What does the term 'capacity overloads and underloads' refer to in supply planning?

The term 'capacity overloads and underloads' specifically refers to the imbalance between production capacity and demand. When demand exceeds the production capacity available, it results in a capacity overload, which can lead to delays, unmet orders, and a strain on resources. Conversely, when production capacity exceeds demand, it results in underloads, leading to inefficiencies and wasted resources, such as excess inventory or underutilized labor and machinery.

Understanding this balance is crucial for effective supply planning, as it directly impacts a company's ability to meet customer needs without incurring unnecessary costs. By identifying and addressing capacity overloads and underloads, businesses can optimize their operations, improve service levels, and enhance their overall supply chain efficiency.