Guide to Effective Strategic Capacity Planning

What is strategic capacity planning?

Strategic capacity planning is how companies figure out the production capacity needed in order to meet consumer demand. It’s a highly difficult process because of several reasons.

The first reason is because it relies on accurate demand forecasting. Most businesses do not do demand forecasting very well, often due to a lack of understanding of how to use the data at their disposal.

The second reason is because demand moves up and down, and capacity may be much less sensitive to on-the-fly changes.

So how do you do effective strategic capacity planning? Here are some tips that will help you do it right.

Strategic Capacity Planning Tips

Keep communication open

Vertical lines of communication are often very difficult to establish due to power distance and differing KPIs between people at different levels of the organization. Making sure that department heads, project leaders, and production managers all are communicating effectively is important to making sure that capacity planning is done right.

Open communication within a company is absolutely vital, but what’s even more often missed is open communication with strategic partners in the supply chain. Keeping communication open from your suppliers, to your logistics company, to your retailers and distributors is important as they often have data that could help you better forecast demand.

Forecast capacity upgrade costs accurately, and don’t assume they’re linear

Not all capacity upgrades will result in linear improvement based on cost! Some upgrades in various departments may see an exponential increase in cost. This does not necessarily mean that the upgrade is not worth doing: it may be necessary in order to meet customer demand.

For example, you may need to invest in tooling or machinery that increases capacity greatly, but is much more expensive, taking up more space, and requiring the use of more workers. But because you need to meet capacity, this upgrade may be necessary.

Capacity planning software

Capacity planning is extremely difficult to do manually. Your firm has access to many different sources of data, and effective capacity planning software can help make use of them.

You want to invest in a software that helps maximize resources and streamlines operations within and between departments in order to assist in effective capacity planning.

Key Features for Strategic Capacity Planning Tools

Flexible scheduling: Most companies will not get capacity planning correct from the get go, so making sure that scheduling and other important tasks can be handled flexibly and without needing to erase all the hard work to establish the system is important for good capacity planning software.

Ability to distribute task hours from task duration: Not all tasks take the entire amount of man hours allotted. The team needs to understand what resources are currently available irrespective of estimated task hours. This will help reduce waste, so employees and managers are able to understand what needs to be worked on, when it needs to be worked on, and what resources are available.

Easy to understand a team member’s workload: Another aspect of understanding resource availability is to see how each team member’s workload is for a given day. This way, you can allocate tasks and projects to them based on their actual workload, rather than an estimate of what their workload should be. This can prevent employee burnout while also reducing resource waste.