Capacity management in manufacturing, KPI and Metrics performance management tools

Capacity management is a discipline that takes into consideration planning, analysis, sizing, and optimization of capacity in order to satisfy demand in a scheduled manner and at a rational and reasonable cost.

It is an upbeat, responsive and approachable strategy that is capable of identifying the business needs before the addition of the supplementary resources, as there is no use of adding any resource to the business if it is suffering from capacity problem and thus, is not capable of utilizing those resources. Taking such inputs as performance and workload monitoring, demand and resource forecasting, application sizing, and modeling, in order to identify the required level of contingency and the required cost of infrastructure is the basic function of capacity management. Although capacity management is extremely important but the proper and effective implementation of it requires a constant monitoring of various aspects. In this respect, Key Performance Indicators (KPIs) can be a good approach as they provide certain critical factors that reflect the performance of the organization with respect to a recently implemented strategy.

KPIs are the basic inputs to prepare a balanced scorecard. A balanced scorecard classifies these indicators into four perspectives, where each perspective signifies a different business aspect while considering the newly implemented strategy at the same time. In context of capacity management, a balanced scorecard can have four perspectives. Unplanned capacity expenditures, unused capacity expenditures, etc. are included in the financial perspective. Operational perspective includes such indicators as % reduction in order fulfillment time, and number of complaints due to non-delivery. KPIs such as resolution time, % reduction in manufacturing cycle time, % productivity improvement together form the internal processes perspective. Capacity planning perspective includes such indicators as % process monitored for capacity planning, % reduction in delivery failures, etc. Although, capacity is a difficult concept to quantify but its proper execution through capacity management and quantifiable KPIs can be very eas

y so as to utilize the available resources up to the maximum level.

The business world was never so much challenging as it is right now. Incessant development in the marketplace creates a stress on all the candidates who are indulged in struggle for their survival. "Survival of the fittest" is the main factor governing this highly demanding and challenging business world. Therefore, a thorough understanding of the infrastructure to enjoy the needed flexibility so as to utilize the resources to the maximum extent is the basic requirement of the organizations, these days. This means that within every aspect of the supply chain there is a need of capacity management. But implementing this strategy in the organization is not an easy task. It has to beat a number of challenges for its final acceptance in the organization. Risk & management issues, financial problems, resistance from the employees, etc. are some of the main problems that capacity management implementation faces.

Although, seems like a simple application, capacity management requires an additional approach to overcome these challenges. One such approach is KPIs. Being the financial and non-financial metrics, these KPIs analyze each and every aspect of a new strategy, thereby helping the organization in scrutinizing its benefits. KPIs reflect the performance of the organization that has undergone major changes after the successful implementation of capacity management after which it can be very easy to append additional resources in the organization.

A very thin line exists between the success and the failure. This means a better and effective combination of capacity management and KPIs is a more beneficial deal than a simple use of capacity management. This is because implementation along with a continuous analysis of a new strategy is a better approach rather than facing long-term losses after the failure of the newly implemented concept.

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