Supply chain leaders should expand their thinking around capacity planning to include all network constraints, particularly those outside of manufacturing.
Organizations that embed capacity analysis within all three layers of the supply network decision processes can look at capacity constraints for the short-term, mid-term, and long-term. Under this model, the decision outputs for each time horizon would be as follows:
- Short-term: operational plans and schedules
- Mid-term: constrained capacity allocation, midterm additions/adjustments, and multi-period anticipation inventory plans
- Long-term: capital commitments and service contract commitments
Vanguard’s team has been solving for this level of capacity planning for years, and we have some key insights to provide to the process:
Forecast accuracy is still paramount
To meet this planning challenge, businesses need to up-level their forecasting techniques to accommodate the requirements of mid- and long-term planning cycles. High levels of accuracy are ideal in any type of forecasting, but they are particularly important when key decisions are being made long-term. The foundation of forecast accuracy, sales and financial included, is that your baseline assumptions come from statistical analysis of the past. Anything short of this first layer of statistical analysis produces less accurate results. In fact, a non-statistically proven forecast can actually compound inaccuracy when applied across an enterprise.
Vanguard Advanced Analytics applies an exhaustive range of time series and model-based methods to not only capture and extrapolate historical patterns but also simulate and compare innumerable outcomes from seemingly unprecedented events and circumstances. These can include product launches, proposed changes to business plans, or long-range capital and investment decisions with effects that span an entire product life cycle or even generations of products. Vanguard also supports expansive stress testing and what-if modeling to allow for better planning, whether it be 12, 18, or 24 months out. Some clients even forecast 10 years into the future.
Manufacturing capacity planning and beyond
Manufacturing capacity planning should be a strategic process, not only identifying capacity at each production site but using your resources holistically to meet customer demand in the most efficient way possible. You’ll need to incorporate rough-cut capacity planning (RCCP) capabilities with support for an unlimited number of constraints, whether driven by physicality or business rules.
Furthermore, capacity exists on playing fields outside of manufacturing, such as sales and workforce capacity. Sales capacity planning helps diagnose the strengths and weaknesses of your sales team and evaluate opportunities to maximize resources; quantify individual and team performance; set goals based on statistical analyses of bookings; and schedule hiring to optimize capacity. Workforce capacity planning requires the ability to accurately gauge and position workforce demand against workforce capacity. Failure to balance capacity with projected demand can waste resources, delay projects, and jeopardize service levels.
Sales & Operations Planning (S&OP)
A new take on capacity planning is an important step in the maturation of organizations trying to plan for the future. Ensuring your organization is ready for the changes means using a single version of the truth, one that is accurate and unified across all functional departments. It also requires formalizing the collaboration between planning leaders in an S&OP process. A solid S&OP process requires technology that allows you to work toward a common set of goals, balance demand with supply and capacity, evaluate probabilistic-based plans with tradeoffs, and track performance. Download the Vanguard Predictive Planning for S&OP data sheet for a full list of features and benefits.