CAPACITY MANAGEMENT
Capacity is the capability of a manufacturing or service resource such as a facility, process, workstation,
or piece of equipment to accomplish its purpose over a specified time period.
Capacity can be viewed in one of two ways:
1. as the maximum rate of output per unit of time; or
2. as units of resource availability.
ECONOMIES AND DISECONOMIES OF SCALE
Economies of scale are achieved when the average unit cost of a good or service decreases as the
capacity and/ or volume of throughput increases.
Diseconomies of scale occur when the average unit cost of the good or service begins to increase as the
capacity and/or volume of throughput increases.
Focused factory is a way to achieve economies of scale, without extensive investments in facilities and
capacity, by focusing on a narrow range of goods or services, target market segments, and/ or dedicated
processes to maximize efficiency and effectiveness.
The focused factory argues to ”divide and conquer” by adopting smaller, more focused facilities
dedicated to (1) a few key products, (2) a specific technology, (3) a certain process design and
capability, (4) a specific competitive priority objective such as next-day delivery, and (5) particular
market segments or customers and associated volumes.
CAPACITY MEASUREMENT IN OPERATIONS
Safety Capacity
Capacity Measurement
LONG-TERM CAPACITY STRATEGIES
Capacity Expansion
1. Amount
2. Timing
3. Form of capacity changes
SHORT-TERM CAPACITY MANAGEMENT
Managing Capacity by Adjusting Short-Term Capacity Levels
-Add or share equipment
-Sell unused capacity
-Change labor capacity and schedules
-Change labor skill mix
-Shift work to slack periods
Managing Capacity by Shifting and Stimulating Demand
-Vary the price of goods or services
-Provide customers with information
