Capacity Management

Published by MBA Skool Team, Last Updated: January 22, 2018

What is Capacity Management?

Capacity management refers to the ability to meet a customer’s requirements with the available resources (machinery, factory, labour, raw materials etc) at hand. Generally the required outputs during manufacturing resource constraints are met by working overtime or redeploying the workforce. Capacity planning is done on the basis of projections for future product demand, labour and equipment requirements. Time and Capacity are the two main constraints in capacity management.

Three types of capacity are taken into consideration:

  • Potential Capacity – It is for the long term and indicates the available capacity at hand which can be utilised to influence the planning of senior management
  • Immediate Capacity – It is the maximum available capacity which can be utilised in the short term ( on a day-to-day basis)
  • Effective capacity - It is the part of the total available capacity which can actually be put into use.

When a customer has provided a deadline, managers have to plan backwards. This is when production schedules come into the picture.  There are two types of schedules:

  • Job Schedule – Manufacturing plan for a particular job
  • Production Schedule – Joining several job schedules(tasks) to arrive at  a production plan

From a technology point of view, capacity management is the management of current IT capacity to meet the present and future requirements of any business efficiently in terms of cost and time.

This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.

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