This article deals with the topic of capacity bottlenecks and goes into more detail about their causes. It then suggests solutions that can be used to eliminate possible obstacles that arise during production. For example, process optimization can contribute to such a solution. The aim of this is to prevent capacity bottlenecks and to achieve the optimum result with the available resources.
Optimizing capacity utilization leads to an increase in productivity. Due to the high output (productivity) of the company, there is the possibility to increase the turnover in sales, because the right products can be made available at the right time in the right quantity.
As a prerequisite for optimizing capacity, the company must consider what products are needed in the market. Added to this are the factors of when, in what quantity and at what location this demand exists. These questions can be answered in sales planning, which is not part of this article.
DEFINITION – WHAT IS A CACPACITY CONSTRAINT?
Generally speaking, a capacity bottleneck is defined as a situation where production is negatively affected by factors such as a lack of personnel, complications in procurement and the insufficient availability of machinery.
The figure is intended to illustrate how the work phases from normalcy to interruption, taking into account a maximum capacity utilization, can proceed, which are attempted due to a capacity bottleneck..
HOW DO CAPACITY BOTTLENECKS ARISE AND WHAT ARE THEIR EFFECTS?
Due to increasing globalization, growing market dynamics and today’s technology in combination with special customer requirements, companies today are constantly faced with new challenges. A major influence on capacity bottlenecks is the requirement to keep production costs low while ensuring product quality. In addition, capacity bottlenecks can be caused by short-term increased order volumes. The consequences of capacity bottlenecks are, for example, financial risks and a possible damage to the company’s image. The current expectation of customers to be able to call up products promptly or quickly is another cause of capacity bottlenecks. Next, the individual causes are examined in more detail. If these occur either in combination or simultaneously, the possible effects can be devastating for the company.
Method / Human: The evaluation of analyses and the resulting decisions are made by humans. When delivery deadlines are no longer met because factors such as new production due to quality defects and processes are generally poorly designed.
Machine utilization: The utilization of machines is differentiated into maximum, normal and optimal capacity. Both maintenance, servicing and retooling of machines can lead to machines not being used to full capacity. This circumstance can therefore be defined as a possible cause of a capacity bottleneck.
Material bottleneck: The interaction of the two departments logistics and production is essential for the success of the company. If the provision of raw materials for production cannot be ensured due to external supply difficulties, the risk of a capacity bottleneck is increased.
Sub-optimal value chain: If all the causes of the emergence of capacity bottlenecks are considered holistically, one speaks of a sub-optimal value chain. If the processes are not coordinated and individual processes in the areas of target setting, machine capacity utilization and material flow are not ideally coordinated, not only can capacity bottlenecks occur in the “worst case scenario”, but they can also result in a loss of orders and associated damage to the company’s image.
SOLUTIONS TO AVOID CAPACITY CONSTRAINTS – SEASONAL / DAILY / WEEKLY / MONTHLY
In order to define possible solutions, the entire process chain must be analysed. Weak points are to be identified, as these form the basis for process optimization. Changes in the workflow show in the end if and how a capacity bottleneck could be eliminated or even completely avoided. In the area of machines, the most efficient variant of capacity utilisation is the optimum capacity, since here production is only based on the order situation and the focus is on cost optimisation and profit maximisation.
Daily / weekly / monthly production planning:
An as-is analysis can help to provide short-term forecasts and thus optimally determine the demand. This should serve as a guideline from now on. The weak points identified in the analysis can be remedied in the short term by taking precautions. Regular analyses control the efficiency of the measures taken and thereby check their sustainability.
Seasonal production planning:
In order to optimize seasonal production planning and prevent capacity bottlenecks, the analysis looks at the value chain over the entire calendar year and especially at individual phases such as Christmas, summer holidays and Chinese New Year. This enables us to determine the period of time during which production is fully utilized and when it is rather suboptimal. Measures such as storing finished products at peak times or increasing manpower can prevent capacity bottlenecks during the peak season.
OPTIMIZING CAPACITY UTILIZATION WITH THE HELP OF SAP?
Now follows a case study in which SCPLAN GmbH was able to help one of its customers to take strategic measures and optimize complex processes in order to ensure a smooth production flow in the long term and to avoid capacity bottlenecks.
Rolling capacity planning is divided into different horizons in order to answer different questions. The long-term view highlights the challenge of what investments should be made. In contrast, medium-term capacity planning deals with the challenges of production in the coming months including up to 2 years. This also includes the issue of seasonality. In addition, short-term capacity planning takes a detailed look at the available resources such as machines, personnel and material usage.
Production and detailed planning (PP/DS) has proven its worth for short-term capacity planning. For medium-term planning, however, the latest SAP Integrated Business Planning (IBP) Supply technology is recommended. Long-term planning can also be carried out using SAP IBP, but the focus here is still on planning for the next 5 to 10 years..
The basis for solid planning through to optimization is master data quality. Because the master data in the system models the real world. If the data is not sufficiently maintained, to name but a few, routings, work centers, bills of material and production versions, the significance of a system is very limited or prevents the potential from being used to the advantage of the company.
Short-term capacity planning in Production Planning & Detailed Scheduling (PP/DS):
The S/4-Hana PP/DS is used for automatic and optimized production planning. Planning problems are represented by messages (alerts), which must be solved manually. During planning, the availability of materials and resources is checked and setup times are optimized.
Medium to long-term capacity planning:
IBP Supply aims to generate a feasible and cost-optimized plan.
Screenshot of optimization within SAP IBP Supply:
IBP Supply deals with the optimal use of resources. In the picture above, we see the planning result with optimal capacity utilization and satisfaction of customer needs. Seasonality is recognized and included in the planning in time so that additional requirements due to seasonality can be met in time for sales.
Do you consider to optimize your Supply Chain?
We are your contact person for additional information, talk to us.