Capacity management and analysis

Capacity management refers to the act of ensuring a business maximizes its potential activities and production output at all times, under all conditions. The capacity of a business measures how much companies can achieve, produce, or sell within a given time period.

Capacity management’s goal is to ensure that information technology resources are sufficient to meet upcoming business requirements cost-effictively. One common interpretation of capacity management is described in the ITIL framework. ITIL version 3 views capacity management as comprising three sub-processes: business capacity management, service capacity management, and component capacity management.

Since capacity can change due to changing conditions or external influences including seasonal demand, industry changes, and unexpected macroeconomic events companies must remain nimble enough to constantly meet expectations in a cost-effective manner. For example, raw material resources may need to be adjusted, depending on demand and the business’s current on-hand inventory.

Implementing capacity management may entail working overtime, outsourcing business operations, purchasing additional equipment, and leasing or selling commercial property.

Companies that poorly execute capacity management may experience diminished revenues due to unfulfilled orders, customer attrition, and decreased market share. As such, a company that rolls out an innovative new product with an aggressive marketing campaign must commensurately plan for a sudden spike in demand. The inability to replenish a retail partner’s inventory in a timely manner is bad for business.

Businesses thus face inherent challenges in their attempts to produce at capacity while minimizing production costs. For instance, a company may lack the requisite time and personnel needed to conduct adequate quality control inspections on its products or services. Furthermore, machinery might break down due to overuse and employees may suffer stress, fatigue, and diminished morale if pushed too hard.

Capacity management also means calculating the proportion of spacial capacity that is actually being used over a certain time period. Consider a company operating at a maximum capacity that houses 500 employees across three floors of an office building. If that company downsizes by reducing the number of employees to 300, it will then be operating at 60% capacity (300 / 500 = 60%). But given that 40% of its office space is left unused, the firm is spending more on per-unit cost than before.

Consequently, the company might decide to allocate its labor resources to only two floors and cease leasing the unused floor in a proactive effort to reduce expenditures on rent, insurance, and utility costs associated with the empty space.

Capacity management is concerned with:

• Monitoring the performance and throughput or load on a server, server farm, or property.
• Performance analysis of measurement data, including analysis of the impact of new releases on capacity.
• Performance tuning of activities to ensure the most efficient use of existing infrastructure
• Understanding the demands on the service and future plans for workload growth (or shrinkage).
• Influences on demand for computing resources.
• Capacity planning of storage, computer hardware, software and connection infrastructure resources required over some future period of time.

Factors affecting network performance

Not all networks are the same. As data is broken into component parts (often known frames, packets, or segments) for transmission, several factors can affect their delivery.

• Delay: It can take a long time for a packet to be delivered across intervening networks. In reliable protocols where a receiver acknowledges delivery of each chunk of data, it is possible to measure this as round-trip time.
• Packet loss: In some cases, intermediate devices in a network will lose packets. This may be due to errors, to overloading of the intermediate network, or to the intentional discarding of traffic in order to enforce a particular service level.
• Retransmission: When packets are lost in a reliable network, they are retransmitted. This incurs two delays: First, the delay from re-sending the data; and second, the delay resulting from waiting until the data is received in the correct order before forwarding it up the protocol stack.
• Throughput: The amount of traffic a network can carry is measured as throughput, usually in terms such as kilobits per second. Throughput is analogous to the number of lanes on a highway, whereas latency is analogous to its speed limit.

Capacity Limitations

It is important to understand your capacity limitations so that you can identify areas of improvement and develop a capacity plan that is just right for your organization.

Many factors contribute and detract from the available capacity. These include the quality and quantity of labor, machine availability, waste levels, government regulations, required machine maintenance, and other external factors.

Physical distancing requirements reduced the total available capacity for many manufacturers, leading to a decreased output. Some of these companies chose to add overtime capacity, while others chose to outsource some of their operations or even added automation to increase the output of their production lines.

The prevailing theme for businesses that thrived during the pandemic had one thing in common agility. These companies were able to quickly identify the effects of losing capacity in order to make the right choices to meet their business goals quickly and efficiently.

Capacity Analysis

The first step to take when you are constantly operating under constrained capacity is to identify the bottleneck.

A capacity bottleneck is a process or operation that has limited capacity and reduces the capacity of the entire production plant.

Bottlenecks cause delays in production, too much work-in-process items, and can be costly to the company. Identifying capacity bottlenecks can help identify the real cause of the problem and develop a plan to resolve it.

There are many ways to increase resource capacity within your facility:

• Purchase another machine (best for inexpensive resources, if possible).
• Perform regular maintenance on machines to increase their efficiency.
• Hire another employee.
• Re-allocate existing capacity to increase the capacity of the bottleneck operation.
• Invest in employee training.
• Optimize your production schedule to reduce sequence-dependent setups.