2. Basics production process

Resource planning is the other important aspect of any production process. An important business term here is capacity. Let us first look at how this term is to be understood.

For complex businesses in the automotive industry is vital to have strategic business process management tools like ERP software (known as Enterprise Resource Planning). ERP consists of systems and technologies that companies use to manage and integrate their core business processes (accounting, project management, procurement, supply chain operations, enterprise performance management, risk management, compliance, etc.). It helps eliminate data duplication, thereby providing data integrity. ERP consolidates the data of every department and empowers all the key decision-makers to have access to up-to-date information, edit it, manage it, and even make quick and informed decisions based on it as and when required.

The capacity of a company describes the quantitative maximum of a production system.

Capacity utilisation provides information about the quantity that is produced (compared to the maximum possible capacity).

The capacity utilization rate is the capacity utilization in per cent – for example, capacity utilization of 85 % (out of a possible 100 %).

The term intensity is also often used. This indicates how technical changes (for example, more material processing) or time adjustments (for example, dividing working time into shifts) can increase or also decrease capacity utilization.

Capacity management aims to achieve the highest possible or efficient capacity utilization – i.e. to design the process in such a way that the maximum possible quantity is efficiently achieved in a production system. The aim is not simply to produce as much as possible but to achieve a previously defined capacity as far as possible.

In this context, the capacity of any production process depends on how many personnel, machines, tools and rooms are available in a given period. These factors can in turn be assigned to three components that influence capacity utilization:

• The previously mentioned intensity
• The number of machines available (sometimes called “aggregates” in this context) and the number of workers
• the time in which the available machines and labour can be used

These three components have a direct impact on capacity utilization – for example, if the time available decreases, either the intensity or the number of machines or workers must be increased. Otherwise, a lower capacity utilization must be accepted. Accordingly, one also speaks of plant capacity (for the machines), personnel capacity and sometimes also financial capacity in production processes, which must be coordinated with each other.

Measuring capacity or the degree of capacity utilization is not at all easy, as standstill times, repairs, maintenance work, illnesses and other disruptive factors occur in production processes. Therefore, capacity measurements are only considered useful over longer periods, whereby the degree of intensity must also be kept constant over the measurement period.

Another important part of resource planning besides capacity is the handling of the materials needed and to be procured for the production processes. This means product materials, auxiliary materials, and operating materials.

Produce materials are materials that go directly into products and are also “consumed” in this sense (for example, in contrast to tools, which can be used again and again). These include materials, raw materials, semi-finished products, components and assemblies, but also auxiliary materials (such as lubricants or packaging material) and operating materials (such as fuel).

General Motors (GM) is a global automotive company that produces a wide range of vehicles. To efficiently manage the production of materials, GM uses a sophisticated material planning process that involves several steps. First, GM’s material planners work with product development teams to determine the required materials for each vehicle model. This includes specifying the types, quantities, and quality of materials needed for each component. Next, the material planners use this information to develop a detailed material plan that specifies the timeline for procuring and delivering the required materials. This plan takes into account factors such as lead times, transportation costs, and supplier capacity constraints. Once the material plan is in place, GM’s procurement team works with suppliers to procure the required materials. The procurement team uses a variety of tools and techniques to manage the supply chain, including supplier performance monitoring, demand forecasting, and risk management. As the materials are received, they are inspected and tested to ensure that they meet GM’s quality standards. The materials are then stored in GM’s inventory system and released to the production line as needed. Throughout the production process, GM’s material planners and production teams closely monitor the availability of materials and adjust the production schedule as needed to ensure that there are no delays or shortages. This involves ongoing communication and coordination with suppliers, transportation providers, and internal teams.

Material planning now deals with the handling of these product materials. The tasks are divided into three parts: Material requirements planning, procurement quantity planning and procurement time planning.

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Material requirements planning determines how much material is needed and how the material should be procured. The make-or-buy question is central here – i.e., whether the required material should be purchased externally or produced internally. The demand is differentiated into three types:

• Primary requirements (finished products, saleable assemblies, and spare parts)
• Secondary requirements (raw materials, individual parts or assemblies that are necessary for the production process for primary requirements)
• Tertiary requirements (auxiliary materials and operating supplies, which in turn are necessary for secondary requirements)

Determining the respective demand is, of course, the decisive task in material planning – and thus also the basis for further quantity and timing planning. There are several methods for this in the industry:

1. Deterministic demand determination: Here, the demand is derived from parts lists or simply from the operating instructions (mainly for the dependent demand). For primary demand, planning is market-related – i.e. according to the company’s planned sales. This type of demand determination is also called “programme-based”.
2. Stochastic determination of demand: Here, past consumption values are used as the basis for a forecast of future consumption. Mathematical methods are used, such as exponential smoothing. This is also referred to as “consumption-based” planning.
3. Heuristic demand assessment: Here, the demand is subjectively estimated based on the expertise of experienced employees or consultants. This method is usually used when there is not enough data from the past (for example, for new parts to be manufactured).
4. Rule-based requirements determination: This is particularly in demand in the automotive industry because of the different equipment and model variants and is based on “if-then” processes. So when certain equipment is ordered, only the parts or assemblies needed for it becomes necessary.

Particularly in complex production systems, such as those found in the automotive industry, combinations of these four methods are also often used to be able to carry out material planning as efficiently as possible.

Once the demand has been determined, the material can be ordered externally or produced in-house with the help of procurement quantity planning and procurement timing planning. Here, work is done to ensure that the right quantities are procured at the right time and are available at the necessary place.

Central to resource planning is also the organization of working or operating hours – that is, when and how employees work in a company. The organization of employees’ working hours is, as we learned earlier, an essential part of capacity utilization. There are two very fancy-sounding words to know here:

• Chronometry: This concerns the duration of working time, i.e., how long a person works.
• Chronology: This concerns the distribution of working time, i.e. when a person works.

Chronometry and chronology result in the distribution of working time. This is shaped by a combination of working time models that differ chronometrically and chronologically.

In the context of industrial companies, shift work is particularly noteworthy. Here, different employees are assigned to the same workplace one after the other according to a certain schedule (chronologically) (for example, in an early shift, late shift and night shift). In this way, companies can produce for longer than the usual daily working hours.

Depending on the intensity of capacity, there are also other important working time models, such as temporary work (here employees are “borrowed” for a certain period) or the use of leapfrog staff (these are employees without a permanent job who can be deployed as needed).

Of course, familiar models such as flexitime, part-time or even newer approaches such as so-called job sharing are also possible in work and operational scheduling – here it depends primarily on the process involved and the tasks in the company. In the administrative area, shift work tends not to be necessary. In mass production processes, on the other hand, where production is to be efficient and above all constant, shift work is of course popular and effective practice.