“If you want to determine the production capacity and the plan necessary to meet the changing demands for its products and services, then you have done sufficient capacity planning, but what strategy and steps were taken to develop your plans?”
It should be self-evident as to why an organization should care about capacity planning. No one wants to be in the situation where they have tons of people with nothing to do or to have too many projects and not enough people. As work piles up you are unable to become more efficient or grow as a company. You are unable to do much more than fight the fires. A company that has done sufficient capacity planning understands their priorities, the resource availability, the cash flow, as well as the intricacies of their time frame. Every project matters!
The repercussions of a poorly planned product launch are not just some unplanned operational costs, but a battlefield of ruthless customer reviews as well as negative impacts on the company’s image. The goal of capacity planning is to reduce that possibility, by minimizing the discrepancy, and provide satisfactory service levels in a cost-efficient manner. In other words, you are checking the system, and determining if you have the roles and skills needed before scheduling the work. Regardless of the situation, capacity planning involves three basic steps:
- Determine Capacity Requirements: Understand what will need to be supported.
- Analyze Current Capacity: Determine if it is meeting the organizational requirements.
- Plan for Future Capacity: Forecast future business activities and requirements.
There is lots more that can be said about each of these steps, but to begin you must understand your limits. After that is determined, you can start to understand your organizational constraints, the true project priority, and further speculate on production holdup. Companies use one of four general strategies to determine the production capacity, and produced the plans necessary to meet the changing demands for its products and services:
- Lead Strategy: Loading the system in anticipation of an increase in demand. The Lead strategy has the goal of luring customers from your competitor by improving service level. You are ensuring that the organization has adequate capacity to meet all demands even during high growth periods.
- Lag Strategy: Add the capacity after demand has increased beyond existing capacity. This strategy decreases the risk of overbuilding, greater productivity due to higher utilization levels, and the ability to put off large investments, but it may result in the loss of possible customers due to the product being out of stock or low service levels.
- Match Strategy: Add the capacity incrementally in response to changes in demand. This is a more moderate approach to reach the same advantages as in the lag strategy.
- Adjustment Strategy: Add or reduce the capacity in small or large amounts due to the consumer’s demand, or do major changes to product, or to the organization.
You made the resources available to really look at the capacity and demand in your organization. You even allowed others to adjust a few of the associated variables such as hiring a new copywriter and adjusted a few projects. So… you’re done with capacity planning? Right? Not so much.
We live in a fast paced world were nothing ever stays the same for too long. The capacity is defined as the maximum amount or number that can be received or contained. This could be about the amount of data on a hard drive, or the maximum amount of work that an organization can complete in each amount of time. It is important to know those numbers, but it is more important to know that capacity requirements can fluctuate between peak and limited demand. You might not require the same number of resources in normal operations as you do in peak demand. You are only human, to ensure the success of business initiatives and reduced cost, capacity planning should be actively done semi-annually, but with this concept, should be continuously in the back of your mind as things change!