CGN Edge Blog

Rough-Cut Capacity Planning - Why is it still and will be important in the future?

Mar 25, 2019 4:04:53 PM Posted by: Greg Modlinski
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 “Continuity of Supply” is critical to Supply Management and part of the Sales and Operations Planning process. If a client has a disruption of supply, meeting their production or build schedule is in jeopardy. Non-value expediting activities, expedited freight costs, and line-shut down costs may be experienced. To meet firm or forecasted customer demand, a client relying on purchased materials to build their product wants to proactively manage any constraints identified from their critical suppliers. Constraints can take various forms, but most frequently come down to lack of materials, manpower, or machines.

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If some type of process to determine supplier capacity isn’t conducted, the client may encounter a disruption of supply and not be able to build to their production schedule. In some instances, a client may want to know if their supply chain could support various demand scenarios before orders are accepted and firm build schedule decisions are made. The process of working with suppliers to conduct an intermediate rough-cut capacity plan can help to identify constraints within their manufacturing process. This leads to corrective action planning to mitigate the constraint.

ACtion Plan-1 

In some instances, a client may chance that their suppliers can meet an increasing build schedule. This is taking a risk and provides a low level of confidence that the build schedule will be met and is usually addressed in a reactionary mode and often too late.

Intermediate Rough-Cut Capacity planning is still a valuable tool that—when done proactively with the supplier—can increase the client’s level of confidence in suppliers meeting certain demand scenarios / schedules. Interactive templates or online portal tools can also be used to capture the supplier inputs and generate burden charts (example below). Being on-site at the supplier facility to witness the manufacturing process is powerful to understanding the process and constraints. The supplier’s production planning manager provides routings, and other key information such as, total average weekly demand on all resources, average weekly client demand, percentage of client load, internal past dues, number of resources, Overall Operating Effectiveness (OEE). These inputs are compared to the demand scenarios and generate a burden chart, which identifies constraints or potential constraints.

Overall Burden-Capacity

 
If there are any resource areas/machines that show to be burdened, action plans are generated to proactively mitigate the constraint of Material, or Manpower, or Machine. Thus, enabling the demand scenario. In some cases, temporary or permanent resourcing may also be an identified action plan.

“Continuity of Supply” to meet production or a build schedule is a critical element of Supply Management and part of the S&OP process. CGN Global has worked with various clients conducting Intermediate Rough-Cut Capacity planning with their key suppliers. This is still a valuable tool that when done proactively with the supplier at their facility, can increase the client’s level of confidence in these key suppliers to meet certain demand scenarios by proactively identifying and mitigating constraints.