The challenges of capacity planning

An increasing number of industrial companies are forced to reorganize their capacity planning as today’s competitive environment renders traditional methods obsolete. Capacity planning plays a key-role, e.g. in improving due date observance and shortening delivery times, and is a precondition when rapid and cost efficiency adjustments of capacity to market-fluctuation are necessary. This paper identifies weaknesses of traditional approaches to capacity planning and suggest a number of remedies. The emphasis is placed on the specific problems of companies producing complex, assembly intensive products in small lots. The empirical basis of the paper is mainly collected from four case studies. The case studies were conducted as research projects and consultancy work during the years 1989-1992. Additionally, materials from detailed case studies of 50 industrial companies made by Gesellschaft fur Technologie Transfer 1988-1992 is utilized. The paper depicts capacity planning as a complex activity with broader methodological and organizational ramifications. An encompassing approach is necessary as optimized solutions of isolated problems concerning, e.g. scheduling technology, lot-size decisions, etc., are not able to guarantee an overall functioning capacity planning. The paper suggests theoretical and/or practical changes in the following seven areas: (1) master scheduling, (2) the level of detail and length of the planning horizon, (3) the scheduling technology, (4) the maintenance of the planning parameters, (5) capacity planning in pre-production departments, (6) integration of subcontractors in capacity planning, (7) order release and start of manufacturing.