What every Business Executive should know about Production and Capacity Planning

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The profits of a company depend on its ability to plan according to the capacity by controlling the production factors. Unnecessary costs can be cut when the number of products to be sold is clearly defined and effective capacity is utilized through proper control of production without causing time delays. The main point of capacity planning is to get realistic data which can be used for predicting the production and scheduling tasks.

The same data can be used for planning if the situation for the company has not been changed. Any trends that can be predicted which affects the demand to be increasing or decreasing should be planned in advance to avoid shortage or surplus of the products. If there is higher need for the products then making changes to schedule by incorporating overtime can meet the demand for the products.

Sometimes when the company plans to expand a business to various locations need more products and proper capacity planning can be done to achieve this. For meeting the increase in volume which is anticipated with respect to the future demand should be planned without causing a further increase in cost.

Some companies wait until the order is received in order to start planning the production and effective utilization of the capacity by considering the number of items to be manufactured. In certain cases, the planning phases are done prior to receiving the order but the implementation is done after making necessary changes after receiving the order.

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