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Capacity Evaluation is not sexy

But it is vital to the Plan to Manufacture process!

 

Let’s face it; the Capacity Evaluation transactions (transactions CM01 to CM05) that have been around since the R/3 days are ugly!  Even the opening screen is wanting; you can’t save a selection screen variant, thanks to a greyed-out ‘Save’ button, making the transaction cumbersome to execute.Opening%20screen%20of%20CM01

Opening screen of CM01

Moreover, the term “Capacity Evaluation” steers some novice consultants to dismiss it as an unnecessary step.   In fact there is a lot more “doing” than “evaluating” in this step. Skip it at your peril!

Where does Capacity Evaluation fit within the Plan to Manufacture process?

The Capacity Evaluation process follows the nightly MRP run and daily Exception Monitoring and precedes Dispatching.  It is Step 4 in the screen shot below.

The%20Plan%20to%20Manufacture%20process

The Plan to Manufacture process

 

What is the purpose of Capacity Evaluation?

If you have correctly executed non-operative planning — Sales & Operation Planning and/or Long-Term Planning — you will have prevented the most egregious of work-center capacity overloads.  But capacity overloads can still occur in the operative plan. Consider these situations:

  • Sales Order quantities exceed the forecast
  • Planners increase safety-stock levels
  • Planners reduce the forecast-consumption period

The purpose of Capacity Evaluation is to find and fix capacity overloads as they come into the evaluation horizon.  By default, the horizon is nine weeks (60 calendar days) but that can easily be changed before executing the transaction by following the menu path: Settings \ General.  Change 60 days to 183 days to report on the next 26 weeks.  (It can also be configured to default to the desired number of days).

Change%20the%20Capacity%20Evaluation%20horizon

Change the Capacity Evaluation horizon

We must find and fix capacity overloads for two main reasons:

     1. Promise accurate ship dates to customers

Your Sales Order Available to Promise (ATP) check promises dates and quantities to your customer based not only on inventory but also on production orders and planned orders. If your work centers are 150% loaded, you will not fulfil your promises.  Below is a screen shot of a typical configuration for the Sales Order ATP “Scope of Check”.

Sales%20Order%20ATP%20Scope%20of%20Check

Sales Order ATP Scope of Check

     2. Keep inventory at the correct level

If work center capacity is 150% and your component materials are planned using deterministic planning, such as MRP type PD, you will purchase 50% more material than you can process at your work center.  As a result, inventory levels will be too high!

Therefore, your Capacity Evaluation period must be long enough to cover most sales order ship dates and procurement lead times.  If customers’ requested ship dates are generally between today and four weeks from today, a nine-week period is likely sufficient.  On the other hand, if several PD planned component materials have lead times that exceed nine weeks, you should run Capacity Evaluation for a longer horizon.  (Another solution is to plan long lead-times materials using consumption-based planning instead of deterministic planning. But that’s a whole other subject deserving of a future blog post).

I’ve executed the CM01 report, now what?

As you can see in the screen shot below, the machine (line) capacity of this work center is overloaded for two periods:  Weeks 31 and 36.  Let’s look at Week 31 first, when 47.72H of capacity are required but only 41.25H are available.

CM01%20report%20for%20work%20center%20A1-LD01

CM01 report for work center A1-LD01

Select week 31/2021 and click on the icon Cap.details/period and you will be taken to the detailed report where you can see the planned orders (PeggedRqmt) that make up the 47.72 H of capacity requirements that week.  Note that the report below shows the capacity requirements in MIN instead of H (my current client’s setup).

Detailed%20Capacity%20Report

Detailed Capacity Report

Here are some things that we can do to solve the overloads in Week 31 (three weeks from today).

I. Jump off this report to re-schedule planned order 10232252 from Week 31 to Week 30. Run a planned order ATP check to ensure that components will be available at this earlier date. Save.

II. Jump off this report to re-schedule planned order 10232252 to a different work center: A1-LD02 since it can also run there; a production version exists.

III. Get agreement from the production manager for overtime work in Week 31. Update the work center’s capacity to reflect this.

After doing any of the above, re-run this Capacity Evaluation report to prove the overloads have been resolved. I used Option II to solve the overloads.

No%20capacity%20overload%20in%20week%2031

No capacity overload in week 31

Now let’s look at Week 36, when the work center has a 127% load.  We could use any of the first three solutions proposed above, although it is probably too early to propose overtime, since the capacity situation will likely change significantly before then.

Here are some additional solutions when the capacity overload is several weeks away:

IV.  If this material can be made in-house or procured externally, convert one or two planned orders into purchase requisitions to buy instead of making in-house.

V.  If you use quota arrangements to plan quantities of these materials against work centers A1-LD01 and A1-LD02, maintain the quota arrangement to drive more volume to work center A1-LD02, if capacity exists there.

VI.  If the capacity overloads are a chronic problem institute a permanent, extra shift.

VII.  As a last resort, ask the demand planner to review her forecast for the materials that run on this work center.  Is she satisfied that the forecast is correct? If it is too high, request that she reduce it. Then you will re-run MRP and this Capacity Evaluation report.

Summary

Solve capacity overloads as soon as they enter your capacity planning horizon (the period of your CM01 report).  In doing so you will provide accurate promise dates to customers since they are based on a feasible plan.  And you will procure the right quantity of component materials that will be consumed shortly after they arrive.

Don’t be like the supposedly seasoned consultant I once worked with who wanted to skip the Capacity Evaluation step and jump right into Dispatching.  This guy suggested we dispatch the work centers for the next three weeks even though they had 160% loads; he wanted to smooth the next three weeks of MRP planned orders out over the next five weeks.  “Problem solved,” he said!

Why was the consultant’s suggestion wrong?  Please comment below.

 

 

 

 

 

12 Comments
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  • That is a splendid piece of writing - concise and yet very informative.

    One of the ways to resolve capacity overload might me to postpone a planned order. That might be the last resort. If we go this way, we need to make sure to have an integrated communication with sales (customer service) team so they can reschedule their sales orders and inform the customer accordingly.

    In my experience, capacity planning, integration back to SD and sales orders rescheduling are the weak points of many implementations.

    Cheers

    Dominik

     

    • Hello

      I think the periodic (ex daily) batch job to update Order Delivery Schedule based on ATP logic for Planned/Production orders may be the best solution to communicate sales team or even customers (if there is integration like EDI or e-commerce solution) regarding estimated order delivery dating.

      Thanks

      Marcin

        • I agree with you Dominik; someone needs to "monitor the job and its results" and this includes communicating with the customer (by EDI, email, phone call, etc.) because some Sales Orders will get an earlier date (V_V2 calls these Improvements) or a later date than originally promised (V_V2 calls these Deterioration).

          LOL, I love that word "Deterioration".  "Mr. Customer, your Order 12345 has deteriorated; it will now ship August 15th instead of August 10th".

  • Hi Ann,

    Superb writing. Surfacing out the practical shop floor situations and mapping this in SAP. And rather now, Capacity Evaluation is more sexy in S/4 HANA cloud. And it's easier with more user experience to simulate possibilities you mentioned.

    Regarding your question, may be thinking that this scenario is better handled in PPDS or other planning tools, or production scheduler are more dynamic on shop floor, and probably see these overload report but not consider to adjust them in system, rather take decision directly on shop floor.

    Like your write up very much. Your blogs are with more practical cases, defined nicely with thought provoking & solution options. Leaving us finally with the question at the end.

    Thank you,

    Sharat

    • Hello Sharat Sugur

      You say:

      production scheduler are more dynamic on shop floor, and probably see these overload report but not consider to adjust them in system, rather take decision directly on shop floor

      That's the corner stone of any ERP implementation - it needs to reflect reality - the system needs to be fed with correct information so it can be used across functions and departments. What's the point of solving shop floor issue and not reflecting that in the system? Then no one but the production scheduler knows about the changes and no one can react accordingly - raw materials are procured to early or too late, subcontractors are confused, customers get angry...

      Cheers

      Dominik Tylczynski

      • I agree with you Dominik.  Every morning when the planner attends the morning production meeting she should have the graphical planning table (dispatch list) open and drag and drop the orders to where they currently are on the shop floor.   Some lines will be running ahead of schedule and some lines behind.

        In fact, she should "live" on this report throughout the day, keeping it updated to reflect where the shop floor is at so that everyone is working from this single correct source of information.

        Example: She gets notified in the early afternoon that Line 3 just went down and isn't expected back up till Monday at 10 AM.  The planner will drag and drop all orders on Line 3 so that they resume Monday at 10 AM.  Can any orders be moved to other lines, sooner?  If yes, do this. Save the plan.  Look in MD07/MD04 and look for exception message 10 "reschedule in".  Notify customer service if a customer order will be impacted.

        SAP is an integrated system; we must use it as such.

  • I've noticed that no one has yet answered the question: Why is the consultant wrong to suggest that we just dispatch the 3 weeks of overloaded planned orders so they squeeze over 5 weeks?

    Here are two reasons; there may be more:

    1. When MRP plans new planned orders in weeks 1 - 5 they will be dispatched to week 6 because weeks 1 – 5 are full with orders that were supposed to be done in weeks 1 – 3. It is a vicious circle that you will never get out of unless/until you address the overloads!

    2. With 5 weeks of firmed planned orders (and production orders) the number of rescheduling messages (exception messages 10, 15 and 20) will be overwhelming to planners. It’s best to keep the planned orders non-firmed for as long as possible so that MRP can make changes to their dates and quantities.

  • Thx for this blog which describes not only core PP functions but also relations around it!

    Words ‘so ugly’ bells in my head. I fully agree.

    Some of these PP transactions stayed in the 80’s and didn’t move forward so there is not much to offer. CM… CM25 .. MD06 are dinosaurs today (I remember them from 3.1i).. with almost no new configuration or interface improvements.

    I know, I know, some will start saying that maybe the process is not well designed or consultants don’t know how to set the capacity processes correctly so they don’t want to use it.

    Yes, we can run the business with them - but in 2021 we should be on another level .. we should get more than this in ECC.

  • The tutorial is very clear and useful enough. Thanks for this.

    In implementation, PP consultant and users are normally facing the issue of overload when running these transaction of Capacity Evaluation.

    This might because start / end date of planned order are not in full shift. Assume that so many planned orders would share the same work center / production line in capacity. When changing start / end date of one product, it will impact on other products also.

    Users are normally using upload facility of planned orders without checking overload of Capacity Evaluation since it is normally overload always. This is often happened in ECC.

    Thanks.

    • Hi Phong, Thank you for your comment.

      If users are "using upload facility of planned orders" then that is mistake #1.  All planning processes must remain inside SAP!  Do not plan outside of SAP and then upload planned orders into SAP.  Instead, follow the Plan to Manufacture process as I outlined in the blog.

      Best regards, Ann