What is the purpose of capacity planning?

The purpose of capacity planning is fundamentally about ensuring that an organization can meet its production and service demands by effectively managing its resources. By planning an organization's ability to deliver at capacity, capacity planning aims to align production capabilities with strategic goals, customer demand, and operational efficiency. It involves assessing both current and future capacity needs and making necessary adjustments to meet anticipated changes in demand.

This process helps organizations determine the maximum output levels that can be achieved within a given timeframe without compromising quality or service levels. By accurately planning for capacity, businesses can avoid underutilization of resources or, conversely, the inability to meet customer demand, which can lead to lost sales and diminished customer satisfaction.