Capacity planning is the best manufacturing practice because it means that a company uses resources based on how many items can be expected to be made. When done within an ERP platform, this gives a company several advantages such as:
- With Capacity Planning, a company can more accurately manage throughput more efficiently over time and can consider seasonality and other surges and proactively address them within the organization as they occur.
- Because data, routing, BOMs, and other components of the ERP system can be utilized, capacity planning has access to past data to help understand labor costs, inventory, and other costs associated with adding capacity if needed.
- Because a company has medium to the long-term understanding of its capacity, it can plan increases to reduce lead times and allow for a balanced product mix. This improves customer satisfaction and gives the company a competitive advantage.
Benefits of Using ERP for Capacity Planning
Today’s ERP systems allow manufacturers to be more agile and flexible in their decision making. They also allow them to operate with a level of accuracy, efficiency, and sophistication on par with larger companies. And for those that chose to utilize capacity planning within their ERP system, there are many benefits to doing so. The benefits include:
- Automation – Automating production capacity within an ERP system reduces manual data errors.
- Increased Capability – While manually calculating capacity is doable for a single machine or a few machines is possible, it becomes more difficult and error-prone for calculating it manually for workgroups with many machines with different speeds, sizes, and ages. Using an ERP system’s capacity planning capabilities exponentially increases the ability to manage large equipment workgroups and to calculate those group’s capacity automatically.
- Monitor Costs – Because core data for purchased materials, labor, value-added processing, and other key factors are already in the ERP system upon implementation, capacity planning can allow a company to monitor costs during high growth or recession periods. The projected capacity can also help companies set budgets for key areas such as personnel and inventory.
- Production Cycles – Because the ERP system contains historical data that can be trended over time, companies can manage and plan capacity for seasonal events and other contingencies. This predictive capability can identify when the heavy cycle starts, so the company can add labor and increase inventory buys. It can also identify when the cycle will end so that labor and purchasing can be scaled back.
- Growth – All manufacturing companies want to grow. And again, by leveraging the historical growth overtime against capacity planning, year over year increases can help a company decide when to seek funding for capital equipment purchases and to trigger those purchases at just the right time to keep capacity growth on track.