Relationship of the economic concept of supply and demand to capacity planning theory

There is a direct relationship between the economic concept of demand and capacityplanning. A common problem that all production and service firms face is matching capacity with uncertain future customer demand. This is because- “Capacity serves demand, but demand is often stochastic”. 

Why is capacity planning critical to production and service firms?

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.