Forecasting Capacity Requirements: It is a process under which a company tries to estimate regarding the production
Question:
Forecasting Capacity Requirements:
It is a process under which a company tries to estimate regarding the production must take place and further it tries to determine whether the company will be able to accomplish its production goals on time or not. It ensures that fluctuations in demand can be predicted prior it actually happens.
Distortions between actual production output and forested output can lead to consequences such as personnel shortage which can cause long delays in products or services or it may result in failure to meet customer’s order. This can lead to losing a customer to the competitors.
For small businesses, it is imperative to conduct capacity requirements on a regular basis so that they can keep up with the changes in supply and demand. How frequent forecasting capacity will be required depends upon the type of business and industry.
Businesses which experiences seasonal fluctuations such as pest extermination companies and retails stores are required to conduct Forecasting capacity more frequent than other companies which have a comparatively more regular flow of revenue which includes technological service firms and consulting firms. A poor prediction can lead to overproduction of products that may not sell.
The following process is included in the forecasting capacity requirement:
1. To conduct capacity planning, firstly demand for company’s product and services must be determined. This can be achieved by analyzing the recent sales and inventory records of the firm which can provide a clear picture of company’s sales.
2. The recent data based on product and services must be compared with the historical data. This helps to establish if there has been increasing or decrease in demand.
3. If the company cannot keep up with the forecasted demand then it must implement some tweaks in its production process.