In this paper a practical case from an Austrian mechanical engineering company is presented. Simulation based manufacturing system improvement is applied to their component manufacturing plant. Based on the high number of items in the real case, a method for reduction of simulation model complexity applying item aggregation is developed in this paper. In the first improvement step, strategic capacity investment decisions are supported with the use of simulation. In the second step, a MRP planning parameter optimization is performed to improve service level and inventory. Additionally, the effect of capacity related decisions concerning setup time reduction and load-dependent outsourcing is evaluated. The results of this simulation study show that service level and inventory can be significantly improved by optimization of planning parameters and reduction of setup times. In addition, the study shows that load-dependent outsourcing is a viable alternative to capacity investment.