Finite & infinite capacity planning


In operations planning, two conflicting constraints are time and capacity. If time is fixed by the customer’s required delivery date or processing cycle, it is possible to accept time as the primary constraint and plan backwards to accommodate these times. In such cases, planning backwards to infinite capacity offers a potential solution to the problem. On the other hand, if the processing time is not a constraint in cases where products are produced to stock and sell, it is simpler to use a forward plan based on finite capacity i.e. based on available resources.

Factors affecting Capacity Planning

The capacity variables are:

1. Controllable factors such as amount of labor employed, facilities installed, machine tooling, shifts worked per day, days worked per week, overtime work, sub-contracting, alternative routing of work, preventive maintenance and number of production set-ups.

2. Less controllable factors are absenteeism, labor performance, machine break-downs, material shortages, scrap and rework and unexpected problems such as strike, lockout, fire accidents, etc.

Ways of changing Capacity

Once the long-range capacity needs are estimated through long-range forecasts, there are many ways to provide for the needed capacity. Firms may have a capacity shortage situation where present capacity is insufficient to meet the forecast demand for their products and services or have excess capacity i.e. capacity in excess of the expected future needs.

Long-range capacity planning hence may require either expansion or reduction of present capacity levels.

Capacity requirement Planning (CRP)

Capacity Requirement Planning is a technique for determining what labor/personnel and equipment capacities are needed to meet the production objectives symbolized in the master production schedule (MPS) and the Material requirement Planning (MRP-I)
MRP-I and CRP establish specifically what material and capacities are needed and when they are needed.

Capacity Time Horizons:

Long-range: Resources planning of land, facilities, equipment and human resources involves strategy of changing facilities and employment levels over long-range time horizon.
This applies to Business and Corporate Companies’ objectives.

Medium Range: (a) Resources requirement planning of total resources needed to satisfy master production schedule (i.e. MRP-II) uses lead profiles for each product and simulation of alternative MPS. Managing through work force re-allocation, inventory and back order and sub-contracting strategies.

(b) Capacity requirement planning of labor and equipment in key work centers (uses finite loading) managing through employment and work force re-allocation inventory, sub-contracting make or buy decisions, alternative routing and more tooling. This is applicable to end products & MRP items.

Short range: Capacity control of input-output and operation sequencing (uses finite loading) managing via overtime, idle time, workforce reallocation, subcontracting and alternative tooling. This applies to Production activity control.

Ways of Changing Long range Capacity


(a) Sub-contracting with other companies to become suppliers of the expanding firm’s components or entire products.

(b) Acquiring other companies facilities or resources

(c) Developing new sites, building new buildings, buying new equipments.

(d) Reactivating facilities on standby status.


(a) Selling off existing facilities, selling inventories and laying off or transferring employees to other units.

(b) Developing and phasing in new products as demand for other products decline.