DEFINITION of 'Capacity Requirements Planning - CRP'

Capacity requirements planning is an accounting method used to determine the available production capacity of a company. Capacity requirement planning first assesses the schedule of production that has been planned by the company. Then it analyzes the company's actual production capacity and weighs the two against each other to see if the schedule can be completed with the current capacity.

BREAKING DOWN 'Capacity Requirements Planning - CRP'

Capacity requirements planning is an important part of ensuring that a company can meet production expectations. If a firm finds that its production capacity is inadequate, it may contract with another firm that has excess capacity. If a firm fails to do capacity requirements planning before production, it may find itself unable to produce the goods it has agreed to produce. This can obviously be disastrous for the firm if it is unable to meet the requirements of a contract or other formal production agreement.

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