Strategic capacity planning balances resources to achieve the best results and output while minimizing waste and costs. It involves understanding customer demand and market conditions to set manufacturing goals and identify cost-effective means of achieving them. A comprehensive approach includes raw material selection, manufacturing, administrative expenses, and shipping costs.
Strategic capacity planning is a process that seeks to balance the use of available resources so that they are used to achieve the best results while achieving the optimum level of output. In many businesses, this involves paying close attention to each stage of the manufacturing process to ensure that little or no waste is created during that process and that manufacturing costs are kept as low as possible while the greatest amount of goods and services are produced and sold. There are a number of factors that go into strategic capacity planning, including understanding customer demand and the company’s ability to adjust its operations to meet that demand.
When thinking in terms of strategic capacity planning, the understanding of market conditions approach is essential. In an economy driven by customer demand, it is important to ascertain how units can reasonably be expected to be sold in the market and at what price. Data like this helps set manufacturing process goals, as companies can use the data to determine how much they can invest in resources and still generate enough products that they will sell and make at least a profit from each unit sold.
To this end, strategic capacity planning will seek to identify the costs associated with producing a certain number of units of finished goods and compare that figure with the price each unit can control in the current market. The idea is to closely examine each component relevant to creating, selling and marketing the product and arrive at a unit price that will generate a return while staying within the price range that is likely to be attractive to customers. Typically, this means going through each step of the process to identify the most cost-effective means of achieving the desired goal.
A comprehensive approach to strategic capacity planning will begin with raw material selection, proceed through the actual manufacturing process, include administrative and support expenses related to the business model, and also include attention to shipping costs of products sold to buyers. At best, this type of planning helps keep inventories low but still at a level that can meet consumer demand, effectively avoiding paying taxes on a large inventory of finished goods while preventing a temporary shortage that it could lead customers to look for similar goods from competitors.
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