SCM Fundamentals: RCCP
Continuing our SCM Fundamentals series of posts the next step in the process is the Rough-Cut Capacity Plan. It takes the output from the Master Schedule and starts to analyse it in a bit more detail. It breaks it into smaller time buckets (most likely weeks) and at a more detailed level in terms of resources or individual machines. This is the process for roughly confirming that the production plan is achievable in that we are likely to plan to only 70-80% of capacity so there is still some headroom for changes. But it is a key step in highlighting issues early in the planning process.
The purpose of the RCCP is to:
- Ensure we have enough capacity to meet demand.
- Check that we are making the best use of resources and that nothing is either overloaded or not being sufficiently used.
- That the plan is achievable without excess costs (e.g. overtime, expedited shipments, use of expensive outsourced capacity etc).
- That we can deliver what the customer needs on time and in full.
If the Long-term resource plan that was done as part of the S&OP is correct and nothing has changed then overall there should not be a major problem meeting the weekly schedule. But when we drill down into resources and days, we may find that there are overloads on certain days or resources. This means there is more demand for that resource on a particular day than the resource can deliver. For example, we may have a factory making chairs that are produced on a resource that has capacity of 200 chairs a week. So, we can produce 800 chairs in a four-week month. We have demand for 600 chairs in February (and other months in this example). So, based on the resource plan that is OK. If anything, we need to get extra business to use some of the excess capacity.
Now let’s look at February itself. The order lead time is 1 week. So, this means we would produce each order one week before delivery is due. But now the customer says they want delivery of all 600 chairs once a month on the 15th of February. Now we have an overload in that one week.
What will be required is levelling out peaks in the week by moving planned production from day to day and maybe from machine to machine. It may even require levelling from one week to the next. But generally, if the S&OP and Resource Plan processes were done correctly there should be a way to fit the requirement into the available capacity.
In the Chair example the simple answer is to push production back into the previous weeks to level out the peak. Now we can produce all 600 chairs in time for the 15th of February. Nice and simple in this example. This may not always be this simple. There are likely to be other orders using the resource in previous weeks. The product may have a short shelf life as in the case of food etc. But here we are just illustrating the process.
The key steps are
- Identify the Resources in the factory and the items that flow through them. Every item should have a Bill of Resources in the same way that it has a Bill of Materials. All those bills of materials will combine to give an overall picture of the demand on a resource. It is possible that some or even all the resources will have been identified in the resource planning stage but is it likely that they have not been. For example, many factories talk about “cells”. In the early stages of my career, I was a planner for a “Cell” in a medical implant company. We made artificial hips. The cell was “HOJ” Hips and Other Joints. The high-level resource plan for the factory saw output from our sell as one overall number. But when I was planning it for the cell, I had to break it down into the resources for that cell. There were grinders, sanders, beading, polishers etc. Each machine, or set of machines, had different capacities, lead times etc. Different hips went through different sequences of machines. All this had to be considered in the RCCP and ultimately in the detailed plans we will come to later. But not everything was a critical resource that had to be planned. For example, we had a “Zyglo” station. This was a step where the hips would be dipped in a special solution and examined under a fluorescent light to see if there were any flaws or cracks in the casting. This was a critical quality step, and every hip went through that step. But it took less than a minute. For most of the day the station stood idle. There was no need to spend time planning it and examining its capacity. If we ever ran out of capacity on that machine, we would have long since maxed out every other resource in the factory never mind my little cell.
- Confirm the capacity of each resource. This is an important step and needs to be checked regularly. I have often seen companies use capacity numbers that were calculated years in the past when the resources were first installed. You can often get an estimate of the capacity of a resource by looking at past output. But that should only be a start point. Always check with the operators of the resource. They know it best because they use it every day. And also verify that with engineering and maintenance. They will often know that speed settings etc can be adjusted.
- Determine the loading on the resource. Take the total required production for the item passing through the resource and multiply that by the processing time.
- A part takes 4 minutes to process on the resource. You need to produce 200 of these parts. So that is 800 minutes loading on the resource. Here the loading may be analysed in units per minute
- You can process 500kg an hour on a resource. You are required to produce 5000kg to meet demand this week. That is 10 hours. Here the measurement is kg per hour.
- Once this is done this for each item passing through the resource you will need to total up the overall hours required for that resource that week. Note that the processing time could vary depending on what you are producing. If could be Units per hour. Or meters per hour. Or KG per hour. Or Litres per hour. And there will be others. The key is to make sure it is consistent for that resource so that you can correctly assess the capacity loading. For example, you may have a machine that produces screws. One small type of screw is produced by weight. Say the orders are for a KG of screws. But another large screw is produced by number. So, someone might order 20 large screws. In order to have a consistent requirement that can be combined together into an overall loading for the resource the measurement must be standardised for that resource.
- It is also important at this stage to factor in things like vacations, public holidays, preventative maintenance, expected absenteeism rates, downtime. Basically you should never plan to run at 100% all the time. That is not sustainable.
- Compare that total required with the overall capacity on the resource. For example: A resource that runs a single 8 hour shift each day for 5 days a week. This is 40 hours. Total required production is 19 hours on product A 15 hours of product B and 5 hours of product C hours. Do you have enough capacity? Answer: In theory yes. You have 40 hours of capacity and only 39 hours of demand so you can produce everything required for that week. But: In practice there may be problems that I would immediately see with this loading.
- 8 hours a day assumes no time for breaks (lunch, toilet etc). In most jurisdictions you will be mandated to provide a set amount of break time. Regardless of local laws it is morally right to do so. You can get around this by staggering breaks so that the team always have enough people on the line to run. However, this means you have to either carry extra staff or run the line slower while breaks are being covered.
- Running at 39 hours assumes no machine breakdowns and is not allowing any time for changeovers etc. Unless you have a very efficient line that is not going to work. You will run at a certain utilisation based on historical performance. For example, you know that you can achieve 80% utilisation on that line. Therefore, the capacity now becomes 40*80% 32 hours. You have 39 hours of production but now you only have 32 hours capacity.
- I have not allowed anything for changeovers etc. Here we are running 3 products. Say the initial setup time is 2 hours and the changeover time between each one is 1 hour to adjust the equipment and at the end of the week you have a 1-hour washdown to clean the equipment. Now this is in effect 5 more hours of production. 1 setup (2 hours), 2 changeovers (2x 1hour) , 1 end wash (1 hour). Now the demand is 44 hours and you only have 32 hours of capacity.
7. Resolve any overloads. This is the heart of the RCCP process, and this is where you will spend most of the time and effort. You will now be back to the sort of problem solving we discussed in the high-level resource planning step. However, because the time scale is so much smaller your options may be more limited. You can look to work overtime, move items to a different line, get a team from another line to work on the constrained one, outsource to a proven subcontractor. However, you will find your options far more limited if the original S&OP and Resource planning processes were very incorrect and every department is under similar pressure. And the reality is no forecast will be 100% correct. So, managing constrained resources will be a constant battle that you as a planner will face. In this regard it is critical that Planning works as a coordinator between production, engineering, sales, etc to constantly solve problems as they arise.
8. Resolve any underloads. You may think having plenty of excess capacity is a good thing. Your finance and operations departments will staunchly disagree. Capacity represents investment. The machinery etc had to be bought and paid for and there needs to be a return on that investment. Take this example, again from the foundry in a medical devices company. The company had invested in increasing capacity in its cast foundry (metal hips, knees etc are all “cast” as the first stage of production). This was because a new product was due to launch and it was projected that it would sell up to 300 units a week. So the foundry was upgraded to cope with this new demand plus the existing demand. That involved a significant investment by the company. But when FDA approval was delayed for the new hip it left a situation of underload for about 3 months. We had to find ways to fill some of this excess capacity by pulling in future inventory builds etc.
This may seem like an overly complicated and difficult process. And I will not sugar-coat it. We are now starting to get into the difficult part of production planning and really it only gets harder for here. This is where good production planners start to really difference to a company.
It can be useful to create a tool that allows you visually see the capacity utilisation in a graph. This will allow you quickly see any overcapacity issues and identify potential solutions. Depending on the system you are using there will be different types of graphical displays showing you the balance between capacity and demand. Some of them are extremely complex and hard to interpret. Personally, I have always preferred straightforward graphs displaying a limited amount of information and using a traffic light system (e.g., green good, red is bad) to show quickly and easily where there is a problem.
The good news however is if you have an ERP system in your company it is likely that there is functionality to do all of this. Even if you do your planning on excel and are inventing the system from scratch if you do this right once it will be much easier in the long term.