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Capacity Planning assuming deterministic demand often leads to stockouts and late servicing.
Companies often plan their production capacity loading on the basis of their demand forecast. It is also a common practice to load various lines to their full working capacity.
When the rubber meets the road and the teams realize that actual demand is quite different from their deterministic assumptions, it leads to frantic firefighting to meet the demand. The key design parameter often missing in this type of working is ‘Protective Capacity’.
Protective Capacity is the capacity buffer in TOC to cater to stochastic nature of demand. Companies thinking of stochastic demand often leave 15-20% of their working capacity unutilized in their plans. It’s a crucial buffer to take care of unforeseen demand surges without causing chaos in day-to-day working.
Protective Capacity helps in improving product availability and protects the promised lead time of delivery to customers.
If you haven’t used this concept of Protective Capacity in your working, my suggestion is to incorporate it and see the amazing results first hand!