You are on page 1of 12




.CAPACITY PLANNING Capacity Planning is the process of determining the production capacity needed by an organization to meet changing demands for its products.

WHAT IS CAPACITY? Capacity is the maximum amount of work that an organizations capable of completing in a given period of time. Capacity= (number of machines or workers) x (number of shifts) x (utilization) x (efficiency) .

machine hours Refinery size Number of tables.MEASURES OF CAPACITY BUSINESS Auto-manufacturing Oil refinery Restaurant theater INPUTS Labor hours. seating capacity Number of seats OUTPUTS Number of cars per shift Gallons of fuel per day Number of meals served per day Number of tickets sold per performance .

The goal of Capacity Planning is to minimize this discrepancy .CAPACITY MANAGEMENT A discrepancy between the Capacity of an organization and the demands of its customers.

DETERMINANTS OF EFFECTIVE CAPACITY Facilities  Product and service factors  Process factors  Human factors  Policy factors  Supply chain factors  External factors  .

STEPS IN THE CAPACITY PLANNING PROCESS  Estimate future capacity requirements  Evaluate existing capacity and facilities and identify gaps  Identify alternatives for meeting requirements  Conduct financial analyses of each alternative  Assess key qualitative issues for each alternative  Select the alternative to pursue that will be best in the long-term  Implement the selected alternative  Monitor results .

CAPACITY STRATEGIES Lead capacity strategy  Lag capacity strategy  Match capacity strategy  .

The possible disadvantage to this strategy is that it often results in excess inventory. .LEAD STRATEGY Lead strategy is adding capacity in anticipation of an increase in demand. which is costly and often wasteful.

LAG STRATEGY This is the opposite of Lead Strategy. With the Lag capacity strategy the company will ramp up capacity only after the demand has occur. There are some advantages of this method:It reduces a company’s risk  The company will enjoy a more stable relationship with their bank and investors  It reduces the risk of wastes  .

. Although this method tries to minimize the over and under capacity of the other two methods. In this strategy we add capacity in small amounts in response to changing demand in the market.MATCH STRATEGY Match strategy is also known as tracking strategy.