The major role of capacity planning is to anticipate the requirements for resources involved within a company structure and so enable the firm to flow smoothly without either a backlog of orders or a build up of stock. Knowing whether will be greater or lesser need for a product will enable the company to create added stock prior to the demand, and therefore offer a quick return and faster processing. It safeguards against low supplies coinciding with high order demands, and the other side of the coin where there is a large accumulation of stock without sufficient demand.

Capacity planning involves the use of business plans, historical records and forecasts with analytical modeling tools in order to determine various scenarios that might occur and to predict the most likely outcome over a given time. Such software is not infallible, but generally works better than mere guesswork or basic estimations based on time consuming manual workouts of expected growth or fall. Accurate predictions can ensure that a company runs more efficiently and stays ahead of demand without creating an overly large supply of inventory just sitting around doing nothing but taking up space and possibly the cost of that space.

Minimizing the discrepancy between excess stock and unfilled orders allows for a business to achieve a better reputation within the community as well as a more efficient working process. When all orders are dealt with in a timely manner and nobody is left waiting, the standing of a company greatly rises and it is regarded with favor. While having excess products sitting around may not be a problem in all cases, it can be wasteful of floor space and if production continues to run faster than demand, a company can end up with the eventual need to cease production for a lengthy time, resulting in the possible temporary laying off of dissatisfied production staff.

Terminology arising concerning capacity planning includes the terms lead strategy, lag strategy and match strategy. Lead strategy refers to the expectation of a higher demand, leading a company to increase production with the possible risk of over production and excess stock. Lag strategy refers to implementing higher production at a time when there is a higher demand for a product, yet may lead to customers waiting for a longer duration before their orders are filled and therefore poorer customer satisfaction and higher cancellation of orders. Match strategy refers to gradually adding to the production based mainly on market trend response and customers following the trends. Match strategy is the safest option, least likely to produce excess stock of waiting customers.