Name: Honeycris H.

Lingatong Date: 03-24-22

Subject: Operations Management Course: BSA-1

Answer the following questions properly:

1. Explain the importance of capacity planning.

The significance of capacity decisions stems from their potential impact on the
organization's ability to meet future demand for products and services; capacity effectively
restricts the amount of output that can be produced. The link between capacity and
operating expenses emphasizes the relevance of capacity. Budgeting benefits: Capacity
planning assists organizations in determining how services are supplied, as well as the
proper time frames and employees required to satisfy current demand and cover all
operational costs.

Capacity planning is a flexible method that assists teams in developing more precise
project plans and resource schedules. It's wonderful to have a full project pipeline as long
as you have team members with the proper skill sets to complete it.

The most basic benefit of capacity planning is that it ensures that you have team members
with the appropriate abilities when you need them.

2. Discuss the major considerations related to developing capacity alternatives.

There are four major considerations in capacity planning:

• Demand Forecast
• Demand Planning
• Cash Flow Forecasting
• Operations Strategy

Demand Forecast
A demand forecast can be made at three levels: macro, industry, and firm. Forecasts for broad
economic conditions, such as industrial production and national income allocation, are made at
the macro level.

Demand Planning
Demand planning is a supply chain management method for forecasting or estimating product
demand to ensure that products can be delivered and consumers are satisfied. The idea is to
establish a balance between having enough inventory to meet client demands while also not
having an excess. Demand can be influenced by a range of reasons, such as labor force changes,
economic upheavals, extreme weather, natural disasters, or global crises events.

Availability of Funds
Cash flow forecasting, also known as cash flow management, is an important part of a company's
financial management since anticipating future cash needs can assist the company avoid a
liquidity crisis. All businesses, especially start-ups and small firms, rely on cash flow to survive.
As a result, management must forecast (predict) what will happen to cash flow in order to ensure
that the organization has enough to exist.
Operation Strategy
It is essential for an organization to have clearly stated goals. A well-defined goal makes it easier
to design strategies and policies, resulting in more value for customers. Operational strategy is
critical for achieving organizational operational goals that are aligned with the company's
overarching goal. The goal of operational strategy is to improve corporate effectiveness or gain a
competitive advantage.

3. Why is it important to adopt a big picture approach to capacity planning?

Big picture approach refers to a method that considers all uncertainties about business
issues in order to arrive at the best business solutions that lead to organization success.
We can also call it extending our views in all conceivable uncertainties with what capacity
is required. In capacity planning, the big picture approach is more significant. Consider a
restaurant that can serve 50 people at a time; if the restaurant wants to expand its
capabilities (capacity), adding more space or tables will not improve its real capacity.
Looking over one detail or a source of uncertainty might cause a slew of issues in the
current business, including need for culinary capacity, service capacity, and maintenance
(accommodation, parking etc.). Taking such judgments without considering all possible
outcomes could result in an unstable company system. Bottleneck resources are the only
reason for such an uneven system. Bottleneck resources are resources that do not meet
the demands of customers. The big picture method aids in the elimination of such
scenarios by assessing all uncertainties in various aspects in order to give appropriate
capacity planning. The key benefit of the broad picture method is brainstorming (new
ideas), which aids in the consideration of all variables such as working crew, lodging,
parking, food, suppliers, and services. As a result, it's critical to take a big-picture approach
to capacity planning.