Capacity Planning and Scheduling

In business, capacity is how much a company can produce. It can refer to the maximum amount of screwdrivers a machine can mold in an hour. Or it can be the amount of shingles a roofing crew can install in an 8-hour day. Knowledge of capacity helps management keep the production team working as close to maximum production as possible. Every day. Every shift.

Let’s say that your business is a roofing company. If you know how many shingles each worker can hammer on a roof per shift, then you can determine the size of the crew you need for each job. You can also plan how many days it will take to complete each job. Then you can schedule roofing jobs so that your team is always putting in a full shift (inclement weather aside).

If you don’t have enough workers, you can easily get behind in jobs and risk losing customers. If you have too many workers, you are paying wages to people who are idle. Capacity planning keeps you from flying by the seat of your pants. Customers can get a new roof put on within a reasonable time. Your workers aren’t working excess overtime one day and face a layoff the next. In short, capacity planning saves headaches.

Capacity planning predicts the most common situations of businesses. In the case of slow growth, the roofing company always has workers available when the call comes in for a new roof. A business in a slow growth phase is expensive to run—it has an abundance of capacity.

If the number of shingling jobs is declining, the abundance gets worse. Something has to be done to fix the disparity between the number of workers and the number of jobs to be done.

Seasonal ups and downs can wreak havoc on a business (all the more reason for a capacity plan). Roofing jobs peak in the early spring and again in the early fall when homeowners go crazy for home improvement projects. Customer calls also increase immediately after home improvement shows. Existing and new construction roofing jobs are plentiful during the spring, summer, and fall. And then drop dramatically during the winter.

As the owner, you are wise to project your capacity for at least a year in advance so that you are better prepared to budget, factor in the peaks and valleys of a calendar year, and reach full capacity most of the time. Otherwise, your idle resources are costing you money or your over-bookings/lost sales are keeping you from money you could be making. Either way it’s money out of your pocket.

To project an ideal capacity, there are four items that factor into the equation:

  1. Base capacity is the most units your business can produce during a normal production schedule. Many businesses refer to this as “at capacity.”

  2. Maximum capacity is the most units your business can produce if it “calls in the troops” with help in the form of overtime, temporary help, outsourcing, or extending deadlines.

  3. Forecast demand refers to the number of units you need to produce to meet your sales forecast.

  4. Extended forecast is not a weather report, but how many units you may need to produce if sales are better than predicted.

Capacity planning allows for the management team of a company to make informed decisions that will affect the profit and loss statement. 

  • Match employee and production schedules to the tasks and number of hours required per person and per piece of equipment required to complete a project.

  • Understand when to use overtime and when to begin recruiting to fulfill needs caused by growth.

  • Understand the difference between when it is appropriate to hire subcontractors and when it is appropriate to hire more people or when to lay people off.

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