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6 Questions that will Improve Your Capacity Planning Strategy

Demand Planning Inventory Optimization & Management Supply Chain Planning Supply Planning
06/30/2020

Capacity planning has always been a core strategic process in the manufacturing industries' quest to meet the demand of customers in a timely and efficient manner. Having accurate insight into your plant’s production capacity within specific durations of time while navigating through constraints such as supply delays, machine downtime etc. is crucial to meeting this demand. This knowledge can be the difference between having happy or irate customers, as well as, having repeat customers or one-off purchases.

Most manufacturers have some form of capacity planning process or strategy today. These processes involve the use of basic data gathering tools to handle daily operations. These tools are generally Excel sheets, whiteboards, or the conventional reams of binders that are strewn across most plant floors.

But in every case, these processes are reactionary.

The use of Excel sheets or other traditional data collection and record-keeping tools simply “keeps the lights on” and provides the perception that your operations are running smoothly. What they do not answer are the most important questions such as “why are we experiencing a stock out, why do we struggle to fulfill orders, or why are our machine utilization rates low?”

This post will examine the challenges manufacturers face with capacity planning. It will also discuss the critical questions you must have the answers to in order to develop an optimized strategy. By the end, you’ll have a sense of the limitations of your planning strategy and how new solutions or tools can help you improve your strategy.

Why Do Manufacturers Struggle with Capacity Planning?

A 2018 Bloomberg report stated that global manufacturers were struggling to keep up with customer demand and this was expected to continue until 2021. Although the ongoing pandemic has dampened this projection, the challenges outlined here are still the reasons manufacturers struggle. The reasons include:

  • Supply Constraints – The stress put on international supply chains due to the increased needs of manufacturers meant that raw materials producers also struggle to fulfill orders. The uncertainties caused by over-stretched supply chains are transferred to manufacturers who then find it hard to plan properly.
  • Out-dated Planning Tools – The manufacturing industry is famous for its lateness in adopting digital solutions to fixing age-old problems. This wariness to technology is due to the fear of changing systems that are perceived to be functioning. Applying this to struggles with capacity planning means manufacturers are yet to embrace the use of technology in capacity planning and management.
  • Internal Accountability – In some manufacturing organizations, lack of data about machine utilization capacity, inventory, and demand, as well as, communication challenges make capacity planning impossible to do.
  • Fluctuating Demand –Not having insight into fluctuating customer demand patterns makes capacity planning difficult for most manufacturers. Increased or reduced demand, the need to revise fulfilled orders, and urgent demands are all factors that challenge manufacturers and their capacity planning abilities.
  • Ongoing Growth – As a manufacturer grows and increases the size of its plant floor and number of assets, keeping track of this growth and the new capacity becomes a challenge. Although the availability of old plant floor data may help with planning, this does not reduce the complexity of capacity planning in an expanding facility.

The 6 Questions that will Refine Your Capacity Planning Process

Improving your capacity planning strategies is a continuous process as there’s no magic wand that can wish away the challenges. To kick start this continuous improvement process, these questions can help.

Where do I Start with Capacity Planning Improvement? – Once you are unable to fulfill one or two orders due to “unforeseen” constraints, it is likely that your current capacity planning strategy does not meet your plant floor’s needs. This means improvements are needed and how do you improve its current state?

  • Acknowledging the problem – Like every process to personal development and business growth, acknowledging that issues exist with capacity planning is the first step. For manufacturing enterprises with multiple departments, an “improvement discussion” with all teams must be had. Here, ideas can be discussed, and the challenges faced by individual teams can be brought up.

What is my plant floor’s capacity? – The second step involves quantifying the challenges ahead. To do this, the current state of things must be documented. If you already have a prior capacity strategy, then you are ahead of the curve and should know your production capacity because most manufacturers do not have one. For those without a strategy documenting the fact that no capacity planning strategy exists within the organization is recommended. This is because that knowledge has a future role to play in creating a strategy.

How does increased demand affect my facility’s capacity? – Having a demand forecasting process in place is the best way to determine the effect of increasing demand or urgent demands on your manufacturing capacity. Demand forecasting is a science that requires the use of tools to analyze past demand patterns and make future predictions based on those demands. If you do not have the capacity to analyze demand, it should also be noted. The answer to this provides the data needed to answer the next question.

What category does my capacity planning strategy fall under? – There are different types of capacity planning strategies as many manufacturers tweak the standard ones to fit peculiar situations. This does not mean broad categorization does not exist and the common strategies include:

  • Lead Strategy – This strategy involves increasing your capacity in anticipation of an expected increase in customer demand. This is a proactive strategy put in place by manufacturers who may have started a marketing campaign and expect new customers to come calling in the near future.
  • Lag Strategy – This strategy involves increasing capacity only when the current capacity is being utilized. This is a conservative reactive strategy and it is widely used in the manufacturing industry.
  • Match Strategy – This involves the limited increase in capacity in response to changing demand. This is a moderate strategy as the manufacturer does not go all out to increase capacity, unlike the lead strategy process.
  • Adjustment Strategy – This process involves adding or reducing capacity according to consumer demand. It is a reactive process and it’s widely used in the manufacturing industry.

Are my capacity planning tools up to the task? – An inadequate capacity planning strategy highlights several problems. These problems include the lack of data or the availability of inaccurate data and the use of inadequate tools to determine your capacity requirements to plan accurately.

Am I open to using new tools? – Having capacity planning challenges despite putting a strategy in place means your current tools may not be up to the task. Recognizing this issue will define your search for more capable tools to help you develop a successful capacity planning strategy and implement them. Finally, the availability of experienced employees who are capable of using these tools must be considered.

Manufacturers with 5 positive answers to these questions are on the right track to improving their capacity planning strategy while for others, the process of developing a strategy starts now.

Next-Gen Capacity Planning and Strategizing Software to the Rescue

The arrival of managed services and software solutions dedicated to capacity planning, strategizing, and management simplifies the process of capacity planning. These software applications are currently helping manufacturers take a proactive and preventive approach to capacity planning.

Crucially, capacity planning software is agile.

Capacity planning software provides insight into every aspect of the strategizing process. This includes data collection, documentation, supply chain visibility, inventory management, determining machine utilization, plant floor efficiency, and demand forecasting.

These next-generation solutions for capacity planning provide a string of solutions which enable manufacturers to integrate every constraint that could affect a production cycle into a strategy. The end result is a master production schedule which optimizes your plant’s floor capacity. This strategy could be a lead strategy or an adjustment strategy or something in-between depending on current and expected constraints.

A flexible strategy means the manufacturer is securely placed to deal with real-time fluctuations to the market and other forces that may affect their production capacity. The example of a manufacturer in the food and beverages industry who was frustrated with the process of meeting urgent orders while balancing them with its long-term orders explains the need for flexibility.

Every time they were seemingly working at full capacity, an urgent order came in and the manufacturer had to create new strategies to meet the order. The result was stressed out plant operators and unhappy customers. A capacity planning software will approach this dynamically by taking into consideration the possibility of urgent demands cropping up at specific durations. Thus, a plan and schedule which accounts for meeting both orders will be developed.

What Are the Next Steps?

The knowledge of better software or tools out there to direct your capacity planning strategy should guide your next step. This step begins with identifying software that provides visibility into operations and provides enough contexts for accurate planning.

This makes knowing what to look out for before signing or subscribing to any capacity planning software the most important decision you will make when taking action. Once in place, a capacity plan can be developed, executed and constantly improved.

Importantly, capacity planning and developing a strategy must not be an afterthought. It should guide every aspect of a plant’s daily operations and production cycle. This ensures that you deliver the high-quality products you promised your customers.

We’ve made it easy for you to choose the best capacity planning software for your manufacturing processes.

 

Best Practices for Selecting Supply Chain Planning Software

Follow these 6 best practices to ensure you get the right software solution when you need it.

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