Capacity is the
ability for the company to store and produce products in a given time in the
planning is very important for every business because it helps the company to
use their resources efficiently in the production of their products. Capacity planning is one of the most critical
and important decisions for the company because once it is planned there is no
going back. Therefore, the company should plan and forecast it correctly.
Capacity planning depends on the company forecasted demand and production of
its products. For example, if the company forecast their demand to be huge they
need to have a big facility and if the company forecast their demand to be
small the company needs to have a small facility. In other words, the company
should be efficient in using their facility. Capacity planning can be
classified into three types according to the time horizon such as long, medium
and short term.