58 Planning hierarchies in operations tema Production Sopsaity Resource tevat Product tines . [Resource rant or families yulrements| i Pian Rough cut Individual Critical Products -— ia work centers plan Wiaterial L omponent fests Capacity, All Work Components Requirements! ~ Requirements| Centers plan Plan T Manufacturing Shop Inputioutput individuat Operations Floor Schedute] _ __ | IRUoutD Machines T T Definition of Capacity planning According to APICS, “ Capacity planning or capacity requirements’ planning is the function of establishing, measuring and adjusting limits or levels of capacity.” ‘The term ‘capacity Requirements Planning’ in this context is the process of determining how much labor and machine resource is required to accomplish the tasks of production”. It is also defined as “Capacity Planning is the study of the level of capacity the organization provides at each stage of the production or service delivery system to meet its objective.” Capacity Planning is the process used to determine how much capacity is needed in order to manufacture greater product or begin production of a new product. Long Range Capacity Planning _— Long Range snort Range capacity sanning oapaeny eiadring WWW .STMARYSMBA.CO.NA39 LONG RANGE CAPACITY PLANNING: Over the long term,capcity planning relates primarily to strategic issues involving the firm’s major production facilities. Technology and transferability of the process to other products is also intertwined with the long term capacity planning. Long term capacity planning may evolve when short term changes in capacity are insufficient, For ex: If the firm’s Addition of a third shifts 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). Tt may even be desirable to add additional plant space or to construct a new facility (long-term alternatives). SHORT RANGE, ‘APACITY PLANNING: In short term, capacity planning concerns issues of scheduling, labor shifts and balancing resource capabilities. The goal of short-term capacity planning is to handle unexpected shifts in demand in an efficient economic manner. The time frame for short-term capacity planning is frequently only a few days but may run as long as six months OBJECTIVES OF CAPACITY PLANNING: The decisions taken by operations managers in devising their capacity plans will affect several different aspects of performance: Costs: capacity levels in excess of demand could mean under-utilization of capacity and therefore high unit cost. Revenues: It is also affected by the balance between capacity and demand. Working Capital: It will be affected if an operation decides to build up finished goods inventory prior to demand. Quality: By hiring temporary staff.-disruption to the routine working of the operation. Speed: By the deliberate provision of surplus capacity to avoid queuing, WWW .STMARYSMBA.CO.NA