What Is Capacity Planning? Examples & Types

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Planning is the utmost important factor for achieving any task. Planning is a primary and essential thing that plays a vital role at every stage in an organisation. Managing every little aspect of an organisation is necessary to make progress. Hence, planning is needed at every step of the organisation. Likewise, planning also helps in the production of any organisation.  

Many organisations have some obvious and common questions related to production, like how much will the product requirement be in the next 3 months or 6 months? How to avoid stock out during high demand? To tackle all these questions, organisations use capacity planning. Every organisation has its capacity to complete work, and it is important to utilise that capacity efficiently and effectively. Here comes the role of capacity planning. So technically, capacity planning means deciding the production capacity needed by an organisation to meet varying demands for its products. Capacity planning also considers workforce needs to meet demand. It is no wonder that capacity planning is of the utmost critical need for every organisation.

The goal of capacity planning is clear: To accomplish the capacity requirement planning of the organisation at the current level and the future level with proper utilisation of all resources at minimum wastage.



Material, machines, and workers are critical aspects of capacity requirement planning. These factors work as pillars of capacity planning. Examining current capacity and determining future capacity are also essential factors for capacity planning.


Types of capacity planning:

Capacity planning types based on resources have three types.

1) Product Capacity Planning: It makes sure you have adequate products or ingredients for day-to-day demand. For example-  flowers, vases, cards for a florist or setting area, raw food products, and other essentials for a restaurant.

2) Workforce Capacity Planning: One of the important factors is its team members to accomplish any task.  Workforce capacity planning helps you in managing members and work hours to complete the job. Workforce capacity planning also helps answer when to recruit new employees and how far in advance you need to start recruiting.

3) Tool Capacity Planning: It makes sure you have sufficient tools or raw material as the case may be to complete your job. This also includes the mode of delivery available to deliver your product.

These three types ensure that all three long-term, medium-term and, short-term have enough resources.


Capacity Planning Classification:

It is classified into three categories depending on time consent:

1) Long-term capacity planning: It is the process that ensures adequate production resources are available to accomplish the organisation's long-term production needs. Here the investment is high as compared to others.

2) Medium-term capacity planning: It helps calculate various services and products together to get a comprehensive view of demand and capacity. Here the investment is less compared to long-term capacity planning.

3) Short-term capacity planning: It helps solve the issues of labour shifts, scheduling, and balancing resource capacities. It helps to handle unforeseen shifts in demand. It is generally used on day to day basis 


Capacity Planning Process

1) Measure: The first step is to measure capacity and resources. To elaborate, you need to measure how many deliveries can be accomplished in a given period, how many drivers are required to complete deliveries, or how many hours will be needed to plan a particular number of deliveries. To achieve a particular goal, it is essential to measure all these questions accurately.

2) Analyse: Once an accurate measurement is complete, you need to analyse that data. It can be analysed using graphs. Analysing helps to determine future forecasts.

3) Formulate: Third and final steps are taking all information together and formulate a plan. This stage helps to evaluate different options so one can make a better decision.


Strategies for using capacity planning

There are three strategies for capacity planning. You have to choose the perfect strategy according to your type of business and your risk appetite.

1) Lag strategy: As the name suggests, this strategy can create lag in delivering products and services provided to the customer. It is planning to have adequate resources to meet exact demand and not projected.

2) Lead strategy: It is planning to meet projected demand. It is pretty risky compare to the lag strategy. A lead strategy helps when you have an unpredictable market or a sudden rise in demand.

3) Match strategy: It falls between lag strategy and leadership strategy. It helps to do strategic planning more frequently. Here you analyse projected demand and genuine demand, market trends, and then adjust your capacity management to meet increasing demand.

Advantages of capacity planning

1) Reduces stock out: It is the main reason for adopting capacity planning. Business can run smoothly if the risk of stock out is low.

2) Increases delivery capacity: Due to proper prior planning, resources are utilised efficiently and in time, increasing delivery capacity.

3) Increase in profit: Capacity planning requires low investment, which ultimately results in high profit.

4) Wastage minimisation: Capacity planning helps to minimise wastage which generally happens due to improper time management, insufficient utilisation of resources, etc



Capacity planning is an important and helpful tool to reach production goals efficiently and effectively to form a healthy environment for progress and better results. For instance, a capacity planning example can include managing workforce capacity to execute a big task in a day. 

For this fast-evolving world, we need to keep ourselves updated and ready to learn new things. And there is an opportunity to learn new things from the best minds in the industry. If interested and ready to grab the opportunity, then check out the Product Management Certification. This program offers to bring your product (BYOP) feature, which will help you learn to build your product and understand the entire product development lifecycle. It is an online live 6-month program with instructor-led sessions.





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