Do you have enough? How do you know if you have
enough? How much is enough? What are the consequences if you don't
have enough? For that matter, what are the consequences of having
too much? In case you didn't know from the title of this
presentation, I'm talking about capacity.
There are fundamentally two things required to
meet customer commitments or the Master Schedule: material and
capacity. Having the material is, of course, critical. But having
enough capacity to convert that material into a saleable product
is equally important. From a planning perspective, there is a key
difference between material and capacity. You can stockpile
material in advance of need as inventory in order to smooth out
production and to act as a buffer against the unexpected. But
capacity cannot be stored for later use. If you have it and don't
use it, you lose it. To paraphrase a popular song of the 1960s,
"If I could put capacity in a bottle ..." Well, if I
could figure out how to do that, I'd be a millionaire.
Manufacturing companies facing the highly
competitive global environment that exists today would like to
have just the right amount of capacity when it is needed—neither
too little nor too much. The consequence of having less capacity
than you need is obvious: you will fail to meet the expectations
of your customers and your operating plans. On the other hand,
what's wrong with having more than you need? Isn't it wise to have
some capacity in reserve to handle unexpected situations? The
answer is "yes, within reason." But too much
"excess" capacity is costly. The difficulty is in
determining how much is really enough.
Most manufacturing companies would like to
operate in a somewhat stable environment: stability in the work
force, stability in the work flow, stability in cash flow, and
stability in several other business functions. But the
relationship of available capacity to required capacity often
see-saws back and forth: first there is not enough capacity, then
too much, then not enough again. No one would prefer to be in the
position of having to flex total capacity daily or even weekly,
although some companies do exactly that.
It is frustrating when a manufacturing company
never seems to have the right amount of capacity at the right
time. For instance, what reaction do you often get from Production
Control or Manufacturing when Sales wants another customer order
jammed into an already overloaded master schedule? Or when a
planner goes out on the floor and insists that the latest
"hot" job be in stock by this afternoon. Only fear of
the consequences keeps one from replying with a line from another
song from the 1960s: "Take this job and shove it! I ain't
workin' here no more!"
Fortunately, the global competitive war has
awakened the competitive spirit in American industry. The
Just-In-Time manufacturing crusade has taught us that
stockpiling material is wasteful and undesirable from an overall
business perspective, and can be avoided without sacrificing
service or stability. Through the diligent application of JIT
principles and techniques, the flow of material into and through a
manufacturing plant can be quite smooth and stable. The credo of
JIT has been "the right material in the right quantity at the
right place at the right time". Living up to that credo has
caused people to be creative and innovative in solving material
flow problems without resorting to inventory.
The same credo could be applied to capacity:
"the right capacity in the right amount in the right work
center at the right time". In fact, the results of the JIT
efforts have not only solved material flow problems, they have
also made significant improvements in capacity problems. For
instance, rapid changeovers have not only reduced the delays in
material flow, they have also improved the flexibility and
utilization of equipment.
However, most of the JIT techniques focus on execution of
current plans, not planning of future activities. The issue in
capacity planning is anticipating changes in capacity requirements
in time to do something about them. Companies who are winning the
global competitive war anticipate their capacity requirements in
advance and manage them to meet the changing needs of the
marketplace and the business goals of the company.
To be Continued
stay current on bullet-proofed manufacturing solutions, subscribe to
ezine, "The Business Basics and Best Practices Bulletin."
Simply fill in the below form and click on the subscribe button.
also send you our free
Special Report, "Five Change
Initiatives for Personal and Company Success."
personal information will never
be disclosed to any third party.
leaders have a responsibility to educate and train their team
members. Help for developing a self-directed, World Class
Manufacturing training program for your people is just a click
are welcomed to print and share this bulletin with your
manufacturing teams, peers, suppliers and upper management ...
better yet, have them signup for their own copy at:
the escalating spam-wars, it's also a good idea to WHITELIST
our bulletin mailing domain via your filtering software or
This will help guarantee that your bulletin is never deleted
Knowledge you’ll not find at offsite
seminars nor in the books at Amazon.com
Lean Manufacturing - Balanced Scorecard
ISO 9000:2000 - Strategic Planning - Supply Chain
Management - MRP Vs Lean Exercises - Kaizen Blitz
Lean Six Sigma - Value Stream Mapping
All at one Website: Good
Six Sigma Training Thinking
Out of the Box
Supply Chain Inventory Management Total
Quality Management Principles
Manufacturing Implementation Lean