Rough cut capacity planning is a control technique used by manufacturing companies. As company management develops a manufacturing production schedule (MPS), they base their schedule on the belief that all required materials needed to meet this schedule will be available. This is not always the case in the real world, and a lack of available resources can quickly derail the best laid plans. Planning allows companies to test the real-world feasibility of the MPS before it is set in motion. This process can alert management to potential scheduling problems so that the MPS can be modified or resources can be added as needed to meet production goals.
Management creates a MPS based on demand forecasts, customer orders, and financial goals. The schedule itself generally has little bearing on the capacity of the factory or on the amount of raw materials on hand. By performing rough cut capacity planning prior to the start of production, factory owners are able to reconcile the goals of management with the capabilities of those working on the floor.
During planning, staff members make a list of all resources needed to produce the quota listed in the MPS. This includes equipment and machinery, as well as raw materials and supplies. It also includes staff and management needed to run the factory and operate equipment during these production runs. Next, the company compares these required resources to a list of resources currently available and makes a note of any discrepancies. If certain resources are missing, the company makes plans to obtain them.
Based on the results of rough cut capacity planning, the company can add more machinery or reconfigure existing assembly lines to better meet its goals. They may also order more raw materials or seek out new sources of inventory. The company could also hire more employees or add shifts to meet demand. The company may modify certain procedures and practices to improve efficiency.
The planning process has many advantages for manufacturing companies. It helps to reconcile the goals of upper management with the capabilities of those performing the physical work, and it also serves as a powerful tool to negotiate a change in the MPS, though this is generally considered a last-resort scenario. This planning process helps with short-term inventory and hiring processes, and it also points out problems in long-term capital investment and purchasing procedures.