Capacity planning has seen an increased emphasis due to the financial benefits of the efficient use of capacity plans within material requirements planning systems and other information systems. Insufficient capacity can quickly lead to deteriorating delivery performance, unnecessarily increase work-in-process, and frustrate sales personnel and those in manufacturing. However, excess capacity can be costly and unnecessary. The inability to properly manage capacity can be a barrier to the achievement of maximum firm performance. In addition, capacity is an important factor in the organization's choice of technology.

Capacity is usually assumed to mean the maximum rate at which a transformation system produces or processes inputs. Sometimes, this rate may actually be "all at once"—as with the capacity of an airplane. A more usable definition of capacity would be the volume of output per elapsed time and the production capability of a facility.

Capacity planning is the...