Capacity planning and its importance decisions

Capacity  is the upper limit or ceiling  on the load that an operating  unit can handle .



The basic question in capacity  handling are :
1.  What kind of capacity  is needed?

2. How much is needed?

3.When is it needed  ?


Importance  of Capacity  decisions : 

1.)  Impacts ability  to meet future  demand.


2).     Affects operating  cost. 

3).    Major  determinants  of initial  cost.

4.)   Involving long term commitment.

5.)   Affects  ease of management.

6).  Impacts  long  range  planning.



Efficiency = Actual output / Effective capacity


Utilisation = Actual output /Design  capacity


Effective  capacity  = Design capacity  minus allowance such as personal  time , maintenance  ,and scrap etc.


Steps for capacity  Planning 》


1.)   Estimate  future capacity  requirement.

2.)  Evaluate existing  capacity.


3.)  Identify  alternatives  .

4.) Conduct financial  analysis  .

5.)  Assess key qualitative  issues.


6.)  Select one alternative

7.)  Implement  alternative  chosen.

8.) Minority results