Business owners rarely discuss capacity planning with enthusiasm. Understandably, it’s one of the least creative aspects of business operations. Nevertheless, they cannot deliver the products efficiently without a capacity planning process.
This article explains the importance of capacity planning in operation management, describes strategies that can be implemented, and showcases helpful examples for your inspiration.
🔝 Top-8 Capacity Planning in Operations Management Examples
- Capacity Planning in Operations Management
- Operations Management and Capacity Planning
- McDonald’s Organization: Operation Management
- Nike: Strategic Operations Management
- The Coca-Cola Company: Operation Management
- Burger King Company's Operations Management
- Role of Operations Manager
- Operations Management in Business Organizations
💡 What Is Capacity Planning in Operations Management?
Capacity planning is one of the main aspects of operations management, as it focuses on the efficient use of resources. In general, capacity is the ability to deliver goods and services to customers. A mismatch between the company’s capacity and clients’ needs leads to inefficiency, and capacity in operations management planning aims to reduce the discrepancy.
Why Capacity Planning is Important in Operations
It is an essential element that ensures proper resource management and optimal levels of operations.
|✔️ Improves productivity||Capacity planning enhances team engagement, helps with resource management, and enables one to make data-informed decisions.|
|✔️ Reduces costs||Capacity planning optimizes resource usage and employs underutilized resources in the system.|
|✔️ Improves delivery timing||Capacity management can improve the punctuality of the organization’s projects.|
|✔️ Helps to avoid the team’s overload||Often employees get overwhelmed because the managers set unrealistic goals. If the team’s capacity is known, the overload can be avoided.|
What Are the Steps of Capacity Planning?
There are five steps in implementing capacity planning in operations management:
- Understand current capacity. Current capacity is the maximum possible output measured in units of output per period. A lot of businesses fail because they do not understand what their operational capacity is.
- Project future demand. Demand forecasting is the process of making predictions based on a customer’s future demand. There are various templates available online that can assist in making these projections.
- Calculate the capacity gap. It can be defined as a disparity between a company’s production goals and actual production capacity. After calculating it, businesses should look for ways to balance the current and future demand.
- Identify where additional capacity could come from. Organizations can add more team members, more machinery, or more projects.
- Assess the risks. Last but not least, organizations should take into account the impact of the implemented changes and possible risks, such as failing to deliver or going over budget.
✏️ 4 Types of Capacity Planning in Operations Management
There are four types of capacity planning in operation management that can affect the organization’s overall strategy. These types include:
Project Capacity Planning
This type of capacity planning looks at separate projects within an organization and measures the time and resources needed. Project managers use a formula to calculate the number of employees that are going to be working on the task. After that, the project delivery milestones are communicated to the clients. The project capacity planning strategies should also consider resource and supply chain management.
Resource Capacity Planning
Companies use this capacity planning tool to identify the resources needed to meet future demands. It is especially crucial in manufacturing as there are three aspects involved: machines, people, and tools. All of them are tied together to guarantee timely production, delivery, and effective use of materials and personnel.
Team Capacity Planning
Team capacity planning is used for groups that operate together. Legal or design teams usually work on multiple projects together within one organization, so project managers need to understand how much work can be accomplished daily and how it will affect project timelines overall.
HR Capacity Planning
This type is similar to resource planning and is conducted by an HR manager or team. It takes into account factors such as the ability to hire, resources for onboarding and training new employees, and budget for the new hires.
💎 Capacity Planning in Operations Management: 3 Strategies
There are three methodologies behind capacity planning. To choose the right one, business owners need to understand the risks they are willing to undertake and the lifecycle of the products.
1. Lag Strategy
This methodology focuses on having enough resources to meet the current demand. It is a conservative way to maintain the costs as low as possible. A disadvantage of this method is that it can create a lag in the production and delivery of services if a business gets more demand.
2. Lead Strategy
This is a way of planning in which you have enough resources to meet the projected demand. It has more risks than the lag strategy. For example, if a company hires new workers and doesn’t get the orders, it will end up paying the wages for the employees to sit around.
3. The Match Strategy
The match strategy method is the balance between the lag strategy and the lead strategy. It is the most flexible of all the strategies because businesses can closely monitor the market’s current and projected demand and movements. Based on the changes, they adjust the capacity management.
We hope our article helped you better understand what capacity planning in operations management is. Share this link if you know a student, business owner, or project manager who needs help with this topic.