OVERVIEW

Capacity planning is the process of determining the production capacity needed by an organization to meet changing demands for its products. In the context of capacity planning, "capacity" is the maximum amount of work that an organization is capable of completing in a given period of time.

A discrepancy between the capacity of an organization and the demands of its customers results in an inefficiency, either in under-utilized resources or unfulfilled customers. The goal of capacity planning is to minimize this discrepancy. Demand for an organization's capacity varies based on changes in production output, such as increasing or decreasing the production quantity of an existing product, or producing new products. Capacity can be increased through introducing new techniques, equipment and materials, increasing the number of workers or machines, increasing the number of shifts, or acquiring additional production facilities.

Capacity is calculated: (number of machines or workers) x (number of shifts) x (utilization) x (efficiency).

The existing System comprises the capacity planning process which locates the people, machines, physical resources necessary to meet the production objectives of the organization. The capacity control process monitors the output, comparing it to the capacity plan and taking corrective action when variations exceed pre-established limits.