Chapter 7

Planning Capacity

In This Chapter

arrow Determining the correct capacity level for your business

arrow Analyzing supply and demand to balance capacity and inventory

arrow Estimating and adjusting wait time

In a perfect world, output would be designed to exactly meet steady demand at a low cost. However, demand variability is an unfortunate business reality, and operations managers have a number of ways to manage fluctuations. One of the most important is adjusting the output rate, or capacity.

Capacity is a company’s maximum possible sustained level of output of goods or services. Part I of this book goes into detail about how to calculate and utilize process capacity. In this chapter, we take a closer look at capacity, focusing on how to leverage capacity by long-term planning (including appointment and reservation policies) to achieve company goals, such as maximizing profit. We also describe a process for determining how much capacity you really need. After all, more capacity costs more money, and a company doesn’t want to build any more than it really needs. We also address how you can use inventory to reduce the need for capacity over the long term. Finally, we look at how capacity ...

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