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Capacity Analysis
Overview
One of the areas that has been overlooked or misunderstood by suppliers
is the issue of capacity. In fact, capacity problems are a concern about 30%
of the time as production, delivery, and volume fall short of the expected
performance. The simple denition of capacity is a study that is regularly
conducted to get conrmation of supplier ability to support new model
launch and/or manufacturing plan changes. Supplier capacity means that
the supplier is capable of providing enough product to sustain the custom-
er’s requirements. It is performed under the following conditions. However,
understand that the timetable given here is approximate and may vary
depending on the product and/or customer requirements:
• New model conrm capacity studies are conducted at 2 weeks post
nal data judgment (FDJ) milestone at 17 months before Job 1 (MBJ1).
• Prelaunch readiness capacity studies are also conducted at 7.5 MBJ1
for new model programs. This should align with the tool trial (TT)
build milestone.
• Capacity studies are conducted for planned capacity uplifts both
within the new model launch timeline and post launch.
• Capacity studies are also conducted to evaluate alternative product
offerings to customers (mix rate changes).
• There is no difference in supplier response expectations for both
What If and conrm studies.
Goal of Capacity
In no uncertain terms, capacity must be understood as a process not a form.
As such, data must be used to conrm that a supplier can produce the
290 Quality Assurance
required volume of quality parts in the planned operating pattern at the planned
production rate. The process starts with
• Planning: Planning and asking are the planned manufacturing
equipment and processes projected to be capable of producing the
required volume during planned operation patterns accurate?
• Verication. Do the demonstrated run-at-rate and capacity verica-
tion stages of the production part approval process (PPAP) results
validate that the equipment and process can produce the required
volume at the appropriate efciency?
• Managing growth and shortages. Can the equipment and process
supply additional volume? What can be done to increase production
and efciency? (The supplier must have at least a 10% buffer capacity
beyond the requirement.)
• Communicating: Do suppliers cascade capacity study requirements
and commitments to their affected plants? (Quite often, the require-
ments are assumed to be cascaded, but in reality they are not—
especially to the subsuppliers.)
• Identifying wrong assumptions of past performance: Are suppliers
misinterpreting new study as superseding prior studies? (In case
of capacity shortages, communication with the customer must be
immediate, clear, and with an action plan to be back on schedule.
This communication cannot be emphasized enough because any
failure in capacity volume will have serious consequences to the
customer’s production requirements. It is imperative that the com-
munication is understood as crucial to mitigating supply risks to the
plants. The earlier the notication of pending issues, concerns, or
problems, the higher the likelihood of being averted.)
• Identifying the process of when and how to escalate: Is there an
escalation process for reporting any type of deviation? If there is
no appropriate action taken, escalate issues impacting supply to all
concerned as soon as possible.
• Recognizing wrong capacity estimates: Are the capacity estimates
appropriately calculated? Sometimes capacity reporting and data
discrepancy are the causes for errors. The result will be an overstated
or understated capacity reported to the customer and, of course, the
data will not be aligned with the capacity verication. Here we must
note that the most common issue is the overstated capacity. The rea-
son for this is more often than not the appropriate allocation has not
been accounted for or the correct overall equipment effectiveness
(OEE) has not been recorded.
• Identifying insufcient information from the customer: Is there suf-
cient information for an appropriate decision? If not, the supplier
291Capacity Analysis
capacity uplift execution falls apart. Typical issues here are delay tool-
ing investment until uplift volumes are cascaded in customer releases.
This is a major concern especially when these delays are close to
design freeze. Sometimes, this lack of information falls on the sup-
plier itself by not communicating early enough potential issues via a
supplier request for engineering approval (SREA). It is very important
to note here that any supplier process and/or location changes to sup-
port capacity uplifts must be communicated to the customer.
• Reviewing the meeting capacity requirements: Are reviews con-
ducted appropriately? This requirement is based on 5 days and maxi-
mum production weekly requirements in 6 days. This means that the
supplier is to manage its tooling, equipment, and facilities such that,
during a 7 calendar day week, the average production weekly (APW)
capacity requirements are to be met by operating the tooling, equip-
ment, and facilities based on a 5-day work week (unless otherwise
dictated by government regulations. In some countries, the normal
workweek is dened as 6 days). On the other hand, the maximum pro-
duction weekly (MPW) capacity requirements are to be met by operat-
ing the tooling, equipment, and facilities based on a 6-day workweek.
The remaining time during the week is reserved for completing the
required tooling, equipment, and facility maintenance. If the supplier
is unable to meet the APW based on a 5-day workweek, or the MPW
based on a 6-day workweek, the supplier must contact its customer to
develop a resolution plan to meet the capacity requirements.
Any exceptions to these requirements must be requested by the supplier
and concurred in writing by the customer.
Environment for Capacity Planning
To validate a supplier’s capacity plan, some type of capacity analysis report
(CAR) form must be lled. (Do not confuse this report with the corrective
action report, which is also designated as CAR.) There is no standard form
for all customers. However, it is imperative that both customer and supplier
agree on a CAR and it should be utilized to make a comparison between the
supplier’s planned manufacturing plan (required OEE for planned volumes)
and its historical manufacturing performance. Relevant information on the
CAR during capacity planning is and can be recorded in a tabular form:
• Capacity planning
• Historical manufacturing performance
292 Quality Assurance
• Shared loading plan
• Supplier declarations including subtier suppliers
The integrity of each tab is critical in completing a proper analysis—the
selection of appropriate processes and parts for historical manufacturing
performance and the inclusion of appropriate changeover times (if appli-
cable) are required.
The intent of the capacity planning analysis is to provide validation of
the supplier’s capacity plan. One of the very basic questions is, does the
supplier plan have an appropriate work pattern, with appropriate equip-
ment cycle times, to meet the expected program volume adjusted for their
historical manufacturing efciency? Note that if historical data is not avail-
able, surrogate production data from a similar manufacturing process may
be used.
To make sure that the basic question is answered, the supplier conducts the
initial run-at-rate. This is a very important step because parts produced from
a production stream (from a minimum of one production tool, line, process
stream) at production feeds and speeds will give an indication whether the
supplier can indeed produce what is expected. This initial stage provides an
early indicator if a supplier can make future timing of delivery and produc-
tion requirements.
In conjunction with the requirement to satisfy the appropriate require-
ments for producing parts at designed cycle times and achieving print speci-
cation requirements, a CAR form is required at run-at-rate to validate the
supplier’s ability to achieve all the run-at-rate requirements. This means typ-
ically a utilization of a short duration of production (~300 pieces, although
according to AIAG [2009, p. 3] this can be changed with the approval of the
customer representative). It is also strongly recommended that a capacity
planning document with historical manufacturing performance data be
reviewed—if it has not previously been completed. It also allows for the
analysis of additional production streams as required for completion of the
quality verication. By adjusting the planned net ideal cycle time to account
for additional production streams, the overall capacity can be analyzed in
support of the quality verication requirements.
The second issue of planning is the concern for quality verication. Here
parts and processes from a minimum of one production stream (tool, line,
facility, etc.) are evaluated for quality performance. Typical issues are dimen-
sional, lab, and engineering specications (ES) testing complete for this pro-
duction stream (less appearance approvals). If the supplier is ready, this stage
may be combined with the run-at-rate.
Production verication is the third stage of planning. Here the complete
actual production stream (tool, line, facilities personnel, etc.) intended for
this specic program/launch is in place and operational. Dimensional,
lab, and ES testing is complete for all tools, cavities, molds, and production
streams (including all appearance approvals). The supplier submits a part
293Capacity Analysis
submission warrant (PSW). Quite often, this stage is combined with the sec-
ond stage. It is only necessary if the supplier has multiple streams.
The last stage of planning is the capacity verication. Here, parts are
produced from the complete actual production stream (tooling, equip-
ment, facilities personnel). Capacity verication is demonstrated by
yielding quality parts to meet a minimum or one day of the customer’s
production requirement (daily planning volume [DPV]). If three shifts
are planned, the capacity verication study must reect that pattern of
production.
In conjunction with the requirement to satisfy the mass production (full
production) requirements for producing parts at designed cycle times and
achieving print specication requirements, a CAR form is required at the
capacity verication stage to validate the supplier’s ability to contain total
program capacity. Again, as the capacity verication continues, so does
the run-at-rate event continue to be a relatively short duration of produc-
tion (~24 h). It is also strongly recommended that a capacity planning doc-
ument with historical manufacturing performance data be reviewed if it
has not previously been completed. At this stage, it is also assumed that all
production equipment, tooling, personnel, and gauging are in place and
that all production streams are capable of achieving the required produc-
tion rate.
Overall Equipment Effectiveness (OEE)
One of the most underrated and misunderstood components of the capac-
ity study is the OEE analysis. OEE combines key manufacturing metrics to
state the overall health of the production process. It can be communicated
as a minimum required OEE, or an effective/demonstrated OEE. The rela-
tionship between these two determines the feasibility of the manufacturing
process to meet customer volume requirements. For a very detailed analysis
of OEE, the reader is encouraged to see Stamatis (2010).
• (Minimum) required OEE: It is the minimum OEE a supplier must
achieve to support the customer volume requirements. Warning: the
traditional 85% initial OEE may not be accurate and may not be as
good as one thinks. The best OEE is 100%; anything else and there
is an opportunity for improvement. If there is more than 100%, the
cycle time is miscalculated. For a detailed discussion on this, see
Stamatis (2010).
• Demonstrated OEE: This is the OEE a supplier demonstrates through
a PPAP event or historical/surrogate analysis.
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