Estimate Future Capacity Requirements:

The basis for estimating long term capacity desires forecasts of demand, competition, productivity and technological changes that extend well into the future. Unfortunately, larger the time of forecast, larger is the uncertainty involved in forecast of demand. The demand forecast ought to be converted to a number that can be compared directly with the capacity measure being utilized. Let capacity be expressed as the number of available machines at an operation. While just one product or service is being processed, let M number of machines is required. It is computed by the following relationship:

Number of machines required = Processing hours required for year's demand/ Hours available from one machine per year, after deducting the desired cushion

                                            M =  DP / (N ((1- C)/100)

Where,            D = number of units (customers) forecast per year,

P = processing time (in hours per unit or customers),

N = total number of hours per year during which the process operates, and

C = desired capacity cushion.

The processing time, p based on the process and methods decided to do the work. The term 'p' is estimated from established work standards. In denominator, 'N' is the total number of hours that are available in the year, multiplied by a proportion that accounts for the wanted capacity cushion C. Also the capacity cushion 'C' is converted from the percent to a proportion by dividing it with 100.

If multiple products and services are involved, then extra time is required to change over from one product or services to the next. Setup time is derived from process decisions, as is processing time. The total setup time is established by dividing the number of units estimated per year 'D' by the number of units made in each of lot, which provide the number of setups per year, and multiplying by the time per setup then. For instance if the yearly demand is 2200 units and the average lot size is 100, then there are 2200/100 = 22 setups per year. Accounting for processing and setup time both while there are multiple products or services, the following relations holds good:

Number of machines required = (Processing and set hours required for year's demand summed over all products)/( Hours available from one machine per year, after deducting wanted cushion)

M = ( DP + (D/Q)s] _{Product 1}   +  DP + (D/Q)s] _{Product 2}   +...............+ DP + (D/Q)s] _{Product n} ) /N[1-(c/100)]

where  Q = number of units in each lot, and

s = setup time (in hours) per lot.

Always round up for the fractional part unless it is cost efficient to utilize short-term options such as overtime or stock out to cover any losses.