Strategic Capacity Planning

Strategic Capacity Planning

Strategic capacity planning is a process that determines the capacity level of capital intensive resources that are a necessity within a corporate infrastructure, which best supports a long-range competitive strategy. The capacity level possesses a significant impact on Riordan Manufacturing’s response rate, cost structure, inventory policies, management, and staff support requirements at the China location. If capacity is found to be inadequate at the Hangzhou location, Riordan Manufacturing can suffer from slow service or entry of additional market competitors which can lead to customer losses. If the capacity is found to be excessive, adjustments such as price, staff, and inventory reduction can be made to aid in market stimulation. Riordan can additionally seek more marketable, loss profitable products to introduce to the market (Aquilano, Chase, & Jacobs, 2006, p. 431). This implementation will also allow the new facility to operate within the company’s guidelines rather than receiving treatment as a decentralized unit.

Before implementation, Riordan Manufacturing must analyze their short, mid and long range decisions. These decisions consist of items such as staffing requirements (both seasonally and consistently), equipment purchases, and additional acquisitions for facility space and disposal. After the analysis, Riordan Manufacturing first must then locate, and isolate the current bottlenecks in place. Some bottlenecks that Riordan Manufacturing possesses are current inventory reduction, seek additional or different suppliers and vendors, and reduce the cost of raw materials in use. By working with vendors and suppliers, Riordan Manufacturing can build purchase contracts that can help to specifically purchase the appropriate amount of raw materials for manufacturing. Using Just-In-Time (JIT) production method will also aid in delivery, lead, and work-in-progress times. This will