Providing Capacity for Production Planning:

In an operating system, Determination and adjustment of capacity is an important task as decisions taken here may intentionally or inadvertently change the structure of the system or affect the efficiency of operation of a particular system. A wrong decision may also result in structure change and loss of efficiency as well. (For instance following the failure to adjust system capacity to match customer demand changes.) The planning and control of capacity is important and complex both, and furthermore the nature of problem will often be affected by structure. In other words, for a given system structure the capacity management problem can differ from that facing management in a different structure. Since structure affects the nature and complexity of the capacity planning problem, by the methods, procedure, and techniques appropriate to tackle the problem may also be influenced by the structure. In all respects therefore we consider capacity management to be principle problem area, the nature of which is characteristics of system structure. The management of system capacity is of crucial importance in operations management. The determination of capacity is the key system planning or design problem and adjustment of capacity is the key problem area in system control. There is direct impact of capacity decisions on system performance in respect of both resource utilization and customer service. It is complex to see how any organization can operate effectively without good capacity management. Excess capacity inevitably gives rise to low resource productivity, while inadequate capacity may mean poor customer service. Decisions made in other areas are unlikely to offset errors in this area. The capacity problem is often of a medium-to long term nature. (Since system capacity is long term reflection of the nature and amount of resources available in the system and short term adjustment are frequently impossible.) Capacity management is concerned primarily with the matching of resources to demand. It is concerned, therefore, with the level of resources and demand. One factor adding considerably to the complexity of inventory, capacity, and scheduling problem is their close interdependencies. The decisions taken for one directly impact the performance of others. Such interdependence is less evident in other problem areas, a fact which tends to underline the central significance of these three problem areas in the management of operations. In many respects the problems of inventory management and scheduling are subsidiary to the problem of capacity management. Capacity management decision shall determine how the operating system accommodates customer demand level fluctuations.