Long term Capacity Reduction

Capacity planning does not necessarily mean the expansion of the capacity. It may also mean reduction of the capacity which may be done in the following ways:

1. Capacity reduction may happen by way of selling off the existing resources and by laying off the employees. The capacity reduced in this manner is different to gain again.

2. Secondly this can be done by temporarily shutting down the facilities. This has to be accompanied by the transfer of employees to some other concern under the same management or some other concerned firm.

3. Finally by way of developing and phasing in new products also the facility can be reduced. This decision is accompanied by the decision to phase out the old products.