Capacity & Facilities Planning: Definition & Objectives Video

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  • 0:01 Capacities and…
  • 2:39 Importance of Planning
  • 4:27 A Deeper Look at…
  • 6:06 Lesson Summary
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Lesson Transcript
Instructor: Brianna Whiting
In this lesson, we will explore capacity and facilities planning. We will look at definitions of both and the important role they play for companies. The lesson will be concluded with a summary and a quiz.

Capacities & Facilities Planning

Without a doubt, video games are a huge craze with both kids and adults alike. However, when some of the big gaming companies first started making their gaming systems, they may have started out in a small building with just a few employees. As the industry began to grow, and there was a greater demand for game systems, many of the companies needed to partake in capacity and facility planning.

Let's imagine that you are one of the owners of a big gaming company known as ABC games. When you first started your business, you had three employees and one building where the gaming systems were produced. Now, we know that the definition of capacity is the highest potential output of a product or good when a company is working at its maximum capability.

This means that all employees are working, all machines are functioning at their highest rate, and resources and technology are being used to their fullest. So, as the owner of ABC games, when you first started, you were at full capacity when all three employees were working full shifts, and all of the machines in your one building were working at full potential using all of the resources you had available. However, as your products became more popular, the demand for ABC games increased beyond what one building and three employees could handle. At that time you utilized capacity and facility planning.

Let's take a look at the steps you took in order to fulfill this task:

  1. Determined the amount of capacity - This means, you needed to determine how much of your product you needed to produce so that you could fulfill all orders. In the case of ABC games, you had to look over all upcoming orders from stores wanting to carry your product on their shelves.
  2. Determined when - You had to figure out when you needed to make these changes. In your case, you looked at upcoming orders and decided when the current workforce and facility would no longer be enough to produce those orders. For example, in terms of ABC games, you looked at when you needed to order more machines.
  3. Employee and facility requirements - This simply means that you had determined how many new employees and how many more buildings you needed to acquire to meet the demands for your products. Along with the buildings, you also had to decide what and how many machines would be placed in each new building. ABC games looked at how big the machines were and how many new ones would be ordered to keep up with demand.

Importance of Planning

Perhaps one important aspect of a business owner is partaking in capacity and facilities planning. We now know that capacity planning is how a company decides how much capacity they need and when they need it in order to meet increasing demand. But, why is this important? Why would a company need to put so much focus on capacity and facilities planning? Well, a company needs to know the number of workers to employee. They need to know how productive their workers are. They need to determine how many machines they need to run and how to maintain those machines. They also need to consider financial aspects. When there is too little or too much capacity, resources are not being used efficiently, and, therefore, companies can lose money. A few other considerations that explain the importance of such planning is: resource waste, company and employee errors, productivity, supplies, and any regulations for their industry.

As the owner of ABC games, when you anticipate a big order, you will need to determine when you will order more machines to complete those orders. Once that is determined, you will also need to figure out how many workers you need to operate those machines. However, you realize that you not only need to increase the number of employees that work for ABC games, but you need to know whether or not those new employees are productive and capable of running all of your new machines. Lastly, as an owner of a game company, you know that there are peak seasons in your industry, such as Christmas; and, therefore, you need to make sure you have enough available resources to supply the demand ordered by stores, while ensuring that you are efficiently using all of your extra resources in order to remain profitable and eliminate waste.

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