Capacity Planning: Fulfilling Our Customer Promises

Our customers rely on us to deliver on our promises and one of the most important ones we make is to deliver on time, in full (OTIF). If we fail in fulfilling this goal, we inevitably lose our leadership positioning to an agile company who is more committed to building a superior customer satisfaction experience.

How, then, do we consistently deliver customers’ orders on the dates promised? We start with capacity planning, which ensures that we have sufficient –but not excessive capacity available to cover supply demand.

Planning capacity is often a tightrope in which we strive to balance scheduling and operations and quickly adapt to ever-changing conditions. Achieving this balance requires a skillful assessment that takes into account multiple considerations. Without relying on a single system of record such as capacity requirement planning in SAP S/4HANA, it becomes far too easy to lose our foothold.

Let’s examine why capacity requirement planning is so integral to production planning and correct scheduling. Capacity planning involves evaluating and leveling a periodic exercise, such as monthly or annual budgeting processing, to minimize the risk of falling short on customer OTIF expectations. By identifying challenges as well as earmarking opportunities to intervene and mitigate risks, we can rely less on firefighting and more on proactively focusing on where to commit resources.

We must ask ourselves, why is capacity planning not regularly performed using SAP functionality? After all, SAP Capacity Planning functionality provides a relatively quick capacity assessment for each capacity category maintained for our work centers, which are typically (but not exclusively) machine and labor.

Moreover, when performed from a Short-Term (Daily Buckets), Medium-Term (Weekly Buckets), and Long-Term (Monthly or Quarterly Buckets) perspective in SAP, value-added updates are immediately visible to other participants contributing to the management of the supply chain. Capacity planning validates that the finite schedule was correctly accomplished, which provides benefits from a short, medium, and long-term horizon.

In the short term, accuracy is improved around the start and finish dates. Casting our eyes to the medium-term horizon, we find ourselves able to identify and fix capacity issues, improving the quality of inventory requirements down to the purchasing group. The long-term horizon offers us the opportunity to support strategic planning within the organization. When one of these horizons reveals an issue, the scope of orders contributing to the capacity issue is immediately visible, enabling informed and insightful business decisions to take place.

Of course, none of these benefits can be achieved without accurate master data, including that which supports the production planning and execution functionality. This data is a vital asset because it influences the performance of the supply chain and related operating cost. If the information we rely on cannot support the capacity planning processes in SAP, there will surely be negative implications elsewhere. The integration of the different processes working with a single record of truth improves information quality, which, in turn, enhances the performance of the supply chain. The process is standardized when done in SAP. When done outside the parameters of SAP, the knowledge of performing capacity planning combined with an ad-hoc solution is prone to mistakes, placing the organization at risk. 

SAP's capacity planning functionality leverages either existing or alternative versions of demand, along with PP master data that currently influences the supply chain. When we are unable to use this functionality, there is usually an educational, process, or technology issue that requires immediate attention. We are also able to glean opportunities we can seize to improve supply chain performance. Is it as simple as providing education, or is it more involved, necessitating adjustments to routings or work centers? The integration aspect of SAP, where multiple processes leverage the same data, significantly lowers the risk of working with incorrect data. 

The bottom line: performing capacity planning in SAP provides a strong opportunity to improve supply chain performance through integration and information quality. Plus, taking advantage of the different functionality, like aggregating the data to logical groupings and long-term planning, allows production planners to work with a process that offers a higher level of integrity. And that translates to providing better requirement information to operations and purchasing information within SAP – and ultimately, honoring our OTIF commitments.