Capacity planning ensures that the organization has the necessary resources to meet customer demand and that its workforce can cope with the workload. This article will explain three capacity planning strategies and provide an example of the Dell company.
🔝 Top-8 Examples of Capacity Planning Strategies
- Capacity Planning in Operations Management
- Coca Cola Company: Sustainable Supply Chain Management
- Operations Management and Capacity Planning
- Just-in-Time and Manufacturing Resource Planning
- Capacity Development Programme
- The Coca-Cola Company: Operation Management
- Nissan Motor Company: Building Operational Resiliency
- Operations Management in Business Organizations
🔤 What Are Capacity Planning Strategies?
Production capacity planning is concerned with supply and demand. It may affect the fate of the project or manufacturing line. This process balances the organization’s resources to satisfy consumer demand or project capacity requirements.
The capacity planning process is vital in project management since it relates to such critical areas as resources, time, team, and work management. Since every company is unique and demand might be volatile, project managers can employ various capacity planning strategies to respond to different conditions.
What Are the Capacity Strategies Available to Operations Managers?
In operations management, 4 fundamental types of capacity planning can influence the company’s overall strategies. The list includes the following:
- Resource capacity planning,
- Project capacity planning,
- Team capacity planning,
- HR capacity planning.
Each type increases the visibility of the firm’s planned work and balances workloads against project deadlines.
📊 Three Primary Capacity Strategies
A capacity planning strategy is a method of raising or lowering the business capacity to satisfy demand. There are three capacity strategies: lead, lag, and match:
- A lead capacity strategy increases capacity in anticipation of increased demand.
- A lag strategy does not add capacity until the company reaches full capacity.
- A match strategy gradually increases the capacity to respond to changing market demand.
In the following paragraphs, we will discuss these capacity planning strategies in detail.
Lead Capacity Strategy
A lead capacity strategy is an aggressive planning approach that requires an initial investment to expand capacity. Companies using this method raise their capacity before any demand increases. For example, a manufacturer may increase its production capacity, lease a larger warehouse, or acquire inventory in preparation for the following fiscal year.
The lead strategy is utilized to gain market share and take advantage of competitors constantly facing inventory shortages, especially during peak seasons. The problem with this method is that expected demand may not match actual demand, resulting in excess inventory and increased stock-holding expenses.
Lag Capacity Strategy
The lag capacity strategy is the total opposite of the lead strategy. Companies employing this approach wait until their present capacity reaches an acceptable limit before adding more. While the lag technique is more reactive than proactive, it is still beneficial. It helps organizations respond to genuine demand spikes and avoid stockpiling excessive inventory. However, the lag strategy may cause a slight delay in procuring goods, which is why companies may lose some of their customers.
Match Capacity Strategy
The match capacity strategy takes a position between the lead and lag strategies. The match strategy entails incremental modifications to the company’s capacity rather than enhancing capacity in advance or increasing present capacity only when it has been stretched to its limits. These modifications are based on the latest market conditions. Therefore, enterprises should regularly monitor capacity use and match demand in increments as needed. Even though this method requires more effort, it is often safer for businesses because it is both risk-averse and proactive.
📝 Capacity Planning Strategy: Example (Dell)
We have prepared a real-life example of a capacity planning strategy for your consideration. If you are interested, you can analyze it to comprehend this concept better.
What Is Dell’s Capacity Planning Strategy?
The capacity planning of the Dell company first requires gathering all the requirements. The best way to do it is to bring together all the team members, including developers, application owners, IT management, and other concerned employees. Secondly, the company implements a “Virtualization first” policy. It means that all new workloads should be virtualized unless there are strong reasons not to do so.
The last step requires picking the right time for virtualization. Application upgrades typically provide an excellent chance to incorporate a virtualization policy. As a result, the company can increase its chances of success in the project.
To conclude, capacity planning strategies are best practices companies may employ to organize their resources and ensure their team members work on the right task at the right time.