What is capacity planning and control?

It is the way operations organize the level of value-added activity which they can achieve under normal operation conditions over a period of time. We usually distinguish between a long-, medium- and short-term capacity decision. This area would deal with medium- and short-term capacity management where the capacity level of the organisation is adjusted within the fixed physical limits which are set by longterm capacity decisions. This is sometimes called aggregate planning and control because it is necessary to aggregate the various types of output from an operation into one composite measure. Decisions made in capacity planning and control affect the ability to generate revenues and the extent of working capital required by the organisation, as well as the normal operations objectives of quality, speed, dependability, flexibility and cost. Almost all operations have some kind of fluctuation in demand (or seasonality) caused by some combination of climatic, festive, behavioural, political, financial or social factors.

How is capacity measured? Either by the availability of its input resources or by the output which is produced. Which of these measures is used partly depends on how stable is the mix outputs. If it is difficult to aggregate the different types of output from an operation, input measures are usually preferred. The usage of capacity is measured by the factors utilization and efficiency.

What are the ways through Long Ridge could cope with demand fluctuation? Long Ridge cannot be kept Output level sustain, in effect ignoring demand fluctuations. This will result in under-utilization of capacity where outputs cannot be stored, due to service nature of business. So far Long Ridge can chase the demand by fluctuating the output level through some combination of overtime, varying the size of the workforce, using part-time staff and sub-contracting workforce which will help them to sustain the output level. However, Long Ridge can change the demand, either by influencing the market through such measures as advertising and promotion, or by developing alternative Services with a counter-seasonal demand pattern. Most operations use a mix of all these three pure strategies.

How can operations control their capacity level? By considering the capacity decisions as a dynamic decision which periodically updates the decisions and assumptions upon which decisions are based. If Long Ridge would consider the major influences on which, periodically, capacity strategies are adopted. The outlook matrix

which compares long-term and short-term outlook for demand (against capacity) is one way of doing this.