Capacity planning is the technique of figuring out the manufacturing capacity required by a business to fulfill shifting demands for its products. A disparity between the capacity of a firm and the demands of its consumers leads to inefficiency, either in under-utilized resources or unsatisfied buyers.
Lag Capacity Strategy
Lag Capacity Strategy (Lag Demand Strategy) indicates adding capacity only when the firm is operating at 100 % capacity because of rise in demand. This is actually a conservative strategy. It lessens the risk of waste, but it may lead to the loss of potential buyers either by stockout or low service levels. The Lag strategy is a reactive approach which adjusts it capacity in response to demand.