What are the top challenges of capacity planning?

As the reality of Covid-19 has hit the world’s supply chains, many companies and
healthcare providers have realized just how vulnerable we are to capacity-planning
problems. It’s no longer OK to deliver “just in time” or to have “just enough.”
Commodities — from toilet paper to vaccines — are up against extreme conditions and
in high demand, and manufacturers must overcome these planning challenges to keep
production flowing.

The challenge of data: Capacity planners need to get their hands on a lot of
diverse information to achieve maximum accuracy. If data inputs are outdated or in
the wrong formats, planning will go awry. Furthermore, because manufacturing
processes have often relied on siloed data systems to plan production capacity,
helpful analysis can be hard to come by. Disparate, unconnected systems and their
data formats must be manually reconciled (unless you're using AI to automate the
most tedious processes).
The challenge of complexity: Planners use complex formulas and legacy calculations
to determine a final capacity plan that is unique to their organization. Manual
spreadsheets are often used to accommodate all this complexity, but if there are
errors made during the data entry process, the entire plan is affected, and knock-
on effects permeate throughout. Moreover, capacity planning typically occurs at
multiple levels and horizons in manufacturing, and each level requires data and
time that increases your risk of making a mistake.
The challenge of communication: Capacity planning involves many moving,
disconnected parts, so communication gaps are likely and can pose a great risk to
the plan’s integrity.
Leveraging AI In Capacity Planning
Capacity planning can never be perfect. After all, no one could’ve predicted the
chaos that Covid-19 would bring upon manufacturing chains in 2020. But there are
strategies you can practice to get more accurate demand insights, boost sales
margins through better customer service, reduce capital locked up in inventory and
enhance your competitive advantage.

Demand-sensing tools, for example, can create near-term forecasts that show current
market trends and apply those to plan capacity based on your own actual data and
not merely simulated datasets. (Full disclosure: My company provides demand-sensing
solutions.) Real-time insights, automation techniques, AI and machine learning
algorithms can help turn your streams of data into clear decision-making.

Here are four ways you can use demand sensing to create capacity plans:
1. Optimize operating costs: You can consider using real-time demand sensing to
help you budget and cut operating costs where you need to so you don’t waste money
and resources on contingency.
2. Get accurate fleet positioning: Logistics managers often face the challenge of
how to adequately use their transport potential, so you can also use demand sensing
to create fleet position plans. Using real-time analytics, you can get a clear
picture of what kind of fleet would be most useful in the coming hours, days, weeks
or months, based on your data.
3. Manage carriers to their optimum capacity: While demand sensing repositions
fleets more accurately, it can also help monitor and manage fleet loads against
capacity commitments and reveal existing gaps where daily needs overwhelm the total
committed capacity. This helps managers address, solve or avoid potential
challenges with carriers that cannot meet load commitments.

4. Absorb demand shocks. Short-term demand sensing capabilities can help logistics
companies better respond to immediate demand fluctuations. This gives them the
power to streamline capacity and operational plans and save on the day-to-day cash
reserves that end up impacting their bottom line.
However, when leveraging this tech, it's important to keep a few best practices in
mind, including:
Start small and scale. Avoid the common trap of taking on a major multiyear, all-
encompassing digital transformation or industry 4.0 projects with one-off
consultants. When aiming to improve your operations and the supply chain, I've
found it is better to crawl, walk and then run.
After all, you wouldn't manually service a jet engine at 36,000 feet. The same is
true when applying advanced technology to your existing data systems that support
your daily business units. Start with a few small pilots with vendors that address
specific challenges you are looking to overcome in the near term. Those that are
successful with a positive return on investment can then be scaled up across your
enterprise to capture greater economies of scale and returns. 

Leverage your own people. After all, they're already domain experts who know your
business. If you're incorporating demand-sensing tools or other AI solutions,
empower them with targeted training on how to leverage your data. That way, they're
not crunching numbers like a super-computer but elevating those best AI
recommendations for implementation to achieve better business results.
Overcoming capacity-planning challenges has never been more important. With global
supply chains becoming more complex, logistics companies need to empower themselves
to make quick yet accurate decisions with confidence so they can serve customers —
even when supply chains are turned upside down.