Concept explainers
To determine: The importance of capacity planning in strategic decision.
Introduction: The capacity in term of business refers to the capability of the business to conduct its production process. It determines the level of productive goods produced by the businesses.
Explanation of Solution
The importance of capacity planning:
It is very important for the firms to determine the level of capacity to be maintained. In order to establish the resources of the firm, the capacity planning is most important. The decision about the capacity of the business has impact on the responsiveness of the customers, cost of operations, competitiveness of the firm, and product lead time. The sales of the firms may reduce if the capacity maintained is inadequate. If the firms have excess capacity then the resources of the firms may drain whereas if the capacity is low then it limits the growth. Therefore, it is necessary for the firms to determine adequate level of capacity for the firms that can be done through proper capacity planning.
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