Rough cut capacity planning is the process of converting the master production schedule into requirements for key resources. This often includes labor, machinery, warehouse space, supplier’s capabilities.
The concept behind the term Rough cut capacity is that it is the total amount of material required to fulfill the gross requirement, of a company. It does not consider scheduled receipts or the on-hand inventory; it just calculates the rough cut amount required to fulfill the gross requirement.
This is later used in the preparation and planning of the Master schedule planner, which is responsible for managing the resources and materials required.
The Rough cut capacity planning is an easy and simplified technique, which does not involve a lot of hidden values or inventories. Thus, it is a simplified way of capacity planning which is more intuitive, organizational, and preliminary.
The concept of Rough cut capacity planning software usually comprises of matching or balancing the assets available, with the demands arising at the moment.
A firm needs to convert its demands into capacity, labor, materials, orders, and inventory of finished goods. It needs to balance its assets and plan accordingly.
A model that targets to establish a computational relationship between production designs, process sheets, consumption of raw materials, time available, labor availability and so on.
Types of capacity planning
In the case of capacity planning, a lot of details need to be considered. Hence capacity planning is based on two types,
- Short term capacity planning
- Long term capacity planning
In the case of short-term planning, the main goal is to increase the production capacity by a few folds and handle the pressure of irregular, unexpected shifts in the face of increased demand.
Plenty of changes can be made to manage increased demand but the foremost is to increase production hours, which means overtime for the employees. Setting up extra facilities and acquiring more materials is also a way to proceed.
A lot of employees are happy doing overtime, which means extra bonuses and increased wages for them. This can go on for a few days or even a few months, depending on the rush, and also on the other aspects of production.
In the case of long-term capacity planning, it is a cumulative effect of numerous short term effects. Increasing shifts in temporary basis to meet immediate demands, can, in the long run, add to the production capacity, if continued.
Opening up a new facility for example or increase in hiring and investing in proper training also adds up to an increase in production capacity in the long run. Adding capital equipment and to modify the production plan is also another opportunity to increase production capacity.
Some manufacturing firms can efficiently delay demands by backlogging, queuing demands or by managing an anticipatory inventory that takes care of sudden rises in demand during special periods. This allows the firm to perform at its own pace in a smooth manner.
Example of rough cut capacity planning
Let us take the instance of a factory that produces two items, for example, boots and sandals. An MPS will be calculated before the production of the items begins. The amount of material required is calculated and also the number of working hours necessary.
A Rough cut capacity planning is done by charting out the,
- man-hours required to fulfill the job
- the units required
- a number of days that will be required to eventually complete the task
- the amount of material required to be purchased.
This chart would not consider any inventory management details or scheduled receipts to arrive later. Hence a rough cut capacity planning schedule is like the simple, intuitive and organizational planning that is done to chart out the requirements in a rough estimation.
There are various advantages and disadvantages involving the concept of rough-cut capacity planning technique, but all over it is considered a safe starting point.
Get more definitions about rough cut capacity planning and other ERP related terms here.