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In an ever-changing world, it might feel like yous need a crystal ball to plan for your visitor's hereafter. How could you know how much production you'll demand to social club in three months, six months, or a year if orders oasis't come in withal? How do you adapt to evolving customer expectations? Or calibration your concern fast to avert stock-outs if a surge of orders comes in?

The answers to these questions are simpler than you lot might remember. Successful businesses of all types use chapters planning to reply similar questions every day.

What Is Capacity Planning?

Chapters planning is a type of production planning that involves determining product capacity and workforce needs to make sure your supply chain is equipped to meet need. Capacity planning lets businesses know how and when to calibration, place bottlenecks, create ameliorate pattern capacity, and mitigate risk, within a planned period of fourth dimension.

The 3 Types of Capacity Planning

The three types of capacity planning make certain you have plenty, just not likewise much, of three major resources for both the long- and brusque-term. You'll want to plan weeks, months, or fifty-fifty a twelvemonth in advance.

1. Product capacity planning

A product capacity plan ensures you take enough products or ingredients for your deliverables. For a florist, this would be flowers, vases, and cards. For a puddle maintenance company, this would be things like chlorine that are required to exercise the job.

2. Workforce capacity planning

Workforce capacity planning ensures y'all have enough squad members and piece of work hours available to consummate jobs. This blazon of planning volition likewise help you communicate overall business organization, resource & manpower needs to relevant stakeholders, evidence you lot when you need to hire more employees and help you decide how far in advance you demand to beginning recruiting based on the length of your onboarding process.

3. Tool capacity planning

Tool capacity planning ensures yous accept enough tools to complete jobs. This includes any trucks, assembly line components, or machinery you lot need to manufacture and evangelize your product.

How to Start Chapters Planning

In that location are three bones steps to capacity planning.

1. Measure

First, you'll need to measure your resource capacity. How many deliveries tin can each of your drivers make in a given period? How many orders tin fit onto each of your trucks? How many hours does it accept your fleet manager to plan 50 deliveries? It's important to respond these types of questions as accurately as possible because the remainder of your programme volition be based on these numbers.

2. Clarify

Once you lot accept authentic measurements, you tin spend time analyzing this information and determining whether or not you have insufficient capacity or excess chapters, or if you're fully utilizing all available resources. Making graphs will help you empathize the numbers and make demand forecasting easier.

3. Codify

The final step is taking all of the information you lot've gathered and formulating a plan. Y'all can make calculations to meet how much information technology will price to fund new projects or rent a total-time employee vs. bringing on seasonal part-time workers. You could likewise calculate the ROI for upgrading a piece of machinery or adding assembly lines to your production facilities. The formulation stage helps yous see what the probable outcomes are for various options, and then you tin make the best decision.

How Is Chapters Planning Different From Resource Planning?

Resource and capacity planning sometimes become confused with ane another, but they are different things – and you demand both. Capacity planning is more high level and helps yous determine what and how many resources you lot need to meet demand. Resource planning is more about analyzing resources utilization: y'all apply it to takes the number of resources available (equally adamant by your capacity planning) and allocate them to individual projects.

For example, permit's say you run a bloom shop like The Lilliputian Posy Co., and Valentine's 24-hour interval is your busiest time of the year. You would use capacity planning to determine if you demand to hire more employees, bring on seasonal workers, or increment your stock of flowers before February fourteen. Once you've determined how many workers and how much stock you'll have in February, you would use resources planning to allocate those resources. Then, if virtually of your demand is for vases of red and pinkish posies, you lot could allocate the largest portion of your resources to creating those floral arrangements.

3 Strategies for Using Capacity Planning

There are iii methodologies behind capacity planning. In order to choose the right strategy, y'all'll need to consider the type of business y'all run, the level of risk yous can safely assume, and the lifecycle of your products.

1. Lag strategy

Lag strategy is planning to take enough resources to see true demand (not projected). Lag strategy is a bourgeois method of capacity planning that ensures your costs are every bit low as possible. The potential downside to this strategy is that it can create a lag in the delivery of products or services to customers, which is where the name comes from. If you get a sudden surge in orders or land a large new client who wants fast turnaround times, lag strategy may prevent you from meeting due dates.

2. Pb strategy

Pb strategy is planning to have plenty resource to run into your demand forecasts. Lead strategy assumes more than adventure than lag strategy. For example, if you hire new workers and don't current of air upwardly with the orders you were predicting, yous could lose money paying employees to sit effectually. The major benefit of this strategy is that if you do accept a sudden uptick in orders, you will most likely be able to proceed all of your customers happy and come across due dates.

three. Lucifer strategy

Lucifer strategy is the centre basis between lag and lead strategy. Using friction match strategy, you practice strategic chapters planning more oft. You closely monitor true demand, projected need, and market place shifts/trends. Based on this information, you adjust your chapters management to run across demand in increments. This strategy offers the most flexibility with less risk than pb strategy, but information technology has more ability to scale than lag strategy.

The Benefits of Capacity Planning for Modern Business

The goal of capacity planning is to ensure that your supply chain is always ready and able to encounter demand. Incorporating this type of strategic planning into your procedure will help you run across due dates, finer scale your business, and increment your bottom line.

☑ Reduces stock-outs

Customers don't similar to look, and if they don't have to, they won't. The internet has made it easy for consumers to find products somewhere else if you're out of stock, and then you need to reduce stock-outs if you want to minimize customer churn.

You could lose a third of your potential sales for an item if it'due south out of stock and, worse yet, that client may never come up back.

In 2004, the Harvard Business Review published the results of a global study where they assessed the behaviors of more than 71,000 customers faced with stock-outs. Depending on the retail category, 21% to 43% of consumers went to another shop to buy an item if it was out of stock. You could lose a tertiary of your potential sales for an item if information technology'southward out of stock and, worse still, that client may never come dorsum.

Chapters planning can aid you avoid stock-outs and ameliorate profitability. And the more you exercise information technology, the meliorate you will understand your unique demand. The capacity planning procedure volition help y'all see how demand fluctuates during different seasons (such every bit holidays) or how information technology is affected past events (similar kids going back to school). Yous'll be able to employ this insight as a guide for overall decision making and supply chain management.

☑ Increases delivery capacity

McKinsey and Company published a 104-folio compendium that illustrates the importance of delivery chapters in your retail distribution strategy. Shoppers not simply desire to exist able to take products and nutrient delivered to their door; they desire quick turnaround times, which means your delivery procedure needs to exist operating at maximum efficiency. McKinsey's written report explains that due east-commerce has fabricated up more than xl% of retail sales growth in the United states of america since 2016, and it isn't showing whatever signs of slowing downward.

Equally online sales grow ever more than pop, delivery capacity is condign an essential component for many businesses. In another global consumer study conducted past Oracle Retail, 92% of retail shoppers said they would like or beloved "free 1-24-hour interval delivery by whatever means is most expedient." Capacity planning ensures you have the workers bachelor to evangelize products whenever needed, keeping your concern competitive.

☑ Identifies process inefficiencies

When you beginning capacity planning, you have to ask, "what is the maximum chapters of this resource?" It's easy to lose sight of these limitations in real-fourth dimension when you're struggling to patch together a supply chain. By taking a moment to assess bachelor capacity and capacity requirements, y'all'll gain insight into what factors limit capacity, and you'll be able to easily spot bottlenecks that can be fixed or improved.

For instance, let's say yous run a delivery business. Capacity planning reveals that the amount of time it takes your fleet manager to program routes is preventing your business from being able to take on more than deliveries. You lot realize that fifty-fifty though you accept the trucks, drivers, and products to deliver more orders, your fleet manager requires a lot of lead time in order to effectively program routes for new orders. You could use this insight to replace your manual planning system with route optimization software. In fact, one of our clients doubled their scheduling chapters by doing just that.

Southern Star is in charge of transporting natural gas to vii states in the U.S. In a single week, Southern Star'southward 250 technicians tin can perform upwards to 2,500 maintenance activities on pipelines that span v,800 miles. Capacity planning helped Southern Star spot inefficiencies in their scheduling process. Equally a consequence, they started using OptimoRoute, and now they are able to fit 100% more than tasks into pipeline maintenance and service schedules.

☑ Facilitates risk management

At its core, effective capacity planning is a roadmap for your business. Both brusque- and long-term capacity planning aid businesses understand their strengths, weaknesses, and limitations. You'll be able to make informed decisions nigh how fast yous should calibration your business, when is the best time frame to launch a new production, and when you demand to hire new employees.

Capacity planning volition better set y'all to overcome obstacles, also. No affair how much planning you exercise, you'll still need to be able to respond speedily when unexpected challenges arise. If your supplier suddenly goes out of business organisation or three of your 10 drivers come down with the influenza, you'll need to take high-level plans in identify to apply equally a guide, so you tin can make smart adjustments chop-chop.

Capacity, Route Planning, and Scheduling: An Efficient Trifecta

Once you've got your high-level (chapters) plan in identify, yous tin employ it as a guide for scheduling and road planning. You'll want to employ all iii together to achieve the highest level of logistical efficiency.

We are here to help with all three. From high-level planning to managing drivers in the field, route optimization software can help y'all refine your commitment procedure and increase overall efficiency. OptimoRoute enables businesses to do delivery and route capacity planning upwardly to 5 weeks at a time. You'll be able to easily adapt the number of drivers, orders, and constraints to run into where yous tin can salve money or take on more orders.

Learn more nigh scheduling and road planning in the deep-dive manufactures on these subjects on the OptimoRoute weblog.

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