Operations Management: An Integrated Approach, 5th Edition

Develop Capacity Alternatives

Once a company has identified its capacity requirements for the future, the next step is to develop alternative ways to modify its capacity. One alternative is to do nothing and reevaluate the situation in the future. With this alternative, the company would not be able to meet any demands that exceed current capacity levels. Choosing this alternative and the time to reevaluate the company's needs is a strategic decision. The other alternatives require deciding whether to purchase one large facility now or add capacity incrementally, as discussed earlier in the chapter.

Capacity Alternatives: 1. Do nothing

2. Expand large now

3. Expand small now, with option to add later

Evaluate Capacity Alternatives

There are a number of tools that we can use to evaluate our capacity alternatives. Recall that these tools are only decision-support aids. Ultimately, managers have to use many different inputs, as well as their judgment, in making the final decision. One of the most popular of these tools is the decision tree. In the next section we look more closely at how decision trees can be helpful to managers at this stage.