What is capacity planning in supply chain management?

Capacity planning in supply chain management refers specifically to the process of determining the necessary production capacity to meet projected demand for products or services. This involves analyzing current production capabilities, forecasting future product demand, and evaluating resource requirements, such as labor, equipment, and materials. By effectively planning capacity, companies can ensure they have the resources available to meet customer demand without incurring unnecessary costs or delays.

This process is critical because it helps organizations balance supply and demand, avoid overproduction or stockouts, and optimize the use of their production resources. Through capacity planning, businesses can adjust their operations to align with fluctuations in market demand, ensuring efficiency and responsiveness in their supply chain.