Practice Summary: Enhancing Forecasting and Capacity Planning Capabilities in a Telecommunications Company

In the constantly changing telecommunications sector, capacity planning determines the technological resources that a company must acquire and install in advance to meet highly stochastic demand. Decisions on capacity affect service levels and return on investment. Although excess capacity increases fixed costs and the risk of equipment obsolescence, shortage of capacity may result in complaints and loss of customers. We developed an integrated decision support system to aid in the annual capacity planning process at AVANTEL, a Mexican telecommunications company, which AXTEL subsequently acquired. Using artificial neural networks, inventory models, and optimization techniques, this system addresses the entire capacity planning process, including demand forecasting, capacity expansion, and equipment selection. The significant savings that AVANTEL reported may persuade other telecommunications companies to also use the system.