Capacity Planning
| Author | R. Inman |
| Pages | 66-67 |
Page 66
Capacity planning has seen an increased emphasis due to the financial benefits of the efficient use of capacity plans within material requirements planning systems and other information systems. Insufficient capacity can quickly lead to deteriorating delivery performance, unnecessarily increase work-in-process, and frustrate sales personnel and those in manufacturing. However, excess capacity can be costly and unnecessary. The inability to properly manage capacity can be a barrier to the achievement of maximum firm performance. In addition, capacity is an important factor in the organization's choice of technology.
Capacity is usually assumed to mean the maximum rate at which a transformation system produces or processes inputs. Sometimes, this rate may actually be "all at once"—as with the capacity of an airplane. A more usable definition of capacity would be the volume of output per elapsed time and the production capability of a facility.
Capacity planning is the process used to determine how much capacity is needed (and when) in order to manufacture greater product or begin production of a new product. A number of factors can affect capacity—number of workers, ability of workers, number of machines, waste, scrap, defects, errors, productivity, suppliers, government regulations, and preventive maintenance. Capacity planning is relevant in both the long term and the short term. However, there are different issues at stake for each.
Over the long term, capacity planning relates primarily to strategic issues involving the firm's major production facilities. In addition, long-term capacity issues are interrelated with location decisions. Technology and transferability of the process to other products is also intertwined with long-term capacity planning. Long-term capacity planning may evolve when short-term changes in capacity are insufficient. For example, if the firm's addition of a third shift to its current two-shift plan still does not produce enough output, and subcontracting arrangements cannot be made, one feasible alternative is to add capital equipment and modify the layout of the plant (long-term actions). It may even be desirable to add additional plant space or to construct a new facility (long-term alternatives).
In the short term...
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