Operations Management: Processes and Supply Chains, 12th Edition

Planning Long-Term Capacity

Long-term capacity plans deal with investments in new facilities and equipment at the organizational level and require top management participation and approval because they are not easily reversed. These plans cover at least 2 years into the future, but construction lead times can sometimes be longer and result in longer planning time horizons.

As already seen in our opening vignette, long-term capacity planning is central to the success of an organization. Too much capacity can be as agonizing as too little. Often entire industries can fluctuate over time between too much and too little capacity, as evidenced in the airline and cruise ship industry over the past 20 years. When choosing a capacity strategy, managers ...