Capacity Requirements Planning (CRP) – Definition

Cite this article as:"Capacity Requirements Planning (CRP) – Definition," in The Business Professor, updated September 10, 2019, last accessed October 29, 2020,


Capacity Requirements Planning Definition

Capacity requirements planning (CRP) is a method or application mostly used by manufacturing companies to determine the capacity of the company in meeting its production goals. This method is more of accounting, it examines how much a company needs to produce and the available production capacity of the company.

Capacity requirement planning require certain procedures which includes the assessment of the production of a company, planning production schedule, analysing the company’s production capacity and determining whether the capacity matches the item to be produced.

A Little More on What is a Capacity Requirements Planning (CRP)

Capacity requirements planning outlines the actual production capacity of a company and relates it to the amount of items the company needs to produce. CRP is an important process that companies need to undertake, especially emerging or small businesses. CRP helps to determine whether a company has enough capacity to meet its production expectation or not.

If the production capacity of the company is  insufficient to meet its production expectation, the company needs to reconsider taking the contract. CRP helps businesses avoid production failures and inability to meet the terms of  contract. When a company’s production capacity is below the required number of products needed, it is important to adjust the contract or the contract given to another company with higher production capability.

Reference for “Capacity requirements planning-CRP” › Investing › Financial Analysis…/capacity-requirements-planning/

Academic research on “Capacity requirements planning-CRP”

An evaluation of capacity planning techniques in a remanufacturing environmentGuide Jr, V. D. R., Srivastava, R., & Spencer, M. S. (1997). An evaluation of capacity planning techniques in a remanufacturing environment. International Journal of Production Research35(1), 67-82. Remanufacturing is a growing segment of the manufacturing industry, aided by environmental greening initiatives. There is scant literature on how to manage operations in this emerging industry segment. In this study, an important component of the manufacturing planning and control function, capacity planning is analysed. It is shown that the remanufacturing environments characteristics are sufficiently different from the traditional new product manufacturing environments that production planning and control techniques need to be different. New capacity planning techniques are developed and implemented along with some standard capacity planning techniques in a remanufacturing environment. The results show that the new techniques, developed for the remanufacturing environment are significantly better than the standard techniques, which had been developed for the traditional new product manufacturing environment.

Capacity planning techniques for manufacturing control systems: Information requirements and operational featuresBerry, W. L., & Vollmann, T. E. (1982). Capacity planning techniques for manufacturing control systems: Information requirements and operational features. Journal of Operations Management3(1), 13-25. Substantial interest has been focused on techniques that determine the amount and timing of work center capacity to satisfy the master production schedule. Although several techniques have been developed for preparing work center capacity plans, very little analysis of the operational features and the application of these techniques has been reported. Four techniques, capacity planning using overall factors (CPOF), capacity bills, resource profiles, and capacity requirements planning (CRP), vary substantially in their complexity and the level of detail required to plan work center capacities. All four procedures require the use of the master production schedule to develop a capacity plan, but some have much more demanding data requirements. Important differences are the means by which capacity requirements are estimated by the techniques and the manner in which the bill of material, manufacturing lead time and inventory status information are incorporated into the capacity plan. The purpose of this paper is to describe the operational features of the four capacity planning techniques, the underlying data base requirements, and some key managerial issues in choosing among these techniques.

Capacity requirements planning for twin Fabs of wafer fabricationChen, J. C., Fan, Y. C., & Chen, C. W. (2009). Capacity requirements planning for twin Fabs of wafer fabrication. International Journal of Production Research47(16), 4473-4496. Based on the assumption of infinite capacity, a Capacity Requirements Planning System (CRPS) is developed for twin fabs of wafer fabrication. Several shared equipments exist only in one of the twin fabs linked by an Inter-Fab Material Handling System. CRPS consists of four major modules. WIP-Pulling Module pulls work-in-process (WIP) that is the closest to the end of the process route to meet the Master Production Schedule. Workload Accumulation Module then calculates the expected equipment loading in different time buckets. If WIP cannot meet the Master Production Schedule (MPS) requirement, new wafer lots need to be released. Wafer Release Time Module is used to determine the release time of new lots by evaluating their expected equipment loading at the twin fabs on various time buckets. According to the lot release time, Wafer Start Fab Module can be used to evaluate the expected loading for each of the twin fabs and determine the start fab to optimise the workload balance among these twin fabs on various days. Based on experimental design, simulation results show that CRPS can balance the equipment loading between the twin fabs with shared equipment, on various days, and across various equipments at various levels of demands.

Focusing material requirements planning (MRP) towards performancePlenert, G. (1999). Focusing material requirements planning (MRP) towards performance. European Journal of Operational Research119(1), 91-99. This paper looks at the successes and disappointments of MRP. It studies numerous articles to determine what the key shortcomings of MRP are. Next, it investigates if these failures are correctable, and what the consequences of not correcting these deficiencies means. This article considers alternatives that have been discussed in the current literature. Last of all this article discusses whether the improvements these alternatives suggest are sufficient to make MRP worth salvaging, or whether MRP is a system that needs to be discarded in favor of systems such as JIT (Just-in-Time), Optimized Production Technology (OPT), Theory of Constraints (TOC), and Bottleneck Allocation Methodology (BAM).

A review of capacity planning techniques within standard software packagesWortman, J. C., Euwe, M. J., TAAL, M., & Wiers, V. C. S. (1996). A review of capacity planning techniques within standard software packages. Production Planning & Control7(2), 117-128. This paper gives a review of capacity planning techniques from which today’s standard software packages for production control make their choice. The following techniques are discussed in the paper: four variants of the rough cut capacity check, capacity requirements planning with infinite and finite loading, input/output planning without and with individual work orders, and a number of sequencing techniques. An important issue throughout the paper is the concept of robustness and nervousness of planning techniques, Aspects of interaction between techniques and human planners arc given. The human planner is still an important factor in capacity planning.

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