Strategic capacity planning is a function of planning for optimal levels of output. Achieving this optimal level of output is a function of integrating customer demand with suppliers. A product's life cycle can be hard to predict, especially with new technologies aimed at giving the customer more decision power over design. As the velocity of customer demand increases, so does the need for meeting that demand with optimal levels of product and service flow.
In many ways, what sets one business apart from another is not the actual product but the administration behind the product. Asset management is the concept of using assets in the best way for optimal output. For capacity planning, this means meticulous attention to detail and timing, from product innovation to logistics and distribution.
In terms of order, capacity planning should start where financial decisions are made. The location, facility, design, level of equipment and layout are also decisions to be made in the early stages of planning. These decisions must be made with a cross functional team because they are difficult to modify once adopted. Timing and changes in seasonal shits in demand are difficult to management because capacity planning consideration usually involves looking at long-run trends.
Monitor marginal output
Capacity represents the upper limit of the amount of product the system can handle. It is the maximum level of output. It is often measured in terms of units or rates of output like machine time or labor hours. Planning in dollars can lead to poor forecasts because prices can change substantially over the life cycle of the product. One way to measure efficiency is with the ratio of actual output to capacity. The utilization ratio looks at actual output to design capacity. Identify the break-even point (cost-volume) to measure progress in marginal output.