Why capacity planning is important

Capacity planning is more high level and helps you determine what and how many resources you need to meet demand. Resource planning is more about analyzing resource utilization: you use it to takes the number of resources available as determined by your capacity planning and allocate them to individual projects. You would use capacity planning to determine if you need to hire more employees, bring on seasonal workers, or increase your stock of flowers before February So, if most of your demand is for vases of red and pink posies, you could allocate the largest portion of your resources to creating those floral arrangements.

There are three methodologies behind capacity planning. Lag strategy is planning to have enough resources to meet true demand not projected. Lag strategy is a conservative method of capacity planning that ensures your costs are as low as possible.

The potential downside to this strategy is that it can create a lag in the delivery of products or services to customers, which is where the name comes from.

If you get a sudden surge in orders or land a large new client who wants fast turnaround times, lag strategy may prevent you from meeting due dates. Lead strategy is planning to have enough resources to meet your demand forecasts. Lead strategy assumes more risk than lag strategy. The major benefit of this strategy is that if you do have a sudden uptick in orders, you will most likely be able to keep all of your customers happy and meet due dates.

Match strategy is the middle ground between lag and lead strategy. Using match strategy, you do strategic capacity planning more frequently. Based on this information, you adjust your capacity management to meet demand in increments. This strategy offers the most flexibility with less risk than lead strategy, but it has more ability to scale than lag strategy.

The goal of capacity planning is to ensure that your supply chain is always ready and able to meet demand. Incorporating this type of strategic planning into your process will help you meet due dates, effectively scale your business, and increase your bottom line. In , the Harvard Business Review published the results of a global study where they assessed the behaviors of more than 71, customers faced with stock-outs. Capacity planning can help you avoid stock-outs and improve profitability.

And the more you do it, the better you will understand your unique demand. The capacity planning process will help you see how demand fluctuates during different seasons such as holidays or how it is affected by events like kids going back to school. McKinsey and Company published a page compendium that illustrates the importance of delivery capacity in your retail distribution strategy. Peter Drucker wrote of the need to focus resources, abandoning a less promising initiatives for every new project taken on, as fragmentation inhibits results.

Optimum implementation of the planning is revolving around the project manager qualities and commitment. Manager should plan and implement the project appropriately and manage all the activities with care.

All the team workers should be explained everything by the manger. It is the responsibility of the project manager to provide better services within the limited resources and time.

Huge amount of money is put on stake by the company for the project so the budget has to be managed properly, and there must be a good coordination between the main and the third parties. These processes are the means whereby products are developed manufactured and delivered to customers and through which the continuing service needs of the customers are met. The logistics concept is the thread that connects these crucial processes and provides the basis for the design of systems that will cost effectively deliver value to customers.

Thus logistics management is essentially an integrative process that seeks to optimize the flow of materials and supplies through the organization and its operations to the customer. It is a planning process and an information based activity. A complex project that I have been on would be for my CIS class where I had to work with my team to create an application for a guitar store to better manage their payments.

The store had a layaway process where customers could give payments for a guitar, but everything was unorganized and records were kept on file cabinets. We had to create an application that would store payment records, customer information, payment method, and the final balance.

I was in the critical path because I was involved in the designing and creation of the application. Capacity Planning is basically the efficient use of the available resources. It is applicable in every aspect of our daily life. For instance, Capacity Planning in any organization involves the efficient utilisation of the labour force in tandem with the other resources like time, raw materials, etc to achieve with the goal of the organization.

The organization needs to determine its capacity requirements before it starts it operations. It is no doubt a bit hard to accomplish, but the risk is very less comparatively. This strategy involves either reducing or adding to the capacity in small amounts depending upon the prevalent consumer demand.

The adjustment strategy can also take place because of some important changes in the product. It is the process of capacity planning that helps an organization to meet the future resource needs effectively. It lets you see the workings of every individual so that the company can make viable changes to future assignments based on the availability and skills of the team. It is the capacity planning that helps a business entity to make choices about resource management so that you can minimize resource costs.

A capacity planning method helps to accumulate digital information on a regular basis that will prove beneficial in the growth of the company.

An organization can easily monitor costs during recession and growths with the help of capacity planning as it takes into account supplies and schedules of production, facilities, and personnel. The planning process allows the organization to make a viable budget and allocate financial resources where they are needed, developing shipping schedules for the finished product and delivery schedule for supplies.

The capacity planning report shows you whether you have the scope to accept new projects. Do you need to outsource or are your resources enough is an important question that is easily answered via this method? An organization uses the process of capacity planning to maintain the necessary production cycle so that it does not have to stay behind during high demands.

There are certain products which have seasonal demand, for example, an umbrella or a raincoat and if you are dealing in these products, you can take help of capacity planning to work in accordance of the expected demands. The capacity planning will even help in recognizing the downward slide so that you can halt the process as you wish. Capacity planning is linked with the skills inventory of a team, and it informs which member has the necessary skills for a particular job.

It becomes easy to allocate resources as per needed. When a business entity starts on the path of growth and prosperity, it needs further space. This is the time when capacity planning proves its worth and helps to develop an accurate estimate in terms of expected production from the new location. The first step in the procedure of capacity planning includes measuring the unit capacity in terms of input or output.