How to Implement a Capacity Plan
To ensure that your supply chain is well equipped to meet demand, it is imperative to have a production plan in place. Production planning involves regulating production capacity and workforce needs, otherwise known as capacity planning. Capacity planning helps businesses know when and how to scale, mitigate risks, and identify bottlenecks within a specific timeframe.
The 3 Types of Capacity Planning
Three types of capacity planning will guarantee that you will have the right amount of major resources for both the short- and long term. It’s best to plan for weeks, months, or even a year in advance. This will help to make sure your business stays viable.
1. Product
Having a product plan in place allows you to have a sufficient amount of ingredients or products for your deliverables. For example, someone who owns an ice cream shop would need a product plan for the various ice cream flavors, sprinkles, cones and any other mix-ins, and cups and bowls.
2. Workforce
A workforce plan will ensure that you have the proper number of team members and work hours so your business can run smoothly. Implementing a workforce plan will communicate general business, resources and labor needs to all relevant parties involved. It will also indicate when more employees need to be hired and will determine the timing of the recruitment based on the onboarding process.
3. Tool
A tool capacity plan will make sure there are enough tools to complete jobs including any machinery, assembly line components, or trucks you need for manufacturing and delivering your product.
3 Strategies for Using Capacity Planning
There are three methods of capacity planning; to choose the right one there are multiple factors to consider. You’ll need to take into account the type of business you’re running, the levels of risk involved, and the lifecycle of your products.
- Lag strategy
Lag strategy is a conservative methodology that will keep your overhead expenses as low as possible. Though effective, the strategy can create a lag in the delivery of services or products to customers, hence the name. This can be problematic if you sign a big client who expects speedy turnaround times, or a sudden influx in orders as the lag strategy may potentially delay due dates.
2. Lead strategy
Lead strategy is when the amount of necessary products is based on your demand forecasts. This strategy is riskier than the lag strategy. For instance, if you hire new employees based on your demand forecasts, then don’t meet that demand. You could lower your revenue for employees who can’t do their jobs. One of the key benefits of a lead strategy is that you will probably be able to appease all your customers and meet due dates if your forecast is accurate.
- Match strategy
Match strategy is the bridge between the Lag and Lead strategies. With a match strategy, you’ll have to do capacity planning more frequently, and closely monitor real demand, trend forecasts, and market shifts and trends. There is less risk involved with this strategy as opposed to the lead strategy and it is more likely to scale than lag strategy.
