written by khatabook | December 14, 2022

All About Capacity Management | Explained with Examples

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Table of Content


In these competitive times, various things affect a company's capacity. It is a changeable quantity that may vary because of circumstances and outside factors, such as seasonal demand, market shifts, and other macro-environmental events. However, the ideal business must continue to move quickly enough to consistently fulfill customer expectations. The company must adopt capacity planning to balance supply and demand.  

According to capacity management theory, information systems resources must be planned for, monitored by IT, and administered to have the capability to meet data processing demands throughout the service life. 

Did You Know? Capacity Management is a focal point for issues related to IT performance and capacity in an organization. 

What is Capacity Management? 

The process of ensuring a business's capability to perform certain tasks is called capacity management. It continuously prioritizes increased manufacturing output under any circumstance. In essence, it is the financial advantages a corporation can realize, generate or market within a specific time frame.

A wide range of planning activities gets included in the capacity management process. These steps guarantee that a firm infrastructure has the resources to realize its potential fully. Additionally, it emphasizes ensuring output in any company and under any situation. 

For instance, planning, IT surveillance, and information on IT and technology administration make up the philosophy and strategies of capacity management. The proposal included space to accommodate data processing needs across various life cycles. The main objective of capacity planning management is to: strike a balance between costs and resources needed.

Also Read: Meaning of Business Communication - Types of Business Communication & Why Business Communication Is Important

Objectives of Capacity Management

The main objectives of capacity management are efficiency, memory, physical space, and operational and development environments. It encompasses all business-related areas, such as hardware, software, peripherals, network infrastructure, and human resources. Comparing the available resources against the deadline is made easier with capacity management. It assesses the capacity and provides you with a snapshot of your company.

Capacity management aids in resource availability analysis and makes it simpler for businesses to verify employees' availability and skill levels for forthcoming projects. Additionally, this research helps project managers and directors make wise judgments on hiring new employees and projects. Additionally, it aids in controlling the supply and demand of resources.

Strategies For Capacity Management

List of effective capacity management strategies every business owner must follow:

Lag Strategy

The organization responds to the call of high demand by increasing its production capacity once the entity has begun operating at full power under this method, which is considerably different from all other methods.

Since it needs facts and numbers before acting, it cannot increase production based on assumptions. The advantages of the lag strategy include the following:

  • Reducing the danger of overproduction.
  • Not carrying any extra inventory.
  • Deferring significant investments until they are essential.

The company's lack of additional units in case of an unexpected spike in demand is a drawback. When the business distributes the excess inventory, the demand decreases or the consumers have already formed brand loyalty for another product.

Lead

One of the more aggressive approaches to capacity planning is to be this one. It is a strategy whereby the business raises its manufacturing capacity in advance of an anticipated rise in demand.

Given the inventory shortages during demand periods, the company utilizes the lead strategy as a crucial weapon to draw consumers away from competing brands and toward its own. It also aims to cut down on stockout expenses.

The Lead method has several advantages, which is why organizations like it. One drawback of the leadership strategy is that the company is left with extra inventory if demand does not increase.

Match

Given that it combines the Lead and Lag techniques, it is a moderate method. It doesn't assume and foresee very high requirements and begin to construct in response, nor does it wait until the high demand is knocking on your door.

Instead, the Match Strategy makes minor adjustments in response to shifting market circumstances. Although it is difficult to complete, the risk is relatively small.

Also Read: How to Write a Business Plan? - Ideas, Format, Need & More

Understanding the Process of Capacity Management

Data transfer efficiency, speed, and volume can all be measured with capacity management solutions. The journey of the data via the IT architecture is: aided by the data journey. Application design is made more accessible by capacity management. Below is the steps involved in the process of capacity management. 

  • The company might initially check how all the hardware and software in the ecosystem are operating thanks to capacity management. Additionally, it records crucial data flow information. The measurement and evaluation tools in the capacity management program must allow it to track the individual performances of IT assets.
  • Servers, network nodes, storage systems, storage network equipment, cloud services, and network communications equipment are some of the components that make up capacity management. Software, technology, or manual methods can all be used for capacity management. Data movement measurements must get intercepted to regulate capacity.
  • Emulation programs are the initial step in the capacity management process. Emulsion programs work well as capacity management tools. The software copies application software, such as database management software. It guarantees its own test data sets to provide precise and reliable outcomes.

Difference In Capacity Management and Planning

Capacity Management and capacity planning frequently need clarification. Despite certain similarities, there are also many differences between them. 

Capacity planning has a "nonrecyclable" quality, which is a distinction between it and capacity management. In other words, capacity planning is something that is done in advance. Capacity management involves the complete lifecycle of monitoring, data collection, data analysis, infrastructure optimization, and returning to the needs intake and evaluation.

Digital enterprises should consider these concepts as distinct entities if they want to provide a successful capacity planning and administration approach.

Difficulties Encountered with Capacity Management

Every day, capacity planners must deal with a truckload of data that must be: manually entered into project worksheets. The data entered must be correct and presented in a proper format for the capacity management process to run smoothly. The same units of measurement, for instance. After the data has been added, they must include information on supply and demand. They then utilize calculations to determine information about the capacity that is available.

A data challenge and a complexity challenge are very comparable. Errors are inevitable in capacity planning since it requires managers to work with numerous computations and intricate algorithms. Adding erroneous data to the spreadsheet, for instance.

Unfortunately, such events may stop the process altogether. Additionally, capacity management typically involves multiple levels or tiers.

Things to Consider in Capacity Management

Different aspects of capacity management relies on resources, information, and time to complete. Simply put, the likelihood of errors increases when too many people participate in the planning process. Therefore, to prevent this, correct procedures must be in place.

The foundation of any successful business is communication. An ocean of issues can result from poor or nonexistent communication. All staff members involved in the capacity management process regularly must exchange data to prevent such situations.

Your capacity management strategy will function effectively if you communicate straightforwardly and transparently. The procedure will go more quickly and easily thanks to the business communication methods.

Also Read: What Is Business Development - Complete Guide on Business Development Strategy for Successful Business

Examples of Capacity Management 

Software firms, finance administration teams, design agencies, and product teams employ capacity management. And a TV making unit can be a perfect example.

For instance, the company's managers must be aware of the approximate quantity of TVs sold to meet the escalating demand because there will be a surge in demand. The next step is determining whether the current capacity is sufficient to handle the increased demands.

Production can start as soon as the license and the necessary personnel are in place. However, the business will need to launch it at least 2-3 months before the start of the world cup. By doing this, it will ensure that the TV sets have entered the retail market and are accessible at the precise moment when demand increases.

Conclusion

To sum up, a firm can obtain capacity management plans and procedures from several market sources and online sources. To execute full capacity planning, all that is required of you is to determine your company's objectives and move in that direction. Capacity management refers to a broad concept, whereas capacity planning is a subdivision of capacity management. However, the ultimate objective is to guarantee enough capacity available at the appropriate moment to meet the needs.

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FAQs

Q: What are the prominent scopes of capacity management?

Ans:

Some prominent Capacity Management scopes include Service, Business, and Resource capacity activities.

Q: What are the three major components of capacity management?

Ans:

The three primary components of capacity management are service capacity management, business capacity management, and component capacity management.

Q: Why is capacity management important?

Ans:

Capacity planning and management assist companies with budgeting and scaling so they can determine optimal levels of procedures.

Q: What are capacity management processes?

Ans:

Capacity management is a process employed by companies to make the most profitable use of production performance concerning the request for a service or a product.

Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.
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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.