Capacity planning is a long-term decision that establishes a firm's overall level of resources. Capacity decisions affect the production lead time, customer responsiveness, operating cost and company ability to compete. 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. Failure to make these decisions correctly can be especially damaging to the overall performance when time delays are present in the system.

2.  Capacity is the upper limit or ceiling on the
load that an operating unit can handle.
 Capacity also includes
 Equipment
 Space
 Employee skills

3.  What kind of capacity is needed?
 How much is needed?
 When is it needed?

4. 1. Impacts ability to meet future
demands
2. Affects operating costs
3. Involves long-term commitment
4. Affects competitiveness
5. Affects ease of management
6. Impacts long range planning

6. Capacity planning is necessary when an
organization decides to increase its
production or introduce new products into
the market. Once capacity is evaluated and a
need for new or expanded facilities is
determined, decisions regarding the facility
location and process technology selection are
taken.

7.  Design capacity
 Maximum obtainable output
 Effective capacity, expected variations
 Maximum capacity subject to planned and expected
variations such as maintenance, coffee breaks, scheduling
conflicts.
 Actual output, unexpected variations and demand
 Rate of output actually achieved--cannot exceed effective
capacity. It is subject to random disruptions: machine
break down, absenteeism, material shortages and most
importantly the demand.

8. Actual output
Efficiency =
Effective capacity
Actual output
Utilization =
Design capacity
Both measures expressed as percentages

9. 9
Design capacity = 50 trucks/day available
Effective capacity = 40 trucks/day, because 20% of truck
capacity goes through planned maintenance
Actual output = 36 trucks/day, 3 trucks delayed at
maintenance, 1 had a flat tire
%72
/50
/36
%90
/40
/36


dayunits
dayunits
CapacityDesign
OutputActual
nUtilizatio
dayunits
dayunits
CapacityEffective
OutputActual
Efficiency

10. Assessing existing capacity
Forecasting future capacity needs
Identifying alternative ways to modify
capacity
Evaluating financial, economical and
technological capacity alternatives
Selecting a capacity alternative most suited
to achieve the strategic mission of the firm.

12. Long term capacity strategies – develop new
product lines , expand existing facilities ,
construct or phase out production plants.
The phase-in strategy – it is planning for the
next model even when the present model is
moving well.
Short term capacity strategies - Overtime ,
Hiring Firing etc.

13. Controllable Factors – amount of labour
employed, facilities installed, machines,
shifts worked per day, days worked per week,
overtime work.
Less Controllable Factors – absenteeism,
labour-performance, machine breakdown,
material shortage, rework, problems such as
strike, lockout, fire accidents etc.

14. Long term capacity: it is dependent on various other
capacities –
Design capacity-the maximum output possible as
indicated by equipment manufacturer under ideal
work condition.
Production capacity-the max. output possible from
equipment under normal working condition or day.
Sustainable capacity-the max. production level
achievable in realistic work condition and considering
normal machine breakdown, maintenance etc.
Effective capacity-the optimum production level under
pre-defined job and work-schedules, normal machine
breakdown, maintenance, etc.

15. the strategic capacity planning undertaken
by organization for 2 to 3 years of a time
frame is referred to as medium term capacity
planning

16. The strategic planning undertaken by
organization for a daily weekly or quarterly
time frame is referred to as short term
capacity planning.

18.  Capacity planning is long-term decision that establishes a firm's overall
level of resources. Capacity decisions affect the production lead time,
customer responsiveness, operating cost and company ability to compete.
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. Failure to
make these decisions correctly can be especially damaging to the overall
performance when time delays are present in the system.