Benefits of Capacity Planning for Your Business

When we talk about supply chain planning and forecasting, it can be enticing to think of it as an uncomplicated process. Simply forecast demand, analyze existing inventory, monitor demand-affecting factors, and plan your supply chain to meet the projected demand. But unfortunately, nothing comes that easy, not even a smooth-running supply chain.

After predicting demand for your product, you need to analyze your capacity or your business's capacity to fulfil projected demand. This includes managing your available materials, manpower, and deadlines and ensuring that your product is on the shelf by the time your customer reaches for it. This is where capacity planning comes into play. 

What is Capacity Planning?

In a nutshell, capacity planning is the process of determining the production capacity of a business. It helps you plan your production based on your available material and human resources to fulfil the projected demand. The focus here is to increase your profit while reducing costs as far as possible.

Capacity planning helps you determine how much production can be done in a given time interval to maximize production and the supply chain changes required to maximize profit in this process. It involves monitoring available products, the current pace of production, and available resources and determining how to reach the projected business goals.

Types of Capacity Planning

Any business's capacity depends on three major aspects - its workforce, product, and tools. Hence, capacity planning is often split into three types, each concentrating on one major aspect of determining your business's capacity.

·        Workforce Planning

Workforce capacity planning manages the workforce required to deliver the predicted demand. It analyzes the available workforce, their work schedule, and the required workforce for the project. The goal is to ensure that your workforce is not overloaded while avoiding idling employees or low productivity. It helps you better plan and manage your workforce for the given time interval.

·        Product Planning

Product capacity planning focuses on maintaining availability to ensure smooth production. It includes analyzing available resources and determining how much more is required to fulfil the forecasted demand. This would help you place early orders for raw materials or products as required so that your production cycle is not disrupted.

·        Tool Planning

Lastly, tool capacity planning concentrates on ensuring the availability of all necessary tools and equipment required for production. This includes production machines, delivery vehicles, assembly line parts, and more. All the required tools should be in working condition and under use to minimize loss in production while ensuring great profit.

Benefits of Capacity Planning

Efficient capacity planning tools can help your business enhance production capacity, recognize and resolve bottlenecks, and increase profit over time. You can determine where production is lagging, the reasons causing it, and how you can alleviate the obstacles to ensuring a smooth-running supply chain for your business.

·        Manage Your Budget Better

Budgeting can be difficult when there are multiple factors into play. With capacity planning, you can save money to ensure lower costs while ensuring greater profit. One way would be to plan your purchases smartly and avoid excessive surcharges during last-minute purchases. Similarly, you can allot simpler tasks to entry-level employees, saving on expensive labor hours for experienced employees. They can be allotted more significant tasks best suited to their expertise. You can also manage your working hours to ensure maximum productivity at a lower cost.

·        Make Data-based Decisions

Capacity planning allows you to monitor your resources, budget, demand forecasts, and workforce all at once. You can use this data to make more informed decisions for your business. You can upgrade your tools to enhance productivity; calculate workloads, take on new projects, manage your workforce likewise, and monitor when you need a greater workforce. You can use data to ensure that all your resources are being put to good use to ensure profit for your business.

·        Improve Customer Service

The end goal of any business is to promise good customer service. Capacity planning helps you determine the right strategy to ensure your products are available when your customers need them. You can manage your inventory better to ensure you are not wasting inventory space on the wrong products. You can also use consumer trends data to determine the right time to launch a new product and anticipate its performance in the market. This will help you keep your customers happy and maximize your sales.

·        Manage Hiring

An important aspect of capacity planning is aiding hiring. You can monitor your current workforce and drill down on each employee's productivity and working capacity. This helps you make smarter hiring decisions and recognize less productive departments or employees. You can hire employees on contract for high-demand seasons and let them go in a few months. This saves you money on labor hours while ensuring that your workforce isn't overloaded. You can also decide the workforce you might need for a newer project and hence plan your recruitment better.

·        Support Your Growth

Capacity planning is a highly beneficial tool for any growing business. You can monitor the areas with high demand and consider opening a new store branch or warehouse in that location to enhance your customer service and lower lead times. When you have an ample workforce, you can provide them with learning opportunities, thus growing your workforce and giving them an opportunity to grow internally. This works well for you since internal promotions are often cheaper than external hiring.

Rough-cut Capacity Planning

An effective capacity planning software is the most efficient way to determine your business capacity and ensure higher profit for your business. Avercast - TransImpact company provides rough-cut capacity planning software in their supply chain planning and forecasting suite. It can help you manage your production and supply, compare forecast demand against production capacity, recognize bottlenecks, and make smarter business decisions.

It can be used as a stand-alone system or with other software in the suite for the best results. Its ability to enhance decision-making using simulation makes it one of the best capacity planning software. It provides features like batch rescheduling, proactive management, custom reporting with MS SQL, and action alerts that highlight issues that require immediate attention.

Get in touch if you wish to know how the rough-cut capacity planning software can help your business. You can also schedule a free demo of the software with Avercast's experts.