resource : http://en.wikipedia.org/wiki/Capacity_planning

1. Managerial Accounting
Mohammed Alkraidees
IPA- Saudi Arabia

2. Capacity planning
Capacity planning is the process of determining the
production capacity needed by an organization to
meet changing demands for its products.
 design capacity.
 effective capacity.

3. The goal of capacity planning
 The goal of capacity planning is to minimize this
discrepancy between the capacity of an organization
and the demands of its customers results in
inefficiency, either in under-utilized resources or
unfulfilled customers .

4. Overall Equipment Effectiveness
OEE
 Demand for an organization's capacity varies based on
changes in production output, such as increasing or
decreasing the production quantity of an existing
product, or producing new products. Better utilization
of existing capacity can be accomplished through
improvements in overall equipment effectiveness .

5. Capacity can be increased
through :
 introducing new techniques.
 equipment and materials.
 increasing the number of workers or machines.
 increasing the number of shifts.
 acquiring additional production facilities.

6. Capacity is calculated:
 Capacity = (number of machines or workers) ×
(number of shifts) × (utilization) × (efficiency)

7. How much to increase capacity
demands depend upon a number
of factors, including:
 Anticipated demand – volume & certainty
 Strategic objectives
 Costs of expansion and operation

8. The broad classes of capacity
planning
 capacity lead strategy .
 capacity lag strategy .
• match strategy . (Average Capacity Strategy)

9. capacity lead strategy :
 In anticipation of demand, capacity is increased.
 This is an aggressive strategy and is used to lure
customers away from competitors.
 It often results in excess inventory.
 Costly and often wasteful .

10. capacity lag strategy :
 Increase capacity after demand has increased.
 It decreases the risk of waste.
 This is a conservative strategy and may result in lose of
customers.
 You assume customers will return after capacity has
been met.

11. Average Capacity Strategy :
 Average expected demand is calculated and capacity is
increased accordingly.
 This is the most moderate strategy.

12. Capacity planning is long-term
decision
 Inadequate capacity planning can lead to the loss of
the customer and business. Excess capacity can drain
the company's resources and prevent investments into
more lucrative ventures. The question of when
capacity should be increased and by how much are the
critical decisions.

13. THE END
Thank you for your attention..