Unit 4: Capacity planning

📊 Capacity Planning

Capacity planning is the process of determining the production capacity needed by an organization to meet changing demands for its products or services.

🎯 Objective:

To ensure that the organization has enough resources (machines, labor, time) to meet customer demand efficiently without over- or under-utilization.

🏗️ Analysis of Capacity Types

📌 Key Points in Analysis:

• Designed capacity helps set long-term goals and plan facility layout.
• Installed capacity shows what’s currently possible based on existing resources.
• The gap between installed and actual capacity shows scope for optimization.
• Capacity planning helps in deciding whether to scale up, maintain, or reduce operations.

Commissioned Capacity

• The capacity officially approved and made ready for operation after installation.
• It refers to the point when the plant or equipment is fully set up and ready to produce.

🔹 Example: A company sets up a new production line with the ability to produce 5,000 units/day. Once it’s tested and approved, this becomes the commissioned capacity.

Utilized Capacity

• The actual output or capacity used out of the commissioned or installed capacity.
• It reflects how efficiently resources are being used.

🔹 Formula:

Utilization Rate=(Actual Output/Commissioned or Installed Capacity)×100

🔹 Example: If the commissioned capacity is 5,000 units/day and you produce 4,000 units/day, the utilization is 80%.

Factors Affecting Productivity

Capacity Expansion Strategies

Conclusion:

• Commissioned and utilized capacity help in evaluating production efficiency.
• Understanding factors affecting productivity guides improvement efforts.
• Choosing the right capacity expansion strategy ensures that companies meet demand efficiently without unnecessary costs.