Introduction

The capacity of an organization is its ability to mobilize its resources to generate output (supply) and satisfy market demand. Capacity planning involves estimating future capacity in the context of a dynamic market environment. Levels of demand may fluctuate, either leaving organizations with too much capacity because of low demand, or stretching their resources to unreasonable limits. If resources are allocated badly, or business processes do not work in tandem with each other, operational inefficiency will be exposed in times of above-average demand. After an estimation of future needs, capacity can be either increased, say, through a new investment in plant, or cut back if supply is outpacing demand.

An effective capacity planning process should be designed so that:

• the correct level of internal and external resources are available to meet and support business needs;

• risks associated with operating business processes are managed at an acceptable level;

• resources are optimized so that business objectives are met with minimal cost;

• an appropriate level of consistency, reliability and predictability is designed into operations; and

• changes can be implemented without adversely affecting ongoing operations.

Operational resilience

There is a direct relationship between capacity management and what we term operational resilience (see Chapter 1). In today's economic climate, all organizations need to operate as near to their full capacity as possible, in order to increase productivity over and above competitor levels and in the process, increase sales and profitability. However, over-stretching operations increases the risk of business interruption. Staff may become...