CAPACITY PLANNING

• Process of determining production

capacity needed by the
organization.
• Concerned with determining the
long term and short term capacity
need of firm.
 NEED FOR CAPACITY PLANNING
• To make decisions regarding the quantity of
the output to be produced.
• To make decisions on whether or not to
introduce new products.
• Affects competitiveness and ease of
management.
 STEPS FOR CAPACITY PLANNING
• Estimate future capacity requirements
• Evaluating existing capacity
• Identifying alternatives
• Conduct financial analysis
• Assess key qualitative issues
• Select one alternative
• Implement the chosen alternative
• Monitor results
 CLASSIFICATION OF CAPACITY
PLANNING
• BASED ON TIME HORIZON-
A) Long term
B) Short term
• BASED ON AMOUNT OF RESOURCES
EMPLOYED
A) Finite capacity planning
B) Infinite capacity planning
 ON THE BASIS OF TIME HORIZON
LONG TERM SHORT TERM
• Decision to develop new • Use of over time and idle
product line time
• Expand existing facilities • Increase the number of
• Construct production plants shifts
and new units. • Sub contracting to other
firms.
 BASED ON RESOURCES
FINITE CAPACITY PLANNING
• Where products are
produced to stock and sell.
• Time is not a constraint.
INFINITE CAPACITY PLANNING
• Where planning is done
backward to accommodate
time changes.
• Time is deciding constraint.
 FACTORS AFFECTING CAPACITY
PLANNING
CONTROLLABLE FACTORS LESS CONTROLLABLE FACTORS
• Number of labor employed • Labor performance
• Facilities installed • Machine breakdown
• Shifts per day • Material shortage
• Preventive maintenance • Scrap and rework
• Number of production set • Unexpected
ups. problems(strike,
regulations, accidents etc.)
APPROACHES TO CAPACITY
EXPANSION.