Provide at least three reasons ofwhy capacityplanning isconsidered to be animportant element ofenterprise resource management and planning.

Capacity Requirements Planning

Every manufacturer faces the challenge of managing production capacity. Since facilities and equipment are expensive, most manufacturers are confronted with the issues of meeting excess demand with limited capacity. How creatively a company meets these challenges compared to its competitors is often a key determinant of profitability and success.

Most planners and production managers are familiar with the capacity planning capabilities provided by ERP systems. At the master production scheduling level, ERP allows you to perform Rough-cut Capacity Planning (RCCP), comparing anticipated demand with gross capacity on a monthly or weekly basis. At the production planning level in which ERP actually generates production and material requirements plans, the planner can perform Capacity Requirements Planning (CRP) weekly or daily. In both cases, the system relies on the planner's knowledge, expertise and effort to compare required capacity with available capacity.

Capacity planning is the vital third dimension to your manufacturing resource planning. If you do not check to make sure your work centers are not overloaded you cannot know that your master schedule is a realistic and achievable plan. If your plan is not realistic and achievable you do not have a plan, you have a wish list. CRP is one of the most useful but most often ignored benefits of having an ERP system implemented. Once you have set up and understood how to use capacity requirements planning, it entails almost no extra maintenance cost as it uses the information you already have on the system for material planning.

One of the biggest differences between MRP (material requirements planning) and ERP (Enterprise Resource Planning) is the recognition that planning material is not sufficient, a company also needs to plan its other resources (labor, equipment) so that both material and resources are available at the same time. Problems with material must affect the capacity plans, problems with capacity also have to affect the material plans.

Planning of these resources is carried out at three levels in the ERP process. At the aggregate planning stage, a Rough-cut Capacity Plan (RCCP) is used to check on critical resource availability. RCCP looks at just the critical resources used by each product group over a time scale of between 3 to 18 months or more. It is also necessary to carry out an RCCP at the master schedule level. At this level you are looking at the critical resource requirement of end items.

Capacity requirements planning (CRP), on the other hand, is carried out at the part number level and looks at every work center. In addition, the resource required is calculated for every planning period, normally a week or day, rather than by the month or quarter as with the RCCP for the aggregate planning, or by week if RCCP is used at the master production schedule level.

RCCP makes a number of assumptions. Rough cut at both the product groups and master schedule item level assumes all the critical resources will be required at the same time as the product is sold or the master schedule part is required. RCCP also does not take inventory on-hand or work in progress into consideration. CRP, on the other hand, calculates the capacity requirements that will be necessary to meet the master schedule taking all planning criteria into consideration.

The same material requirements planning logic that determines what material we need and when we need it also determines what capacity we need and when we need it. We do, however, need a capacity planning structure in place before we can complete this.