoting software for manufacturing in your manufacturing operation can significantly increase output. Numerous project managers settle for substandard capacity planning tools or software, which prevents production from reaching its full potential and ultimately costs you money.
Assessing the tools and features of quoting software for manufacturing will provide you with a comprehensive understanding of how beneficial the system will be to your manufacturing facility. So, here is a comprehensive guide to capacity planning software for manufacturing.
What Exactly Is Capacity Planning?
The manufacturing industry today is extremely complex, with products ranging from commodity goods to high-end engineer-to-order items. Whatever the product, proper planning at all stages is essential. This includes supply chain planning, manufacturing scheduling, and demand planning, which ensures that the manufacturer understands what goods to generate and when.
However, there is one other region where planning is equally important in meeting production goals. This area has an effect on cost, effectiveness, and profitability just as much as the others, and failing to consider and plan for it is risky. This is referred to as capacity requirements planning.
Capacity planning is the method of determining the amount of production capacity needed to meet production demand. Capacity planning is connected to supply chain preparation, inventory control, scheduling, maintenance, and every other element of the operation since it takes finite manufacturing capacity into account.
Moreover, capacity planning takes into account the number of machinery, the size of the worker base required to operate those types of machinery, accessible hours or shifts, the good mix to be manufactured, equipment utilisation, and overall efficiency. These factors are calculated to determine whether an operation has the capacity needed to meet the forecasted demand. Managers can preemptively add or subtract resources to fulfill obligations if the capacity plan is correct.
The Effect of Capacity Planning on Major Budget Costs
Numerous costs within a company are affected by capacity planning. And it is critical that a company not only understands those costs but also uses that comprehension to accept the restrictions and chart a course that allows them to meet service objectives. This could entail extra shifts, increased capEX buying, overtime, work subcontracting, and a variety of other strategies that enable them to stay ahead of the competition.
Capacity planning has an impact on several cost areas, including:
- Fixed Expenses
If capacity is unknown, costs, including warehousing, can have an impact on the fixed expenses line. This may be the result of having too much storage space that isn’t needed. Because these provisions are frequently managed with leased space and equipment, underestimating capacity will force businesses to bear enhanced fixed costs when they are not in use.
- Operating Expenses
If a product’s demand exceeds capacity, a business may be forced to schedule extra shifts or add shifts. Similarly, it could imply that they must reduce labour and idle facilities as soon as possible. Miscalculation of either can boost operational costs and expenses per unit.
- Capital Expenditures
If a business does not comprehend the capacity needed to meet specific requirement levels, it may underinvest in capital equipment necessary to manufacture, forcing it to use overtime or subcontract production. They may also invest in the incorrect type of equipment, leaving them with idle equipment that is no longer needed while equipment needed for hot product offerings is underutilised.
Advantages of Capacity Planning Software For Manufacturing
Capacity planning software for manufacturing can assist businesses in planning for demand and understanding what assets and costs will be needed to meet that demand. It offers a framework and roadmap for other plans, like maintenance planning, supply chain planning, scheduling, and perhaps even sales, to understand what is presently possible and what can be completed over time to achieve service level objectives now and in the future. The following are some of the advantages of capacity planning:
Plan for Development
Most businesses want to expand over time. However, it is preferable if that growth is manageable and can be accomplished incrementally without disrupting cash flow or exceeding CapEx plans. Knowing your factory capacity allows you to plan for growth in a calculated and cost-effective manner.
Evaluate and Reduce Expenses
Businesses can track and cut prices by assessing current capacity and what is needed to add or decrease capacity. Supervisors can use deviations between aggregated and disaggregated plans to regulate expenses and make changes to remain on track over time because manufacturing variables such as labour, equipment speed, and product line mix are evaluated.
Continuous Development
Precise capacity planning necessitates the measurement of key manufacturing factors, as previously mentioned. Since these variables are evaluated, it is possible to identify areas for improvement and take preventive steps to adjust or modify a process. These changes may increase efficiency and capacity by making better use of existing resources.
Increased Profitability
When capacity planning is lacking, manufacturing gaps may happen as demand changes. Managers may be unsure of what resources are required or how to adjust. These gaps are filled by utilising capacity planning. This leads to less overtime, better-trained staff, and more efficient equipment utilisation.