Guide to Capacity Planning

A realistic guide to capacity planning for production managers

Jordan Easterling

Everything in a prefab or modular construction shop comes back to capacity. When can you bring on more projects? How can you prevent slow weeks where you’re not able to provide 40 hours for everyone on the shop team? On the other hand, your project teams won’t be too thrilled if you’re running over time for 75 percent of the shop team for weeks on end. And so it goes on.


But capacity planning is a time-consuming, often manual task that often isn’t estimated (even at a high level). That’s why this article focuses on one thing: being realistic. 


Instead of getting lost in the details that may have a sizable impact, we’re giving you the minimum essentials to get your capacity planning done to a level that provides the insight you need right now. Then you can improve your process over time but more importantly, you can make sure you’re planning, practically.

This Photo by Unknown Author is licensed under CC BY-SA-NC

The real goal of capacity planning: improvement

In an ideal world, capacity planning helps you understand where and when you may experience production challenges. And if you had weeks to do it (with a team to support you), you may actually have a shot of getting close to the mark between managing weekly production schedule changes, a fluctuating labor pool, and a lack of historical data. 


But we don’t live in an ideal world, so we’re aiming not for fixing all problems but improving the worst ones. 


Capacity planning, in this sense, is about being realistic—ensuring you don’t fall behind schedule, you don’t forget the full costs of a project (including labor and material bottlenecks), and you don’t have any cascading issues where one project’s problems impact another. 


Capacity planning is also not about the “should” questions like how many projects you should be able to take on in a shop of your size


Instead, it’s about understanding what your shop has already produced and then improving that using a little bit of planning. It doesn’t matter if your shop size “should” have 10 projects going at any time—if you’ve only been doing six concurrent projects to date, your goal is seven or more, not the elusive amount you “should” have. 


This realistic method of capacity planning not only helps you get results quickly, but it also takes into account the additional reality that plans change. Your project schedules and order sequences change weekly. People quit, get injured, or take vacations. Materials hit supply stockouts and long lead times. Customers’ demands change. It happens. So we built a capacity plan strategy that’s quick enough to do frequently, meaning you can move with change.

First: collect the right information

You need three kinds of information: historical, forecasting, and tools.


1. Historical information


Get a benchmark of how you’ve produced in the past six months to a year. 


In particular, look at:

·        Team sizes.

·        Step or task durations. 

·        Cure times or other wait times. 

·        Move times. 

·        Any other delays or wait times you experienced (note what they were).


Then put it all together in terms of specific projects—how many resources and how much time a project took. Across all projects, segment into types (e.g. studio versus single bedroom units or complex and skidded electrical equipment versus duct banks) so you can look for trends and averages in your work.


2.Forecasting information


To forecast, look at the production capacity of your historical information and add in future order volumes. For example, if your previous capacity indicated you could handle five projects concurrently and you have five orders coming in, then you’ll operate at full capacity. If you only have four coming in, you have capacity to fill. And if you have six or more, you need to identify ways to improve capacity so you can take on that extra project to meet demand and grow revenues.


At the same time as you’re forecasting capacity, look toward future changes or issues. For changes, think about delays in your previous processes and see what you can do to minimize or eliminate them. For instance, pre-ordering consumables earlier and warehousing them so you have fewer materials delays. For issues, think about what could go wrong, for instance, if materials are late by a week due to supply shocks or an accident on the shipyard. For each scenario, draft a quick plan of action so if it happens, you can focus on working around the issue to minimize its impact. 


3. Tools information


Document how you will achieve:

·        Workflow diagrams: whiteboards, manual kanbans with sticky notes, or a digital solution like Trello.

·        Scheduling: digital solutions like Microsoft Project, P6, or Excel.

·        Simulation: tools like 4D or simulation modeling.


Knowing what tools you’ll use ahead of time means fewer questions or confusion later. It also gives you time to train team members on relevant technology to avoid labor-based delays. 

Second: estimate and iterate

This step is when you take your possible changes and see what the real-life impact will be. 


For example, let’s say your current process includes a delay of two days per project to order materials. If you can pre-order all consumables for each project, it reduces the delay to one day. What does one additional day mean throughout your entire project? Does it accelerate things by only one day, or can it bring even more benefits? For instance, does the additional day also mean you can work on another project simultaneously because your key team members are freed up? 


Also run this estimation exercise for as many realistic issues as you can think of such as labor shortages, supply chain issues, spatial constraints in your shop, and how order sequence changes can impact production. Improvements based on atheoretical plan may not always translate into real-life savings because of dependencies or other constraints, so always consider them during planning.


If you notice a constraint blocks a theoretical gain from translating into a real-life gain, think about what you can do to fix it. For example, if your one-day gain isn’t practical because you don’t have the shop size to work on additional projects, one solution might be to source more space. This may or may not be feasible based on your current situation, but it’s worth exploring if the one-day gain means significant efficiency for your team over time. 

Third: go beyond the production line

Capacity isn’t just limited to production. Once you’ve got a handle on your production line, look to other areas like design, procurement, and business operations. Repeat the same process as above to improve all areas of the organization. While capacity planning can be time-consuming, avoiding it means a risk of delays, cost overruns, and other operational challenges. Prioritize capacity planning to avoid falling behind and improve your shop over time.

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