Many companies are very uncomfortable when it comes to discussing or implementing Capacity Planning or many other aspects of Supply Chain. Either it’s too difficult or too expensive or unnecessary or… What most people do not realize is that they do planning every day in their personal life and never even think about it. Let’s look at a specific example:
It’s a sunny Saturday and you have invited friends over for a BBQ. Sounds wonderful, doesn’t it? Then you start thinking about what needs to be done during the party. You want to visit with your friends but someone needs to do the cooking. Oh well, shouldn’t be a problem as you can talk to people while cooking and how long does it take to cook anyway. That is a capacity question which will also lead to a scheduling question – when do you need to start cooking? The answer to when to start depends on when people want to eat and how long it will take to actually cook the hamburgers. In this case the capacity is fixed by the size of your BBQ. You can only cook a maximum of 16 burgers at a time. Since you are expecting 15 people averaging 2 burgers each that is 30 burgers or two lots of 16 (actually 14 in the second lot). Assuming 10 minutes to cook one lot, that is 20 minutes total. Not too bad.
But wait, you forgot to factor in the buns which take up twice the area of the burgers so you can only cook 8 buns at a time. This will equate to 4 lots of buns. Fortunately they toast faster so each lot only takes 5 mins or a total of 20 minutes for all the buns. That gives us a total of 40 minutes to cook the burgers and buns and a starting time based on backwards scheduling.
But – there is a problem with this plan. The meat will be cold by the time the buns are ready and people will be looking for the second burger before you can have them all cooked. We can solve the first problem by cooking some of the buns at the same time as the meat but this is not a one to one swap as it is two bun halves for every burger (check the BOM). The most efficient combination is probably 5 burgers and 10 buns at a time but this will mean 6 batches at 10 minutes per batch. At 60 minutes that is 20 more than the first alternative. Not acceptable so we need to try something else. Maybe we could do 8 burgers and 8 buns at a time. Since the buns take 5 minutes you could do two batches of buns while doing the one batch of burgers. With this plan we need to do 4 batches and actually end up with 32 if we decide that a little safety stock would be desirable. 4 batches at 10 minutes each is 40 minutes or the same as the first plan but neither the buns and burgers will have time to get cold. Definitely a better plan but it does not address the second identified issue – people looking for their second burger before you are finished. It is now obvious we do not have the capacity to resolve that issue so that means we need to get creative. We can either increase our capacity or outsource some of the production. By borrowing the neighbours BBQ we increase the capacity but we might need a second operator to run that BBQ. You might be able to run both by yourself but now you have no time to visit your friends and might burn some of the buns. Best plan is to outsource half the work out to the neighbour. Now all the burgers will be ready in 20 minutes and all it will cost is 2 additional burgers which you can cover out of the safety stock built in to the batch size. As a bonus you get more time to visit with your friends. This obviously calls for a beer, or two.
So there you go – a story from real life that has examples of priority planning, capacity planning, outsourcing, forecasting, BOM, MRP and assuming your spouse is checking up on you, Production Activity Control & Quality Assurance. Maybe all that Supply Chain stuff isn’t so hard afterall.