Balancing capacity can be as challenging as walking a tight rope. It’s a fine line between staying balanced or plunging to your death. Not enough capacity and you lose balance when it comes to delivery and customer satisfaction. Too much capacity and you lose your balance when it comes to costs and margins. All companies are walking this fine line with capacity planning, but some are continuously waving their arms trying to stay upright, while others have secured their footing.
At one end, you have what you might call the “order toss” approach. Let’s throw the orders over the wall and try not to listen to operations scream bloody murder. Planning decisions are made with the best of intentions but for reasons that aren’t always clear, those decisions are made without much consideration for capacity.
At the other end, you have organizations with finely tuned collaborative processes that consider capacity at all levels of the planning horizon. From business planning, sales and operations planning (S&OP) down to detailed material planning, capacity planning is part of the conversation at all levels. Utilization is a key metric for high capital equipment. Capacity and inventory planning work closely together to manage prebuild plans against inventory targets. In overloaded conditions – and let’s face it, regardless of how good your processes are it will happen – demand, supply, inventory and capacity planners are all in sync to balance revenue, margin and delivery targets against utilization, inventory and cost reduction goals.
Others are somewhat in between. Managing capacity, but in a way that makes it tedious and time consuming. So what’s the difference between the two paths?
Those down the successful path were able to recognize some fundamental barriers to best-in-class capacity planning and do something about it. The phrase “if it were easy, everyone would be doing it” is appropriate for capacity planning. It can be a monumental task but those who have figured it out have reaped the rewards.
Here’s what the seasoned planners do to ease the capacity balancing act:
- Manage data requirements to support timely and accurate capacity planning
- Maintain capacity data quality on an ongoing basis
- Centralize all capacity planning analytics in one place
- Collaborate with other planning organizations (i.e. demand, supply, inventory, executives)
The rewards are plentiful for companies clearing the path on their capacity planning journey. Visibility into the full capacity planning landscape provides much improved insights into your ability to make customer commitments. Acting on new opportunities is less painful and operations becomes your best friend rather than someone to avoid after you input a new demand plan.
Interested in finding out more about ensuring a successful capacity planning journey? Check out our latest eBook, Top 4 capacity planning obstacles and how to remove them and give us your thoughts below in the comments.