Do you know what’s the number one capacity planning mistake manufacturers make?
Waiting until the last minute to plan, and that’s the problem…
Running late to react to changes means production lines start to clog and customers are waiting.
The outcome?
Without a dedicated manufacturing capacity planning strategy, production becomes a guessing game.
But there’s good news…
The manufacturers who get capacity planning right are staying on top of demand and running their operations much more smoothly.
And when they do get it right, they’re seeing real, tangible results.
Inside This Guide:
- What is Manufacturing Capacity Planning
- Why Capacity Planning Is More Important Than Ever
- The Biggest Obstacles Manufacturers Face
- Proven Manufacturing Capacity Planning Strategies
What is Manufacturing Capacity Planning?
Manufacturing capacity planning is the process of determining how much production capacity is needed to meet changing demand.
Simply put:
Manufacturing capacity planning is figuring out if the machinery, labor, and materials needed to produce future customer orders are going to be available, now or in the future. If not, it’s important to know as early in the process as possible so changes can be made before it’s too late and production comes to a halt.
All of the pieces of the puzzle are taken into account, including equipment availability, workforce schedules, production speeds, and more.
So the goal?
To ensure production capacity and capacity to produce is in line with customer demand.
Seems pretty straightforward, right?
However, most manufacturers struggle with the capacity planning process because they lack the necessary systems to track and forecast accurately.
Why Capacity Planning is More Important Than Ever
Let’s take a look at this stat first.
78% of manufacturers have already adopted or are planning to invest in supply chain planning software.
Seems like a weird stat, until you remember why planning software is so incredibly important to manufacturers these days.
Seamless capacity planning software solutions are a must-have in today’s world, otherwise manufacturers don’t have the ability to accurately forecast demand and allocate resources as they need to.
Think about that for a minute.
Companies are currently only working at 82.3% of their normal capacity.
That’s not a lot of wiggle room for when demand takes a turn that no one is expecting.
Manufacturing capacity planning allows operations teams to help them avoid all of the following issues:
- Overproduction tying up cash flow in excess inventory
- Underproduction that means missed sales and angry customers
- Resource waste from allocating labor, materials, or equipment poorly
So, if manufacturers can nail capacity planning, the companies that have done so are showing promising signs. Manufacturers that 60% expect revenues to grow in 2025 account for 60% of manufacturers, and manufacturing capacity growth is expected to be at 4% this year.
That’s a huge growth stat.
But there’s one catch.
Capacity planning has to be done correctly.
The Biggest Obstacles Manufacturers Face
Even with the best will in the world, manufacturers have to face a number of obstacles when it comes to capacity planning, and even the best laid plans can come off course with the following problems.
Inaccurate Demand Forecasting
Forecasting is always difficult, and nothing changes when it comes to demand forecasting for future customers.
Market changes can happen overnight, and customer needs can also shift without notice.
If forecasting is inaccurate, the rest of the planning goes downhill from there.
Production schedules go awry, and resources end up either in short supply or over-allocated.
Supply Chain Disruptions
Supply chain challenges continue to rear their head as well.
When there are delays in raw material availability or components don’t come through on time, capacity planning numbers end up all out of whack.
It can make it difficult if not impossible for manufacturers to keep their production schedules steady.
Labor Shortages & Skill Gaps
Not only is it difficult to find enough labor to man manufacturing floors, but those workers have to be skilled in the right areas as well.
Currently, around 48% of manufacturers surveyed say they are experiencing moderate to significant challenges when it comes to filling production and operations management roles.
Proper planning is of no use if the people needed to execute the plan are either not there or do not have the correct skill sets to pull it off.
Technology Integration Issues
A lot of manufacturers still use antiquated spreadsheets and completely siloed systems that don’t communicate with each other.
If data isn’t accurate and current, it’s hard to perform capacity planning because the inputs are wrong to start with.
Real-time visibility into machine performance, inventory levels, and order status is now a necessity with modern manufacturing, which means integrating technology and systems together for cross-visibility.
Proven Manufacturing Capacity Planning Strategies
Here are some of the most important strategies manufacturers are using right now to improve their capacity planning.
Use Real-Time Data
Throw away the old reports and stop relying on “gut-feel.”
Real-time data is now a necessity to keep operations teams informed and able to make decisions on the fly.
Capacity planning is able to be more accurate when machinery is running, inventory levels are fluctuating, and order statuses are changing.
Once there is visibility into real-time data points, manufacturing capacity planning can be more efficient.
Use Advanced Planning Software
Advanced planning software is essential as well.
Doing capacity planning manually is no longer an option because this type of software automates many of the calculations, as well as providing scenario planning options.
Manufacturers can then model different demand situations and plan for multiple eventualities at the same time.
Set Realistic Capacity Targets
Most manufacturers operate at around 90% of capacity utilization, and that’s because it’s a realistic target. Targets that are too high can mean operations teams burn out or have quality issues.
Targets that are too low mean resources are wasted and unnecessary costs are created.
Build In Flexibility To Production
Flexibility is key.
Rigid production schedules are not going to last long if reality hits, so capacity plans need to be flexible in order to change with production.
Cross-training workers to do more than one task, or multiple tasks is one way to build this flexibility in, but also making sure that there are relationships with other suppliers if main suppliers can’t deliver, planning for overtime or additional shifts during busy periods are all important.
Monitor & Adjust Capacity Planning On A Regular Basis
Capacity planning isn’t a “one and done” kind of activity.
Market conditions change constantly, as does the reality of production on the ground.
Successful manufacturers revisit and adjust capacity plans frequently, and this is important because waiting until problems occur can be too late.
This includes investing in the workforce alongside other technologies because employees that have been trained in the area of capacity planning make more well-informed decisions in those areas.
Align Manufacturing Capacity Plans With Business Goals
Capacity planning doesn’t exist in a bubble.
Aligning manufacturing capacity with business goals means that manufacturing production is aligned to sales forecasts and business growth targets, meaning the whole organization runs more efficiently.
Capacity planning needs to be relevant to the rest of the business in order to make sure resources are being spent on the right priorities.
Final Thoughts
It’s no longer possible to ignore manufacturing capacity planning.
Manufacturers that are successful in 2025 are those that plan, and part of this planning includes making the right investments in the right capacity planning systems and strategies.
Real-time data, planning software, and a more flexible approach will allow manufacturers to meet demand, no matter how fast it shifts.
Key Takeaways:
Proper capacity planning requires accurate forecasting, the right technology, and regular capacity monitoring and adjustments.
Get these 3 elements right and production efficiency is going to shoot up.
The problem?
If manufacturers don’t have the right systems in place for capacity planning, it means resources are going to be wasted, deliveries missed, and customers will likely be lost to competitors who have their act together.
But with the right strategies in place, manufacturing operations will run more smoothly, costs will be contained, and customers will get what they want, when they want it.
Guessing is no longer an option, and planning will always win out.
