October 07, 2022 | Supply Chain Strategy
Capacity planning identifies the resources required — production capacity, workforce, inventory, funds, and any other — for meeting demand.
As many businesses have struggled with disruption in recent years, planning supply chains' capacity can be challenging.
Given below are a few challenges that companies face during supply chain capacity planning.
For accuracy, capacity planners need access to a wide variety of data collected in the form of records and reports. However, the data is mostly manually aggregated before being used to compare the figures, identify gaps, and ultimately produce a complete picture .
Businesses should verify the consolidated data and confirm the integrity and accuracy of the information once all the data is merged. Verifying will also make it simpler to eliminate any data that is unnecessary. Data integrity is essential before analyzing the data since any inaccurate measurements within the data can put the final findings into jeopardy, and the entire process may need to be restarted.
Cross-functional collaboration and communication are critical to the success of a capacity plan. This is true internally, where disparate and isolated technologies can inhibit collaboration, and externally, where supplier communication frequently occurs via email or fax. These situations impact collaboration and expose planners to erroneous, missing, or new data.
Businesses should overcome obstacles in supply chain capacity planning to stay competitive in a world where global supply chains are becoming more complex. Here are a few strategies to overcome the obstacles.
All data extraction and analysis processes must access a centralized, open system wherein the whole supply chain is visible. Cross-functional conversations are easy when all relevant data and analytics are available in one location, making it simple for all planners to examine and evaluate from any site. Also,
different business functions can come together and negotiate to ensure mechanisms for collaborative capacity planning
are used to support all objectives, such as utilization, profit targets, delivery and revenue targets.
Artificial intelligence (AI) leverages data gathered from multiple sources in real time. It combines and analyzes the data to accurately forecast the optimal material flow for demand and capacity planning.
It's crucial to set restrictions on spending time on capacity planning each month, quarter, or year. Therefore, creating a procedure that makes planning simple and painless is essential. The business can see unforeseen benefits by starting small and testing the waters.
Large volumes of data may be deployed by businesses to model, examine, and improve their operations. Capacity planning enhances a company's supply chain in several ways.
Too many businesses make the mistake of only paying attention to production or inventory costs. They miss the "hidden" expenses across the end-to-end supply chain because of their narrow perspective — for example, taxes and inventory storage within each factory and transportation expenses between them.
Organizations with multiple factories can use capacity management in supply chain software to analyze the tradeoffs of many cost factors and make the best decisions for optimizing their entire supply chains.
Facilities that share materials or collaborate on projects with other plants should consider their supply chains when reviewing capacity planning.
Strategic decision-makers optimize their supply chain by determining the quantity of a product each facility produces against the demand.
The product demand changes over time to new areas or markets or in different amounts, in line with the business cycle. These changes require facilities to adapt and optimize accordingly to remain profitable.
Manufacturing firms spend a lot of time and effort on deciding how to produce and distribute their products. A crucial aspect of optimization is considering outsourcing production to cater to demand while being productive and profitable.
Companies can achieve competitiveness and a dominant position in the market by adopting supply chain capacity planning methods and AI-powered supply chain software that closely supports their business plan.
When done correctly, supply chain capacity planning can improve a company's performance in crucial areas and aid in accomplishing strategic objectives. It increases operational efficiency, lowers operating costs, and returns on current assets.
The six steps in capacity planning are:
Usually, capacity planning is used for scheduling production capacity to satisfy short- and medium-term demand. However, it is also a crucial component of long-term organizational and strategic planning carried out once a year by most organizations.