Capacity Planning
Matching supply capability to the demand plan across labour, equipment, storage and suppliers.
By SupplyChain.management · Last updated
Definition
Capacity planning is the process of confirming that labour, equipment, storage and supplier capability can deliver the demand plan over the planning horizon.
Why it matters
Plans that exceed capacity fail late and expensively, usually as overtime, expedited freight and missed customer dates.
Formula
Capacity Utilisation = Required Hours / Available Hours x 100
Example
A line with 4,000 available hours facing 4,600 required hours is 115% loaded and needs demand shaping or added shifts.
How to interpret it
Sustained utilisation above roughly 85% removes the flexibility needed to recover from disruption.
How to improve it
Run rough-cut capacity checks in every planning cycle, identify the constraint explicitly, and decide early between adding capacity and reshaping demand.
Common mistakes
Planning capacity on averages, which hides the weekly peaks where failure actually occurs.