Capacity Requirements Planning (CRP)

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  • 0:00 CRP
  • 1:38 Inputs
  • 3:45 Output
  • 4:31 Balancing Capacity
  • 5:31 Lesson Summary
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Lesson Transcript
Instructor: Yuanxin (Amy) Yang Alcocer

Amy has a master's degree in secondary education and has taught math at a public charter high school.

Watch this video lesson to learn how capacity requirements planning can help a business to fulfill its orders. Learn what information is needed to perform this type of planning, and see what kind of information is gained.

CRP

Billy makes bow ties. His company is called Billy's Bows. It has grown over the years and has customers all over the world. It's not just Billy making the bow ties now. He has several employees that also sew the bow ties. Each month, Billy performs capacity requirements planning, or CRP. Capacity requirements planning tells you whether you have enough capacity to produce the amount of products you need. For Billy, it tells him whether he and his team are able to sew the required number of bow ties that sell each day. He performs this planning once a week so that he can continue to meet the bow tie demands of his customers.

CRP is part of MRP, or materials requirements planning. Companies perform MRP so they can see what materials are needed, in what quantity, and when they are needed to successfully fill all their orders. The MRP tells companies when to order the materials so they can make the products to fulfill demand. CRP tells companies how many products they can make per employee, per workstation, etc. per hour, per day, per month.

For Billy, his MRP tells him when he needs to order his fabrics and in what quantity to make the bow ties that his customers have ordered. His CRP tells him how many bow ties each of his employees and himself can make per hour, per day, etc. Billy looks at his CRP and determines whether he has the capacity to fulfill all his orders or not. He also uses his CRP to make adjustments in the workloads so that everybody has an even workload and all the orders get fulfilled.

Inputs

To perform a CRP, certain pieces of information are needed. To calculate the amount of available work hours you have, you need to know information such as how many employees you have, how many hours each employee can work, how many machines you have, and how efficient they are, etc.

For Billy to calculate the amount of available work hours, he needs to know the number of workers he has and the number of hours each worker is available. Since Billy works full time and so do his other employees, his calculation becomes number of workers times 40 hours per week. If the employees had different working hours per week, Billy would need to add the working hours per week for each employee. Billy has 3 other employees, making a total of 4 workers including himself. Multiplying 4 times 40 gives 160 working hours per week.

To calculate the time needed to fulfill orders, you need to know information such as the number of products that need to be made, the time it takes to make each product, set-up time per employee and workstation, etc. To do this calculation, Billy needs to know the number of bow ties that need to be made, the time it takes to make each bow tie, and then the time it takes to set-up.

Billy wants to calculate this time per week, so he looks at the orders he needs to fulfill for the week. Right now, he has 300 bow ties that need to be made for the week. It takes 30 minutes to make one bow tie. It takes 10 minutes to set up each morning. The total set-up time for the week is 10 * 5 = 50 minutes. Before Billy makes his calculation, he changes his minutes into decimals. He gets 30 / 60 = 0.5 and 50 / 60 = 0.83. To calculate the total time needed, he multiplies the number of bow ties that need to be made by the time it takes to make each bow tie, and then, he adds the set-up time for the week. Billy gets ( 300 * 0.5 ) + 0.83 = 150.83 work hours needed per week to fulfill 300 bow ties per week.

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