May 28, 2020 is a daily online magazine covering small business news. We help entrepreneurs transform ideas and innovations into greatness.

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Capacity Planning


Capacity Planning for Business Services

Looking for information on capacity planning for business services? Now you're thinking outside of the box. Although capacity planning has its roots in traditional manufacturing, it's becoming an increasingly relevant topic for business services companies.

The manufacturing industry has known about the advantages of capacity planning for years.
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Now, more and more business service firms are exploring the possibilities of capacity planning strategies despite the fact that they lack the tangible inventories at the heart of the capacity planning approach.

What is capacity planning? It's the ability to accurately and efficiently match production levels to customer demand. Manufacturing firms employ capacity planning strategies to coordinate everything from long-run resource planning to the details of real-time scheduling and workflow coordination on the shop floor.

In theory, the utilization of capacity planning strategies sounds like an obvious winner for any business. But in practice, business service companies (e.g traditional consulting, design, technical support, call center operations, IT implementation and IT outsourcing firms) face multiple challenges in implementing a capacity planning approach.

The most obvious challenge business service firms face is the fact they sell services, not products. Unlike manufacturing firms, they can't manipulate inventory because no inventory exists. Business service firms also find it difficult to boost capacity through resource planning because their assets are often intangible and/or consumable. Capacity planning for business services is possible, but it looks a little different than it does for manufacturing companies.

  • Service supply. Service is a perishable resource in a business services company. It can't be stockpiled. So the only way to control the firm's supply of service is by either adapting it to the rate of consumption or by manipulating the rate of consumption through pricing, tiered service plans, or variable commitment models.
  • Forecasting. Forecasting plays a central role in manufacturing-based capacity planning because it motivates production, inventory management, and resource procurement. But although forecasting is just as important in a business services firm, it is used mostly in the areas of financial planning and scheduling. In some situations, forecasting may also serve as the catalyst for augmenting the workforce (temporary) or assets the company relies on to deliver business services.
  • Pricing. In a business services company, pricing structures can be used to influence the supply of services, workflows, and consumer demand (work orders). For example, service contracts give business services companies a way to flatten demand, and even adjust peaks in demand by providing routine maintenance or other capacity planning strategies.

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