Today I attended a meeting where a lot was discussed of the RCCP and I realized that it is not always clear what it is and what it is for.
So I will try to explain it below.
Rough-cut capacity planning (RCCP) is a long-term capacity planning technique. RCCP validates the master production schedule (MPS). The goal is to ensure that companies don’t purchase or release an excess of materials.
It is not uncommon for the MPS to overstate the need for more materials than production can process. Once the RCCP analysis takes place, changes may trickle down to the MPS or available capacity to better balance raw materials, capacity, and demand.
What Is the Difference Between Rough-Cut Capacity Planning and Capacity Requirement Planning?
Capacity requirements planning (CRP) is a short-term capacity planning technique that determines whether you have the appropriate capacity to meet the demand for products. As mentioned, RCCP is a long-term planning technique.
RCCP is common in the early MPS planning stage, while CRP occurs at the end of the capacity planning process.
Rough-Cut Capacity Planning Software
Software solutions have made short- and long-term capacity planning more manageable and accurate. Before software automation, many companies planned once per year. With capacity planning solutions, companies can plan more frequently.
Traditionally, companies used Excel to perform capacity planning. But this proved difficult for getting a complete look at a company’s product portfolio, multiple locations, and work across teams. With digital innovation, organizations can integrate capacity planning and analysis, as well as ensure that investments in materials and resources align and that plans are optimal and achievable.
Types of Rough-Cut Capacity Planning
Capacity management techniques are for long-, medium-, and short-term planning. Rough-cut capacity planning is a long-term capacity planning technique.
Short-term capacity planning addresses unanticipated increases and decreases in demand. This approach can impact activities over a few days or up to six months. Such short-term planning often results in companies offering employees overtime to handle high product demand.
By contrast, long-term capacity planning looks at the big picture to ensure that the company has enough resources to meet long-term production needs. Long-term capacity planning typically focuses on strategic decisions that impact technology, processes, and locations.
For example, suppose in the short term, overtime does not increase production enough to meet demand. In that case, it might be necessary to add more equipment or facilities in the long term.
How to Determine When to Use Rough-Cut Capacity Planning
RCCP takes place after the demand planning process and once the master production schedule is complete. At this point, the capacity manager must validate production decisions to meet demand.
As depicted in the diagram below, both the business plan and the sales and operations plan feed into the master production schedule. RCCP takes place after the MPS is complete and might impact changes to the MPS.
The Levels for Calculating RCCP
RCCP can take place at two levels. You use routing-based RCCP when you want to capacity plan by resource. Then use rate-based RCCP to plan by production line.
The output of both routing- and rate-based RCCP is a statement of capacity load ratio. An example formula is as follows:
Capacity load ratio = Required capacity / Available capacity
Routing-Based RCCP
Routing-based RCCP evaluates required and available capacity in hours per week for each resource. This level of RCCP demonstrates your resource availability.
The routing-based RCCP formula is as follows:
Resource capacity load ratio (hours per week) = Resource required capacity (hours per week) / Resource available capacity (hours per week)
Rate-Based RCCP
Rate-based RCCP measures required and available capacity per week per production line. This level of RCCP demonstrates your production line capacity.
The rate-based RCCP formula is as follows:
Production line capacity load ratio (per week) = Production line required capacity (per week) / Production line available capacity (per week
Rough-Cut Capacity Planning Examples
The example below walks through a RCCP scenario at a garment factory. Begin with the demand for each product, the capacity for the factory per quarter, and the number of production lines.
Using the production plan, you will understand gaps in production capacity and make adjustments. In this example, you will see that modifications need to occur to accommodate Q2 demand. The company in this example might be able to shift capacity from Q3 to Q2.
Another example comes from M Sugaring and R Nurdiansyah at the Department of Industrial Engineering, Universities Islam Indonesia, Jogjakarta, Indonesia. The study “Production Capacity Optimization with Rough Cut Capacity Planning (RCCP)” demonstrates the improvements to production plans based on the findings of rough-cut capacity planning. In this research paper, the researchers analyzed the production of musical instruments.
According to the study, “The company's success in achieving its goals is the ability to meet demand and provide satisfaction to customers.” Unfortunately, there is an imbalance between capacity available and capacity requirements. The analysis determines that “workload rearrangement must be carried out to distribute labor and increase work hours to 90 minutes and 120 minutes so that demand can be fulfilled.”
As presented in the research paper, the graph below shows how redistributing excess workload away from painting booth four and adding overtime helps overcome capacity deficiencies in painting booths one and three.
Rough-Cut Capacity Planning Example for Calculating RCCP
To use this rough-cut capacity planning template, adjust the product demand, capacity, production lines, and production plan to reflect the parameters of your company. This template will help you discover any gaps in capacity.
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