Capacity planning

1. CAPACITY PLANNING

2.  Capacity is usually expressed as volume of output
per time period. Capacity refers to a system's
potential for producing goods or delivering
services over a specified time interval. Both
input and output measures can be used
 Output measures are used for high-volume,
standardised processes, e.g.:
Automotive production line: number of cars per
week
Call centre: customer calls per hour
 Input measures are used for low-volume, flexible
processes , e.g.Hospital: beds available

3. CAPACITY PLANNING
 Capacity planning is the process of
determining the production capacity needed
by an organization to meet changing
demands for its products.
 Determination and adjustment of the
organization’s ability to produce products and
services to match customer demand

4. Capacity Planning Classification
 Long Term Capacity: Long range capacity is for long
period of time i.e. for 1 year or more. Long range
capacity of an organization is dependent on various
other capacities like design capacity, production
capacity, sustainable capacity
It may involve location decisions,technology etc
 Short Term Capacity: The strategic planning
undertaken by organization for a daily weekly or
quarterly time frame is referred to as short term capacity
planning.

5. Capacity Decision
Major considerations in capacity decisions
are:
a)What size of plant? How much capacity to
install?
b)When capacity is needed ?
c)At what cost? How to budget for the cost?

6. Capacity Planning Decisions
 Assessing existing capacity
 Forecasting capacity needs
 Identifying alternative ways to modify
capacity
 Evaluating financial, economical, and
technological capacity alternatives
 Selecting a capacity alternative most suited
to achieving strategic mission

7. Importance of Capacity Decisions
 Impacts ability to meet future demands
 Affects operating costs
 Major determinant of initial costs
 Involves long-term commitment
 Affects competitiveness
 Affects ease of management
 Impacts long range planning

8. Factors affecting Capacity decision
1.Market demand for a product/service
2.The amount of capital that can be invested
3.Degree of automation desired
4.Type of technology selected
5.Difficulty in forecasting future demand and
future technology.
6.Obsolescence of product and technology
over a period of time

9. CNTD..
7.Present demand and future demand both
over short-range and long-range time
horizons.
8.Flexibility for capacity additions.
9. Human factors: Skill & quality of workers
10. Supply factor: Timely & assured supply of
inputs
11. External factors: Investors & government
policies

10. CNTD..
7.Present demand and future demand both
over short-range and long-range time
horizons.
8.Flexibility for capacity additions.
9. Human factors: Skill & quality of workers
10. Supply factor: Timely & assured supply of
inputs
11. External factors: Investors & government
policies