If one of your business goals is to maximize profits or improve efficiency, matching production capacity plans to market forecasts is essential. If planned capacity doesn’t match the forecast, your company will either miss out on potential sales because of insufficient inventory or amass excess product that you can’t move, resulting in costly storage or product waste.
For years, most manufacturing plants have relied on a process called rough cut capacity planning, or RCCP, to create forecast-based production plans. Many businesses utilized RCCP because it provided improvements over manual planning processes, and there were few other options available. However, as the name implies, the calculations were based on rough estimates of the site’s capacity, which could still result in inventory that did not meet demand.
Throughout our years of experience, we’ve worked with a variety of manufacturers that still rely on RCCP as their capacity planning strategy. In that time, we’ve observed its advantages and disadvantages firsthand. We’ll share our knowledge with you below, and also discuss alternatives that can provide a more accurate and efficient approach to capacity planning.
Positives of RCCP
Naturally, there are many reasons RCCP became the industry standard for capacity planning. RCCP is a form of long-term capacity planning that balances current plant capacity metrics with the future demand forecast, giving the business time to build up inventory or add capacity to meet projected sales. For example, if forecasts indicate demand will increase in six months, RCCP will help your company identify whether you should hire more employees for certain shifts, invest in more equipment and production lines, or cut idle time. These insights help plants scale up profitability and avoid wasting any unsold product.
Because RCCP is powered by automated calculations, it’s also much easier to make frequent planning and scheduling modifications. When businesses rely on manual capacity calculations, the time and effort it takes to create a plan can make it difficult to adjust as forecasts change. Continuously using RCCP ensures the plant will stay on top of developing trends and works only from the most efficient plan. Similarly, your site can use RCCP to make quick schedule decisions based on the highest-priority or highest-demand activities in order to maximize valuable production time.
Drawbacks of RCCP
Although RCCP offers improvements and benefits to traditional, manual capacity planning, it’s still based primarily on approximations and back-of-the-napkin assessments rather than a highly detailed plant model. As a result, there are often inconsistencies or errors in RCCP’s model, and the subsequent capacity plan will not account for every constraint or contributing factor. Without a fully optimized and accurate plan, your business will always miss out on some opportunities to increase capacity and sufficiently meet demand.
It’s also important to note that utilizing RCCP requires your plant to stay organized and on top of data collection. Without regularly updating the tool with new information on productivity, maintenance, waste levels, and other factors, the plans it creates will become increasingly inaccurate and outdated. If your business doesn’t have the time or systemization in place to gather this data, RCCP can’t function effectively. Despite these drawbacks, companies continued to rely on RCCP because until recently, it was the best choice they had.
Advantages of Finite Capacity Planning as an Alternative
To improve upon the benefits already offered by RCCP, other capacity planning strategies must offer more definite and detailed solutions. To achieve that, they must be based on precise specifications and a plant model that contains all the process knowledge of the site. When you increase the specificity, your business can engage in a more finite capacity planning process. This added level of detail will help the plant respond to projected forecasts even more purposefully, which can have lasting financial advantages. For example, a finite capacity planning tool can help your plant make smart tradeoff decisions based on your most profitable products, or instantly calculate the cost of an urgent plant schedule revision to determine whether the disruption is worthwhile.
After working with a client in the specialty chemical manufacturing industry, we recognized how their newly acquired site could benefit from finite capacity planning capabilities. During our project, we took the pre-existing detailed plant model we created and layered capacity planning optimization on top. Given the impressive results we saw with this client, we recently invested in creating a finite capacity planning tool that can be adapted to manufacturing sites in several industries. To learn more how this tool benefited our specialty chemical client, check out our recent case study.
