Rough-cut capacity planning enables effective application Early in World War II, Russian tanks were sent into battle to breach reinforced lines and exploit ground troops. Because going in with no ground support had been successful during World War I, Soviet commanders believed tanks alone would be equally victorious in the Second World War. However, leaders soon realized that opposing foot soldiers could attack from concealed positions, jeopardizing battles and causing attacks to falter. Ultimately, Russian tanks were sent into battle with ground support, which enabled troops to engage opposing combat personnel, free up tanks, and break through enemy lines. This account illustrates the main difference between strategy and tactics: A sound strategy can be undermined without appropriately structured tactical support. For instance, production management is tactical execution of a strategy, but many of us ignore or nullify the control inherent in our positions as production managers by allowing circumstances to dictate tactics to us. As another example, consider the unabated increase in outsourcing programs, which serves to lengthen supply chains and increase costs. This, in turn, causes marketing programs to falter, compromising competitive strategy. Significant advances
Rough-cut capacity planning (RCCP) can be used to objectify and quantify productive processes with the goal of establishing stability on the shop floor. Using RCCP, operations management professionals are able to quantify revisions for both quantity and cost, which enables cogent communication of needs to upper-level managers and offers them the opportunity to appropriately leverage these competitive advantages.
The APICS Dictionary defines RCCP as "the process of converting the master production schedule (MPS) into requirements for key resources, often including labor; machinery; warehouse space; suppliers' capabilities; and, in some cases, money. Comparison [of the MPS] to available or demonstrated capacity usually is done for each key resource. This comparison assists the master scheduler in establishing a feasible [MPS]."
RCCP can be used to realize meaningful improvements on the factory floor via:
■ leveling load lines
■ calculating the cost of overtime versus increases in labor or capital investments
■ controlling demand spikes with calculated levels of overtime
■ delivering early or late based on delivery date and production trade-offs
■ avoiding end-of-quarter spikes by matching productive capability to the forecast
■ matching supplier capabilities to the plan
■ minimizing component-availability problems
■ increasing inventory or capital investments before shifts in demand patterns affect lines.
Considering the manufacturing planning and control hierarchy, RCCP is a crucial element of both strategy and planning execution. (See Figure 1.) MPS was designed to establish a plan for finished goods. The subsequent step—typically, material require¬ments planning (MRP)—breaks out requirements for subassemblies and components.
 MPS has three primary inputs: the business plan, RCCP, and the demand plan. RCCP is a vital link in this chain. Break it, and there is no connection between strategy and planning execution, which causes tactics to go bad. For example, consider a business-person choosing to outsource in order to gain competitive advantage. The strategy is: "We will be the low-price market leader." The tactic would be: "We will outsource to control costs." And planning execution would encompass: "How many units should I request this week?" Outsourcing is not a bad thing; but its rough-cut effect must be known before implementing the program. If it is not thoroughly considered, the potential dangers can include the following: • Longer lead times cause increases in finished goods inventories or late component deliveries. • Extended pipelines bring about more materials in transit, more work in process, and higher inventory carrying costs. • Low-priced labor may lead to equally low-quality products, increased training costs, higher turnover, and rework. • Remote manufacturing processes can result in less control over the safety of material inputs, potential labor abuses, and lost customer goodwill. When rough-cut capacity validations are not performed, demand moves unaltered through the MPS, and it is rendered meaningless. This translates into an immediate loss of operational control. Furthermore, as schedules begin to change within frozen planning horizons, purchasers will focus on near-term component availability. Factory floor operators are forced to make best-guess estimates about how to achieve the plan, causing numerous ill effects. Planning alternatives
RCCP provides four planning alternatives that can be used to control the factory floor. Table 1 illustrates their pros and cons.
Table 1 - Planning alternative pros and cons
 The bill of resources approach assesses the required capacity needed to manufacture one unit of a selected item or family. RCCP uses these items to calculate the approximate capacity requirements needed by the MPS. A one-part requirement for machine and labor resources is exploded and then multiplied by the MPS to determine load. Note that this is an explosion of requirements identical to that used to determine the materials needed by a supply chain planning process. Manufacturing resources planning also may use a form of this bill.
The capacity planning approach uses overall factors, multiplies items on the master schedule by quantity and the total time required to build. Then it provides the total number of hours required to produce the schedule. Historical work center percentages are applied against the total number of hours to arrive at an estimate of the hours per work center needed to support the master schedule. This technique eliminates the need for engi¬neered time standards. The approach uses total time, rather than the critical path, and then apportions resource determinations based on historical work center percentages within that time line.
Resource profile uses the standard load hours placed on a resource by time period with lead time offset. This provides the total standard hours multiplied by the MPS, which equals the resource requirement.
Finally, takt-based calculations are focused on customer requirements. They can be used in both machining and assembly environments and are perfectly suited to performing RCCP reviews. The basic formula is:
Time to produce one unit
Takt
The formulaic definition is: where ATw = average time weighted,
Dc = demand at capacity, and Hs = effective hours available to produce.
Taking control
Operations management professionals are hammered daily on controlling costs. Often, their compensation is attached to the same. These people are hired to make tough decisions; so, when they observe increasingly chaotic production routines, they use labor—via mandated staffing requirements, overtime, or outsourcing—to restore control and hit revenue goals. Operations managers must not cede control to circumstance, misunderstandings, or unpredictable events.
Being responsible for strategy, these professionals compete on a personal level in an unforgiving manufacturing arena that continually redefines the manufacturing base. In the process, many professionals have lost sight of an operational basic that provides a vehicle to help take back control. RCCP is that tool, and it is vital for effectively emphasizing competitive advantages.
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