Proper capacity planning assists firms to
determine the optimal level of input (raw materials and other resources) for
producing the projected amount of output (final goods and services) with
creating little to no barriers (i.e. bottleneck and downtime issues) for its
production and operational success.
An organization’s ability to meet the future demand of products and services heavily depends on capacity planning. Capacity decisions have an effect on overall operating costs. Excess or too much capacity can result an increase in the total operating expenditure. Insufficient capacity implies lost sales, makes it difficult for firms to deliver goods and services on time as it affects the work ordering system thus unnecessarily increases the number of work in progress.
Capacity issues impinge on the ease of management; mismatched capacity makes the management process difficult to handle. It also has an impact on the competitiveness of an organization; a firm’s ability and flexibility to add required capacity or release excess capacity quickly helps it to prevent other firms from entering into the market, which can be considered as a competitive advantage.
Relevant Search Terms
Importance of Capacity Planning
Why Capacity Planning is important?
Why firms need good Capacity Planning?
An organization’s ability to meet the future demand of products and services heavily depends on capacity planning. Capacity decisions have an effect on overall operating costs. Excess or too much capacity can result an increase in the total operating expenditure. Insufficient capacity implies lost sales, makes it difficult for firms to deliver goods and services on time as it affects the work ordering system thus unnecessarily increases the number of work in progress.
Capacity issues impinge on the ease of management; mismatched capacity makes the management process difficult to handle. It also has an impact on the competitiveness of an organization; a firm’s ability and flexibility to add required capacity or release excess capacity quickly helps it to prevent other firms from entering into the market, which can be considered as a competitive advantage.
Relevant Search Terms
Importance of Capacity Planning
Why Capacity Planning is important?
Why firms need good Capacity Planning?