Capacity requirements planning

Capacity requirements planning is an activity in the production planning process, where the capacity level of a production process is compared to the preliminary production plan, to see if the organization is capable of producing to the plan. If the analysis indicates that there is a capacity shortfall, the production plan is altered to accommodate the difference, or work is outsourced to take advantage of the excess capacity of third parties. Without capacity requirements planning, a business will likely find that it is unable to meet its order delivery commitments, resulting in a decline in customer orders.