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Capacity Planning

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  • #53606

    MacDonald
    Member

    I am putting together a proposal for a new custom production facility with a very seasonal demand pattern (e.g. March and April demand is nearly 3 times that of July and August). I have put together a couple models that would increase monthly capacity to meet demand (e.g. added shifts, OT, and outsourcing). I also want to put together a model that levels the monthly production to mitigate the seasonal spikes in demand. My order analysis shows that only about 25 – 40% of the demand for a given month are ‘at once’ requests. The balance of the demand are prebooks usually taken a few months in advance of the requested delivery date.

    Understanding that there are some risks associated with leveling custom production (e.g. cancelled orders, custom edits/changes, lower inventory turns, etc.), does there exist a formula or does anyone have some advice on how to level the monthly production so I can plan capacity accordingly?

    If there are other questions I need to be asking or if there is more information I can provide, please let me know.

    Thanks for your help!

    -Toby

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    #190830

    broderick
    Participant

    Leveling volume or mix?

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    #190831

    MacDonald
    Member

    Monthly Volume.

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    #190832

    Strayer
    Participant

    Leveling production volume tends to be costly since you will accumulate inventory between demand spikes. Since the spikes are seasonal they can be predicted. And since you are doing custom production you are right that there is a risk since the inventory you accumulate may not match demand during the spike. It sounds like you would be much better off with a “pull” model where you can quickly ramp up or down according to demand.

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    #190836

    Rohatgi
    Participant

    Answer is PULL.
    But question is how do you do it.?

    Few things to remember
    1. Past history not a reflection on future demands. So keeping large inventory would be risky.
    2. Flexible work-force is useful for meeting seasonal variations.
    3. You are considering Demand / Month but what is your lead-time
    4. What is the Demand for each model ? If you know this, you can level your production using model mix.

    Anupam

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