Capacity Planning Essay

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PRODUCTION & OPERATIONS MANAGEMENT PROJECT ON STRATEGIC CAPACITY PLANNING Submitted to Submitted By, Prof. J.P.RATH Md Sarfaraz Khan 15320 * WHAT IS CAPACITY PLANNING? Capacity can be defined as the ability to hold, receive, store, or accommodate; a measure of an organization’s ability to provide customers with the demanded services or goods in the amount requested and in a timely manner. Capacity planning is the process of determining the production capacity needed by an organization to meet changing demand for its products. The objectives of capacity planning are: * To identify and solve capacity problem in a timely manner to meet consumer needs. * To maintain a balance between required capacity and available capacity. * The goal of capacity planning is to minimize this discrepancy. Capacity is calculated: (number of machines or workers) × (number of shifts) × (utilization) × (efficiency). * THE NEED FOR CAPACITY PLANNING: Capacity planning is the first step when an organization decided to produce more or a new product. Once capacity is evaluated and a need for a new expanded facility is determined, facility location and process technology activities occur. Too much capacity would require exploring ways to reduce capacity, such as temporarily closing, selling, or consolidating facilities. Consolidation might involve relocation, a combining of technologies, or a rearrangement of equipment and processes. Capacity planning is done in order to estimate whether the demand is higher than capacity or lower than capacity. That is compare demand versus capacity. It helps an organization to identify and plan the actions necessary to meet customer’s present and future demand. * HOW IS CAPACITY MEASURED? For some organization capacity is simple to measure. General Motors

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