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Capacity Management
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This document describes the entire process of capacity planning and Control. It covers all the points from the main reading as well.
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Chapter 11Capacity Management –
Capacity Planning – This refers to the maximum level of value-added activity over a
period of time under normal operating conditions. It considers the effect of
changeover/cleaning/setting-up before determining the level of production of that
resource. The main idea is to plan in such a way that balances capacity with demand,
although both fluctuate. Capacity planning is different for manufacturing and service
systems because the former has inventory while the other doesn’t.
The main objective of capacity management is to be cost-effective, increase profits by
decreasing revenue loss, increase speed of response to consumer demands and
prevent working capital from being stuck in accumulated inventories.
Long –term planning is the first planning activity to be undertaken. At this level,
strategic decisions are made. It is then followed by medium term (2-18 months) and
short-term (daily – 1 month) planning.
Steps to Capacity Planning
There are three steps to capacity planning
1. Measuring capacity and demand
2. Identifying alternative capacity plans
3. Choosing the appropriate plan.
Measuring Capacity and Demand
Measuring demand is the job of the forecasters. It can get difficult because of the vast
number of reasons that can bring about a fluctuation in it.
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