GOOD

AFTERNOON
 CAPACITY PLANNING
 WHAT IS CAPACITY ?
 Capacity is elusive, & therefore often
qualified by terms like licensed capacity,
installed capacity, rated capacity etc.
 Capacity planning is both quantity &
quality to manage the things.
CAPACITY + PLANNING
efficiency+ effectiveness
quantity + quality
 DEFINITION OF CAPACITY
 Capacity of facility is its limiting capacity to
produce an output over a period of time.
Thus, the annual capacity of BAJAJ is 7lacs
scooter currently.
VARIOUS CAPACITIES ARE:
- Installed capacity
- Normal capacity
- Practical capacity
- Ideal capacity
- Budgeted capacity
 Capacity planning in general is
the maximum production rate
of facility or a firm. It is usually
expressed as a volume of
output per period of time.

 Capacity indicates the ability of

firm to meet market demand.
Capacity is a committing financed & other
resources to a business i.e. manufacturing &
services both:
 MANUFACTURING  SERVICE SECTOR
SECTOR - Creation of more space
- in-house capability - Availability of
- Future capability furniture, accessories
Eg: capability of labour is to & equipments
be ensured for long,
expansion, analysis of Eg : beds/days
market trends, policy
making are the example
Of capacity planning in
manufacturing.
WAYS OF ADJUSTING CAPACITY
IN SHORT RUN ARE:
 use of overtime
Increasing the number of shifts per day to

meet a temporary strong demand.

Sub-contracting to other firms.
WAYS OF ADJUSTING CAPACITY IN
LONG RUN
 Once the long range capacity needs are estimated
through long range-forecasts. There are many ways
to provide for the needed capacity.
 In operation planning ,two conflicting constraints are
time & capacity. If time is fixed by the customer’s
required delivery date or processing cycle .it is
possible to accept time as the primary constraint &
plan backwards to accommodate these items.
 On the other hand ,if the processing time is not
constraint in cases where products are produced to
stock & sell ,it is simpler to use a forward plan based
on finite capacity.
 OPTIMUM CAPACITY UTILIZATION
 MACHINE REQUIREMENT:-In a manufacturing
concern, a substantial part of the financial resources
are invested in the plant ,machine & Equipment.
The optimum capacity utilization can be made as:
1.Making the optimum investment in plant &
machines.
2.Making the optimum utilisation of installed
production capacity.
3.The issue of machine requirement generally deals
with line balance.
Following formula can assess how much
machines are required for a particular
operation so as to know how to
optimally utilize the available capacity.
N==ST*MP/MC*UC
N= No. of machines
ST=Standard time
MP= Maximum production
UC=utilization of machine capacity in %\
MC= Maximum capacity
Aggregate planning:-
aggregate planning involves the
best quality to produce during time periods
in the intermediated- range horizon (often
3 months to 1 year) and planning the
lowest cost method of providing the
adjustable capacity to accommodate the
production requirements.
For manufacturing operations aggregate
planning involves planning work force size ,
production rate (work hours per week) and
inventory level.
 OBJECTIVES
1. To develop plans that are:

a) Feasible: the plans should provide for their

portion of demand that firm intends to meet
and should be within the financial and physical
capacity of the firm.
b) Optimal: the firm should aim for plans, which
will ensure that resources are used as wisely
as possible and cost kept as low as possible.
 To increase the range of alternatives of
capacity use that can be considered by the
management of the firm.
 STEPS IN AGGREGATE
CAPACITY PLANNING
1.Prepare the sales forecast for each
product that indicates the quantities to be sold in
each time period
2. Sum up the individual product or service forecast
into one aggregate demand for the factory.
3. Transform the aggregate demand for each time
period into labour, material, machines & other
elements of production capacity to satisfy aggregate
demand.
4. Develop alternatives resource schemes
for supplying the necessary production
capacity to support the cumulative
aggregate demand.
5. Select the capacity plan from among
the alternatives considered that
satisfies aggregate demand & best
meets the objective of the
organization.
FLOW CHART OF AGGREGATE PLAN
Market Resource Base
environment Technology
Forecast & customer Capacity ( Facilities,
order material , labour)

Aggregate
production plan

Master production
schedule
Material Capacity
Requirements Requirement
 APPROACHES TO AGGREGATE PLANNING
An aggregate planning takes into consideration the
overall level of output and the capacity that is
required to produce it. There are two basic
approaches to estimating the capacity that will
be required to produce an aggregations or
grouping of a company’s products.
1. Top down approach: aggregate planning involves
development of the entire plan by working only
at highest level of consolidates the products into
an average product and then develops one
overall plan.
2. A bottom-up approach: involves development of
plans for major product families at some lower
level within the product line. These sub-plans are
then consolidated to arrive at the aggregate plan
which gives the overall output and the capacity
required to produce it
•THANK YOU