Capacity is theability for the company to store and produce products in a given time in thefacility. Capacityplanning is very important for every business because it helps the company touse their resources efficiently in the production of their products. Capacity planning is one of the most criticaland important decisions for the company because once it is planned there is nogoing back.
Therefore, the company should plan and forecast it correctly.Capacity planning depends on the company forecasted demand and production ofits products. For example, if the company forecast their demand to be huge theyneed to have a big facility and if the company forecast their demand to besmall the company needs to have a small facility. In other words, the companyshould be efficient in using their facility. Capacity planning can beclassified into three types according to the time horizon such as long, mediumand short term.