What is Capacity Planning?

capacity planningCapacity planning is the process of determining the production capacity needed by an organization to meet changing demands for its products or services. In the context of capacity planning, Design Capacity is the maximum amount of work that an organization is capable of completing in a given period. Effective Capacity is the maximum amount of work that an organization is capable of completing in a given period, due to constraints such as quality problems, delays, material handling, etc.

A discrepancy between the capacity of an organization and the demands of its customers results in inefficiency, either in under-utilized resources or unfulfilled customers. The goal of capacity planning is to minimize this discrepancy to keep your customers happy.

Capacity Planning Strategies.

There are many ways to increase capacity. Capacity can be increased by introducing new techniques, equipment and materials; hiring more workers; increasing the number of shifts; converting to automation; or expanding facilities. These are all strategies that can be implemented to meet the demands of your customers.

Capacity planning for a diesel repair shop does not come easy. It's a demand-based business that is almost exclusively reliant upon engine wear and parts failures on aging trucks. And, although it is inevitable that trucks will break down or need repairs, you can never really predict exactly when that will happen. However, by analyzing trends in your business cycles, you may be able to determine when you can expect to see an increase in demand for your services, thus being prepared to handle it when it happens.

For example, if you have a fleet customer that brings in their trucks for annual preventative maintenance during the winter off-season, then you can expect an up-tick in business at that time. Or, you may discover that repairs and maintenance increase at year-end for tax purposes, or in preparation for the holiday shipping rush. These would be good times to consider increasing capacity to avoid getting behind on other jobs, while impressing your customers with fast turn-around times during critical periods.

Ramping up capacity in anticipation of an increase in demand for your services is referred to as Lead Strategy. Lead Strategy can be risky for some businesses. If you ramp up your capacity by hiring more workers and buying more equipment, and the demand doesn't increase, it can have a negative impact on your bottom line. So perform your due diligence very thoroughly before making large investments to increase your capacity.

Because of the risk, some businesses prefer not to implement a Lead Strategy. They instead, employ what is called a Lag Strategy. This strategy involves adding capacity only after they are running at full capacity or beyond, due to an increase in demand for their services. This conservative strategy decreases the risk of a costly investment, but, if not implemented properly, it can result in the loss of customers due to slower repair times, poor service, and costly delays.

If you have the ability to pull talent and resources from other areas or branches of your business, this could help you develop a capacity planning strategy that reduces your risk and increases customer satisfaction.

What Drives Capacity Planning?

Today, companies are focusing more and more on improving customer fulfillment and satisfaction. The driving force behind this trend is the fact that it costs a lot more to acquire a new customer than it does to retain a current one, which costs virtually nothing. Service and performance drive customer satisfaction more so than price. However, stiff pricing competition among diesel repair shops makes the decision easier for dissatisfied customers to switch shops. This means that repair shops need to come up with more creative ways to keep their current customers and prevent them from jumping ship. The best way to do this, without lowering rates, is to improve customer satisfaction.

So how does customer satisfaction relate to the capacity planning strategies of a diesel repair shop? One of the core objectives behind capacity planning is to ensure customer satisfaction through; better service; greater efficiency; higher quality; and timely completion. In order to meet these objectives, you must have the capacity to deploy skilled, knowledgeable personnel with the proper tools and equipment in a timely manner.

Customer Service Capacity Planning.

Last, but not least, you must have the capacity to provide your customers with accurate and timely communication and documentation regarding the status of their repair jobs. You can have the largest, most skilled crew in the business, and be the best and fastest at completing repairs, but if you don't communicate with your customers, they’ll never know it. Your customer service staff must be in direct proportion with the number of jobs in your shop to ensure no customer falls through the cracks. You don't want a dissatisfied customer simply because they didn't get an update on the status of their engine rebuild, or receive an estimate in a timely manner. A good customer service capacity plan will help improve your customer satisfaction and retention levels, which are important to achieving sustainable growth and minimizing risk to your business.

Capacity Planning Process.

Your Capacity Plan should document every demand scenario that would require you to increase the capacity of your repair shop, and identify the measures you will take to implement the plan to meet those demands.

A simplified version of the Capacity Planning Process would go something like this:

1.   Develop a detailed, forecasted estimate of demand.

2.   Translate the demand into capacity requirements to meet the demand.

3.   Analyze your existing capacity across all relevant resources.

4.   Estimate the gap between capacity and demand.

5.   Conduct a financial analysis.

6.   Develop the strategy and tactics for aligning capacity with demand.

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