Let us first understand what capacity stands for in project management. Capacity is the maximum output a business can produce or accomplish within the perimeter of a normal working schedule. Therefore, capacity planning can be elaborated as a process that determines the capacity of production needed by a company in order to meet changing demand for its products or services. It is all about preparing your business for the future. With it, you will know how to scale, create better designs, and even identify bottlenecks in the supply chain before they actually happen. Capacity planning is a great way to invest your time and resources in order to identify how much a business should produce in order to bridge the gap between demand and supply of its products.
This process of evaluating production capacity can be further divided into three categories that together ensure the right amount of resources required by a business both in the short term and the long term. Capacity planning is briefly categorized into the following three types:
- Workforce Capacity Planning– basically takes into consideration the human resources that are required in the production process to meet the demand.
- Product Capacity Planning– the main purpose of this strategy is to maintain resources that are essential to fulfilling deliverables.
- Tool Capacity Planning– in this planning it is made sure that your business is equipped with the right tools and techniques, starting from machinery, vehicles, the latest technology or any such tool that could be needed to deliver the product or service on time.
To find out about types of capacity planning and how they help a business in achieving forecasted demand, you can visit various guides.
A modern entrepreneur very well understands that the need of the hour is to know the market competition and your customers. To do that, one requires field specialists and experts who best understand the latest processes like demand planning, capacity planning, supply planning, and likewise, which contribute to the growth of modern businesses. Given below are some salient points that explain how modern businesses benefit from capacity planning.
- Maintain Adequate Inventory- think like a consumer, will you wait at a shop if the product is not in stock? The answer would be NO. Similarly, it is really important for a business to maintain an adequate stock of goods so that you don’t lose customers. And this is one big benefit of capacity planning that it helps in the reduction of stockouts by predicting how the market and demand can fluctuate, making you better able to predict supply and demand changes. In 2004, the Harvard Business Review published results of a global study where they assessed the behavior of more than 71,000 customers faced with stock-outs. Depending on the retail category, 21% to 43% of consumers went to another store to purchase an item if it was out of stock.
- Maintain Deliver Capacity- in a world where everything is just a click away, people have become intolerant of slow or poor delivery services. Everyone wants their demand to be met as early as possible and it is when your business can stand out in the market. By maintaining an apt workforce available at known locations, capacity planning vouches for your business among competitors.
- Rightly Identify Business Elements- think of everything ready in stock but you are not able to achieve sales as you fail to accept online payments. Horrifying, right! The process of capacity planning rightly identifies all essential elements of a business from raw materials to machinery so that demand is met without any hindrance and profits are earned.
- Risk Management- one can define capacity planning as the roadmap to making profits. It identifies strengths, weaknesses, opportunities, and threats in a business and thus prepares it to manage the risk. For any business to flourish, it is important to forecast and manage business-related risk. For example, shortage of resources, unavailability of products, an overburdened workforce, etc.
Thus, to run a successful business in today’s market capacity planning is a step that one cannot skip. To know more, some publications can have the information you need.