Key Concepts of Capacity Planning Software
Various factors like successful advertising campaigns, referrals, some external contributors such as season can produce an increase in sales. And you should always be prepared to handle the sudden surcharge. It’s essential you work to your maximum capacity to meet the demands. However, how do you measure your capacity and how do you know if you are working to your full potential or not? The answer is simple and can be answered with three words Capacity Planning Software. Before we dig deep into Capacity Planning software, here’s more on capacity planning.
Capacity planning is one of the stepping stones for any company. The method of analyzing the production capabilities to achieve the demand is commonly known as Capacity Planning. Besides the obvious explanation, Capacity planning is also defined as a tool to reduce the inconsistency between customer demands and capacity of entity of business.
Besides assisting you in identifying the capacity of the business, it also contributes to enhancing the efficiency of the business and allocation of the raw materials and labor to the projects. Here is more on why Capacity Planning holds a key role in the success of your business:
Why is Capacity Planning Important?
Capacity Planning ensures an organization continues to deliver its products or services to its customers while bearing and controlling costs and all the risks. Let’s look at some key importance of Capacity Planning:
Enhances Productivity: Believe it or not, capacity planning does assists in improving productivity of your business. The reason for the improvement is that with capacity planning software you will be able to optimize your resources in a way that is used to the fullest. Eventually it contributes to production increasing the productivity.
Cut-down Resource Cost: With the increase in productivity of every resource, the most obvious effect is the reduction of costs. Capacity planning enables businesses to monitor each resource and their workability. Resources can be allocated to different projects based on their working efficiency. It results in a reduction of resources cost.
Supervise Inventory of Skills: Capacity Planning is essential in overseeing and managing the skill inventory of your team. Skills inventory is the term used to describe the individual as well as combined skills that your team holds. With the help of capacity planning software, you can manage your team and allocate work to them based on what they do best.
Concepts of Capacity Planning
The three basic concepts of Capacity Planning are:
Design Capacity: The maximum or ideal capacity that a company can get in a specific period of time with their current resources is called Design Capacity.
Effective Capacity: This is the full capacity achieved after allowing changes in product mix, resources challenges, labor problems, operating and programming issues. This capacity is always less than the designed capacity.
Actual Output: As the name suggests it is the output that has been achieved at present. It is always less than the effective capacity because of machine failure and breakdown, absenteeism of labor, inappropriate raw materials supply, abnormal power outage, supply related issues etc.
The Benefits of Capacity Planning
Capacity Planning is a keystone for the success of your business. It contributes to enhance efficiency, reduce costs, and maximize potential. Here are some other key benefits of Capacity Planning:
Reduction in Stockouts: It takes a whole lot of different efforts to make a single sale and it only takes one reason to lose it, forever. That single reason could be out of stock. Capacity Planning ensures that you never went out of stock and work at your full potential to meet customer demands.
Assists in Making Data –based Decisions: With all the relevant data in your hand, you’ll be more in control of your company. You’ll know where you are lacking, why you are lacking, and based on these data, you can make informed decisions like hiring a new talent, changing the machinery etc.
Avoid Burdening or Boring Your Team: More often than not, the employee does not perform to the fullest because of the amount of work they are doing at a time. Contrastingly, there are some employees which are sitting idle. Capacity planning software empowers you to monitor your employee's effort and allocate work accordingly.
Steps in the Capacity Planning Process
The following are the steps taken while processing the Capacity Planning
Examining the Current Capacity: The foremost step in the Capacity planning process is assessing your present capacity. This assessment generally occurs based on Input and Output measure. Output is suitable for manufacturing units while Input is suitable for services units.
Forecasting for the Capacity Required: The next step in the Capacity Planning process is anticipating the capacity required in future. The short-term needs can be forecasted or obtained based on demand forecasting. However, the gap comes when you must anticipate for the long-term in future. That is when Capacity planning process helps you forecast.
Finding Out the Different ways of Altering Capacity: What if your current capacity is not enough to fulfill the forecasted demands of customers? In those scenarios expansion may be required, and the company may start an additional shift demand is met. It’s vital to find alternatives that will help you complete the demand.
Assessing the Alternatives: There are numerous alternatives considered to fulfill the capacity and all needs to be evaluated based on economic, technical, and other factors. Reactions of employee and societal factors must be considered as well.
Deciding the Course of Action: Once the analysis of cost incurred and benefits expected are completed, a rightful course of action is decided.
