Capacity Requirements Planning 1
Integrated Learning Project: Part 6 – Capacity Requirements Planning Assignment
Kweku M. Wallace
School of Business, Liberty University
BUSI615: Logistics
Dr. Wilson
September 29 2024
Author Note:
Kweku M. Wallace
I have no known conflict of interest to disclose. Correspondence concerning this article should
be addressed to Kweku Wallace. Email: [email protected]
Capacity Requirements Planning
Capacity Requirements Planning 2
According to Wenyi et al. (2007), Capacity Requirements Planning (CRP) is a technique
that determines if production can meet demand needs by converting production demand into
capacity requirements and estimating capacity. This technique aims to maintain a balance
between production capability and workload demands for effective production management.
Implementation
Planning for capacity requirements involves management procedures that are crucial for
the smooth execution of efficient operations. The three primary management procedures include
assessing capacity by identifying the resources required for task completion and estimating the
support needed for stages. Determining capacity involves scrutinizing the MRP and MPS
modules, followed by analyzing the production schedule to comprehend the workload. This
analysis entails comparing actual versus predicted production to evaluate resource efficiency and
pinpoint which resource utilizes the majority of response time. The third step in management is
about looking and planning how to anticipate any capacity issues that could slow down the
production system, as outlined by Chofreh et al. (2019)
The managing director of the CRP works closely with another individual who supervises
all operations within the company's department, where workers play a role as both producers and
sources of information (Chofreh et al., 2020).
Operation
During the fourth quarter of 2023, Tesla manufactured around 495 thousand cars. Tesla
dispatched over 484 thousand vehicles during the fourth quarter of 2023. In 2023, the number of
vehicle deliveries surged by 38% year over year to reach 1.81 million, while production
increased by 35% year over year to hit 1.85 million cars (Tesla, n.d.).
Tesla Motors implements two types of capacity planning: one focuses on short-term
capacities, while the other, known as aggregate capacity planning, aims to meet the increasing
Capacity Requirements Planning 3
demand. The management process, in this aspect, entails predicting and assessing the demand
and gaining an understanding of the vehicle demand. The next step is to identify the capacity
strategies required to meet the anticipated demand. The management tasks involve making
decisions about the capacity required to meet the projected demand, while also considering the
limitations of the company's capacity resources. This step entails choosing between short-term
and long-term capacity planning, or utilizing aggregate capacity (Leftan et al., 2020).
Numerous elements play a role in determining the policies for capacity requirements
planning. Tesla Motors has developed state-of-the-art machines to ensure efficiency, which
significantly impact production speed and reliability. Workforce availability is also a factor;
shortages or labor competition may cause delays. Tesla hires workers to boost productivity
levels. Financial investment plays a role in acquiring high-quality equipment and skilled workers
necessary for operations (Leftan et al., 2020).
The people in charge of managing the capacity requirement plan consist of the planning
team and operational manager, overseen by the managing director, who holds the power to
authorize all team decisions. The operational team is also responsible for analyzing and
providing details on expenses and operations (Leftan et al., 2020)..
The individuals utilizing the capacity requirement planning consist of the managing
director, who obtains an overview of each employee's tasks within the organization. The capacity
planning team strategizes for the company's ventures. The production team utilizes this tool to
forecast the time required for manufacturing vehicles (Leftan et al., 2020).
The future sources of inaccuracy
When evaluating requirement planning, it's crucial to consider the potential impact of
unforeseen events in the future. Capacity requirement planning encounters its own set of
Capacity Requirements Planning 4
challenges. Excessive automation is one of the reasons for inaccuracies in capacity requirement
planning. A case in point is Tesla's attempt in 2018 to manufacture 5 000 Model 3 cars weekly,
but it did not meet that target. Relying on automation without considering the need for flexibility
and adaptability in the process led to the failure to achieve the goal. It is important to highlight
that humans currently outshine artificial intelligence (AI) when it comes to adapting to situations.
Although AI may have the capability to take over jobs in the future, it is essential for leaders to
thoughtfully evaluate how quickly changes are happening in today's world ( Buchel & Floreano,
2024).
There could be information about the storage capacity that makes it tricky to figure out
the stock in the storage units and plan accurately for capacity requirements. This can create
difficulties for the planning team when dealing with changes in consumer demand, as it becomes
challenging to stay updated on market trends. In this regard, incorrect data may lead to mistakes
or inaccuracies in capacity planning. Reaching the total capacity before reaching the planned
target could lead to major errors, necessitating a halt in production. Equipment malfunctions can
also lead to errors that can disrupt production and waste time for the business operations team as
a result of the breakdown in machinery functioning properly. This scenario typically occurs
when a company employs machinery alongside a workforce that lacks the skills or relies on
outdated equipment that struggles to keep pace with production demands. Having a workforce
can significantly contribute to mistakes occurring and requiring time to rectify them, while also
diminishing the company's efficiency. Neglecting updates to capacity planning may result in
inaccuracies arising from shifts in market trends. If a company's management fails to fulfill their
responsibilities, there is a chance of mistakes occurring in capacity planning. It is important for
employees to receive guidance irrespective of their level of expertise, like how Tesla provides
Capacity Requirements Planning 5
training to all its staff members before assigning them tasks within the organization. Research
has demonstrated that this approach effectively reduces errors and inaccuracies within the
company (Sris, 2021).
Comparison
The principles of the ERP software logic system typically center on the evaluation of
feedback from customers, who share their opinions primarily after experimenting with the
system's functionality and efficiency levels. The key areas for comparison include the pricing of
the CRSP software, the system's user friendliness, and its overall ease of operation.
When it comes to comparing QuickBooks Desktop Enterprise and Fishbowl software
solutions for business management systems, one noticeable difference lies in the user ratings
they have received over time. QuickBooks Desktop Enterprise seems to have a larger user base
than Fishbowl software. In terms of user friendliness and ease of use for customers navigating
through the system's features and functionalities, QuickBooks Desktop Enterprise appears to
outshine Fishbowl according to user feedback. Customer evaluations place both software options
at a level, but their functionality and performance capabilities significantly differentiate them.
The functionality of QuickBooks Desktop Enterprise surpasses that of the Fishbowl software.
QuickBooks employs the in-first-out-cost method instead of the last-in-first-out-costing
method used in the Fishbowls average calculation approach. The Fishbowls system requires a lot
number to generate an invoice, while QuickBooks permits the creation of invoices with pre-
existing lot numbers. Fishbowl allows you to add deadlines for orders, while QuickBooks uses
past stamps as indicators. One additional distinction is that you can receive more than what's
available in Fishbowl if needed, whereas with QuickBooks you must list any extra items as a
separate line item.
Capacity Requirements Planning 6
References
Buchel, B., & Floreano, D. (2024, July 15). Tesla’s problem: overestimating automation,
underestimating humans - IMD business school for management and leadership
courses. IMD Business School for Management and Leadership Courses.
https://www.imd.org/research- knowledge/strategy/articles/teslas-problem-
overestimating- automation-underestimating-humans/
Chofreh, A. G., Goni, F. A., Klemeš, J. J., Malik, M. N., & Khan, H. H. (2019).
Development of guidelines for the implementation of sustainable enterprise
resource planning systems. Journal of Cleaner Production, 244, 118655.
https://doi.org/10.1016/j.jclepro.2019.118655
Lefta, F., Gozali, L., & Marie, I. A. (2020). Aggregate and Disaggregate Production Planning,
Material Requirement, and Capacity Requirement in PT. XYZ. IOP Conference Series
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Materials Science and Engineering, 852(1), 012123.
https://doi.org/10.1088/1757-899x/852/1/012123
Sri, D. (2021). RAW MATERIAL INVENTORY PLANNING OF PATIENT MENU USING
MATERIAL REQUIREMENT PLANNING (MRP) IN RSIA KENDANGSARI MERR
SURABAYA. Jurnal Ekonomi Dan Bisnis Airlangga, 31(1), 14.
https://doi.org/10.20473/jeba.v31i12021.14-27
Tesla Investor Relations. (n.d.). Tesla Vehicle Production & deliveries and date for Financial
Results & webcast for Fourth Quarter 2023. https://ir.tesla.com/press-release/tesla-
vehicle-production-deliveries-and-date-financial- results-webcast-fourth-quarter-2023
Wenyi, N. Y., Jian, N. L., Junbin, N. Y., Jianhua, N. P., & Xiaoqiang, N. W. (2007). A study of
the method of capacity requirements planning. IEEE International Conference on Grey
Systems and Intelligent Services. https://doi.org/10.1109/gsis.2007.4443496
