Integral Logistics Management — Operations Management and Supply Chain Management Within and Across Companies

5.3.3 Basic Principles of Scheduling and Capacity Management Concepts

Intended learning outcomes: Present the objectives of the tasks as well as the overall objective of scheduling and capacity management. Describe the vicious circle caused when capacity bottlenecks prolong the planned production lead-time.

The type of business or company makes no difference when it comes to time management and scheduling and capacity management. Industrial and service companies alike face essentially the same challenges:

  • How can individual order processing tasks be synchronized in time?
  • What capacities must be available to realize master planning?
  • Where and when must special shifts and overtime (or short-time work or part-time work) be put in place? What jobs, or whole orders, must be turned over to subcontractors (due to overload) or taken over from them (due to underload)?
  • Where can the rhythm of production be brought into balance? Can short-time work in one area be compensated for by overtime in another?
  • When and where can capacity or orders be shifted? For example, what shifts can be made from one shop, production line, office group, team, and so on to another?
  • Can lead times and the number of orders in process be reduced?

The objectives of the tasks of time management and scheduling and capacity management are similar to the objectives of materials management (see Section 1.2.1):

  1. High service level, short delivery times, high delivery reliability rate, and, at the same time, flexibility to adapt to customer requests
  2. Low invested capital, that is, minimal inventory of work in process; optimization of wait times
  3. Efficient use of available capacity through good utilization at a constant level; prediction of bottlenecks
  4. Flexibility and adaptability of capacity to changing conditions
  5. Minimal fixed costs in production administration and in production itself

Finding solutions for these issues requires consideration of large bodies of data from various open or planned orders. IT-supported handling of the problem is often necessary. The planning problem becomes more complicated because some of the above objectives, such as the first and the third, contradict each other.

Figure shows the consequences of not planning capacity. If capaci­ty is inadequate (here, too low) to begin with, a vicious circle of actions results. To gain an understanding of how this can arise, begin with “in­creased number of orders in the factory” at the bottom right of the figure.

Fig.        A vicious circle caused when capacity bottlenecks prolong the planned production lead time. (From [IBM75]).

  1. If the number of customer orders increases, the number of orders released to production also increases, thus increasing the load on capacity.
  2. If the number of orders exceeds capacity, queues will form behind the work centers.
  3. In consequence, orders must wait and their actual lead times lengthen. Orders cannot be met at their due date, that is, not within the customer tolerance time.
  4. Standard lead times, particularly the inter­operation times, are prolonged to gain more realistic planning.
  5. As a consequence, orders are released earlier, which in turn causes additional load in the form of released orders. The “game” begins all over again at point 1.

In this example, increasing the capacity could be a way to break out of the vicious circle.

Continuation in next subsection (5.3.3b).

Course section 5.3: Subsections and their intended learning outcomes

  • 5.3.4b Overview of Scheduling and Capacity Management Techniques

    Intended learning outcomes: Produce an overview on order-oriented infinite loading, order-wise infinite and finite loading, operations-oriented and order-oriented finite loading, constraint-oriented finite loading, load-oriented order release (Loor), capacity-oriented materials management (Corma).

  • 5.3.5 Available-to-Promise (ATP) and Capable-to-Promise (CTP)

    Intended learning outcomes: Explain available-to-promise (ATP) and the determination of ATP quantities. Produce an overview on the techniques of multilevel available-to-promise (MLATP) and capable-to-promise (CTP).