Capacity Planning Essay

2075 words - 9 pages

Resource Requirement Planning
A process that finds amount and types of resources that are used to get an organization’s strategic plan is called resource requirement planning. Its main objective is to get the appropriate level of production. Resource requirement planning is used to meet the future product demand. It includes capacity planning, facility layout and equipment and labor planning. The first step includes capacity planning and it is very important part of resource requirement planning. In this essay, we will focus on capacity planning.
Capacity Planning

Before doing capacity planning we should forecast the future demand of the good or service. Determining future capacity is based on future demand for the product. It is a very complex decision but it can be done by different tools like primary data or previous sale. When demand for goods and services is done then we can proceed to capacity planning,
Capacity is the maximum value of load that an operating unit can hold. It can be defined as the utmost logical output rate that can be achieved with the current operating unit. Operating unit does not only mean machine or a plant, but it includes worker, department, store or any other thing that is busy in doing any work production. Every worker has its own capacity to complete a task. We can say that a worker can give services to five customers in an hour.
It is the most crucial element of resource requirement planning as it holds cost implications. It should be prepared in the face of significant uncertainty about future product demand. The firm should balance the cost of having excess capacity to avoid losses.
Factors to be considered
There are many factors that should be considered at the time of capacity planning. We will discuss some factors here:
1. Flexibility
In this era of innovation, every product has a life cycle. Customer demands some new and improved product after some time. There is usually a high capital and long term investment involved in adding different resources like machinery and plants etc, and once these decisions are made, they cannot be easily reversed. So capacity planning should be done carefully. It must therefore involve some flexibility so that it has a capacity to change and add some new or minor functions in the...

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