Capacity planning and lead time management

In this paper we discuss a framework for capacity planning and lead time management in manufacturing companies, with an emphasis on the machine shop. First we show how queueing models can be used to find approximations of the mean and the variance of manufacturing shop lead times. These quantities often serve as a basis to set a fixed planned lead time in an MRP-controlled environment. A major drawback of a fixed planned lead time is the ignorance of the correlation between actual work loads and the lead times that can be realized under a limited capacity flexibility. To overcome this problem, we develop a method that determines the earliest possible completion time of any arriving job, without sacrificing the delivery performance of any other job in the shop. This earliest completion time is then taken to be the delivery date and thereby determines a workload-dependent planned lead time. We compare this capacity planning procedure with a fixed planned lead time approach (as in MRP), with a procedure in which lead times are estimated based on the amount of work in the shop, and with a workload-oriented release procedure. Numerical experiments so far show an excellent performance of the capacity planning procedure.