Capacity planning

It is an uphill task for any organization to estimate their future demands and it is really difficult to meet plan out the production capacity that an organization requires for its products. Enter capacity planning and all these problems are now being put to rest. Capacity is generally known as the highest quantity of work that an organization is competent of carrying out in a given timeframe. Capacity planning has witnessed an enlarged prominence owing to the financial benefits of the proficient use of capacity plans within the material requirements planning systems and further information systems. Inadequate capacity can rapidly show the way to deteriorating delivery performance, unreasonably increase work-in-process and disturb the sales staff and those in manufacturing. Nevertheless, surplus capacity can be expensive and uncalled for.

The incapability to appropriately manage capacity can be an obstruction to the accomplishment of utmost performance of the firm. In addition, capacity is a significant aspect in the organization's choice of technology. Some of the objectives of capacity planning are put forth:

• To satisfy the future demands of products devoid of shortage.
• To find the optimal capacity of the company so that the sum of costs of under-capacity & over- capacity is kept minimum.
• To make sure that the initial capital investment is kept low to attain a much lower break-even volume.
• Investments in capacity of the facility are long-standing & cannot be overturned without facing difficulties.

Some of the determinants of capacity planning are:

• Product and service issues.
• Process factors.
• Human factors.
• Operational factors.
• Supply chain aspects.
• External factors.
• Product and service factors.

Short Term Capacity Planning:

Short term capacity planning is related to matters of scheduling, labor shifts and balancing resource capacities. The goal is to handle unforeseen changes in demand in a resourceful and economic way. The time frame is often only about a few days but might run as long as 6 months.

Long Term Capacity Planning:

Long term capacity planning is concerned mainly about strategic problems involving the firm's key production facilities. Also, long term capacity issues are interconnected with deciding the locations.

Questions:

• List some of the objectives of capacity planning.
• What is short term capacity planning?