4.1 Introduction
Businesses develop strategies to increase their market share based on their competitive advantage, recognition of the forces in the business environment, how these forces have shaped the demand in the past, and how it can change in the future. In other words, they are trying to find what products and services they should produce to win more customers. Knowing what needs to be produced is the first step. The more critical question for them is whether they have what it takes to do so. Do they have the resources (capacity) they need to meet the demand in the market, and if not, what should change in their operations to make that happen?
This chapter delves into the critical role of strategic capacity planning for products and services. Strategic capacity planning aims to achieve an optimal balance where production capabilities align seamlessly with demand. Capacity requirements encompass diverse elements, including equipment, physical space, and skilled workforce. Failure to match production capabilities with demand can have severe repercussions, leading to escalating costs, resource constraints, and potential customer attrition. Given the enduring commitment of resources required, it is imperative to recognize that capacity planning necessitates a long-term perspective.
Strategic capacity planning is a multifaceted endeavour that demands a holistic approach, considering the intricate interplay of various factors. Effective capacity planning ensures operational efficiency and contributes to organizational competitiveness, customer satisfaction, and long-term sustainability. By proactively aligning capacity with demand, organizations can mitigate risks, optimize resource utilization, and position themselves for growth and success in dynamic market environments. Consequently, strategic capacity planning emerges as a critical function that transcends operational considerations and holds profound implications for an organization’s overall strategic direction.
“7 Strategic Capacity Planning” from Introduction to Operations Management Copyright © by Hamid Faramarzi and Mary Drane is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted.—Modifications: some paragraphs rewritten; added additional explanations.
