Capacity Planning
Capacity Planning
The overall objective of strategic capacity planning is to reach an optimal level where production capabilities meet demand. Capacity needs include equipment, space, and employee skills. If production capabilities are not meeting demand, high costs, strains on resources, and customer loss may result. It is important to note that capacity planning has many long term concerns given the long term commitment of resources.
Managers should recognize the broader effects capacity decisions have on the entire organization. Common strategies include leading capacity, where capacity is increased to meet expected demand, and following capacity, where companies wait for demand increases before expanding capabilities. A third approach is tracking capacity which adds incremental capacity over time to meet demand.
Finally, The two most useful functions of capacity planning are design capacity and effective capacity. Design capacity refers to the maximum designed service capacity or output rate and the effective capacity is the design capacity minus personal and other allowances. These two functions of capacity can be used to find the efficiency and utilization. These are calculated by the formulas below:
Efficiency = Actual Output/ Effective Capacity x 100%
Utilization = Actual Output/ Design Capacity x 100%
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Strategic Capacity Planning for Products and Services
Capacity refers to a system's potential for producing goods or delivering services over a specified time interval. Capacity planning involves long-term and short term considerations. Long-term considerations relate to the overall level of capacity; short-term considerations relate to variations in capacity requirements due to seasonal, random, and irregular fluctuations in demand.
Excess capacity arises when actual production is less than what is achievable or optimal for a firm. This often means that the demand in the market for the product is below what the firm could
The overall objective of strategic capacity planning is to reach an optimal level where production capabilities meet demand. Capacity needs include equipment, space, and employee skills. If production capabilities are not meeting demand, high costs, strains on resources, and customer loss may result. It is important to note that capacity planning has many long term concerns given the long term commitment of resources.
Managers should recognize the broader effects capacity decisions have on the entire organization. Common strategies include leading capacity, where capacity is increased to meet expected demand, and following capacity, where companies wait for demand increases before expanding capabilities. A third approach is tracking capacity which adds incremental capacity over time to meet demand.
Finally, The two most useful functions of capacity planning are design capacity and effective capacity. Design capacity refers to the maximum designed service capacity or output rate and the effective capacity is the design capacity minus personal and other allowances. These two functions of capacity can be used to find the efficiency and utilization. These are calculated by the formulas below:
Efficiency = Actual Output/ Effective Capacity x 100%
Utilization = Actual Output/ Design Capacity x 100%
--
Strategic Capacity Planning for Products and Services
Capacity refers to a system's potential for producing goods or delivering services over a specified time interval. Capacity planning involves long-term and short term considerations. Long-term considerations relate to the overall level of capacity; short-term considerations relate to variations in capacity requirements due to seasonal, random, and irregular fluctuations in demand.
Excess capacity arises when actual production is less than what is achievable or optimal for a firm. This often means that the demand in the market for the product is below what the firm could