Capacity Planning
.... involves analysis and decisions to balance capacity at a production or service point with demand from customers (orders, visitors etc). In this sense it is useful to think of information flows and constraints in a client-server relationship. The production or service point has a given capacity and may or may not have the flexibility to expand this or reduce it in response to demand. Operations managers must :
have sufficient production or service capacity (machines, space, staff skills and hours, stocks, vehicles etc) to be able to supply the right quantity at the right time. Thus must optimise the utilisation of resources.Order flows and customer arrivals can be unpredictable and capacity inflexible. The sales team may desperately want to take the order but do operations have the actual capacity to produce and deliver?
Capacity planning methods vary according by industry or service yet many of the principles are similar.
- a long-term view may cover months to years. An operations strategy/policy is needed covering overall organisational capacity (production sites, hotels, hospital wings (rooms and beds), warehouses, production lines/machinery, computer up-grades and investment in new facilities etc
- medium-term forecasting demand then scheduling available capacity to best meet or balance that demand. This typically involves manufacturing or requirments planning, machine scheduling, staffing rotas and materials requirements planning. These plans reflect different levels of aggregation.
- short-term day-to-day adjustments are typical of capacity management. Our aggregate plans help in assigning production/service capacity to accommodate the demand but many details are only revealed in operation. Unforeseen contingencies occur by the hour, day or week. Local staff need the expertise, discretion and some "slack" for flexibility to make locally identified adjustments - without upsetting the objectives of the aggregate plans.
Capacity planning provides an operational framework and ensures the coordination of supplies and scheduling of resources. The starting points are
- market information - do we know what the demand is and by when? Can we forecast (predict) it?
- Shall we make goods to order only (MTO) or, being able to rely on a steady flow of orders with additional predictions of demand, make to stock (MTS)?Trends for both MTO and MTS must be predicted to ascertain capacity implications and generate plans.
Capacity planning considerations
- Forecasting
consider the differences between dependent and independent demand. Techniques of time series and estimating may be helpful.
Consider the capacity difficulties in relation to perishables (newspapers, airline seats and meals, Belgian pate). Overbooking by hoteliers can work to their advantage but can upset holiday-makers!
A telephone company or Internet Service Provider needs capacity to fit maximum demand (and growth) - office/college hours and weekend demand. Operational chnageovers and line repairs need to respond to existing demand. Fast operator/help desk systems may be needed at peak times. Public transport needs enough capacity for peak traffic. At other times buses and trains are idle.
