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Capacity planning is important when starting a new organisation, extending the operations of an existing business, considering additions or modifications to product lines, and introducing new techniques, equipment and materials. In business, capacity is the maximum rate of output for a process. This means that capacity is the work that the system is capable of doing in a given period of time. Capacity can be expressed in the formula (number of machines and/or workers) x (number of shifts) x (utilization) x (efficiency) = capacity. The goal of capacity planning is to meet current and future demand with a minimal amount of waste. The three main types of capacity planning are lead strategy, lag strategy, and match strategy. The lead capacity strategy is adding capacity in anticipation of an increase in demand. Lead strategy is an aggressive strategy with the goal of luring customers away from the company’s competitors. The possible disadvantage to this strategy is that it often results in excess inventory, which is costly and often wasteful. Lag strategy refers to adding capacity only after the company is running at full capacity or beyond due to increase in demand (North Carolina State University, 2006). This is a more conservative strategy that decreases the risk of waste but may result in the loss of possible customers. The match strategy (also known as the tracking strategy) is adding capacity in small amounts in response to changing demand in the market. This is a more moderate strategy. References: North Carolina State University. (2006). Definitions: Capacity Planning and Capacity Strategy. Retreived January 10, 2006 from http://scrc.ncsu.edu/public/DEFINITIONS/C.html Hill, Joyce. (2006). Capacity Requirements Planning. Retreived January 10, 2006 from http://www.freequality.org/sites/www_freequality_org/documents/Training/Classes%20Spring%202003/PowerPoint%20Slides/Capacity%20Requirement%20Planning.ppt Krajewski, Lee J., & Ritzman, Larry P. (2005.) Operations Management; Processes and Value Chains. Upper Saddle River, New Jersey: Prentice Hall. |
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