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Operations Management: Processes and Supply Chains, 12th Edition by Larry P. Ritzman, Manoj K. Malhotra, Lee J. Krajewski

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Capacity Timing and Sizing Strategies

Operations managers must examine three dimensions of capacity strategy before making capacity decisions: (1) sizing capacity cushions, (2) timing and sizing expansion, and (3) linking process capacity and other operating decisions.

Sizing Capacity Cushions

Average utilization rates for any resource should not get too close to 100 percent over the long term, though it may occur for some processes from time to time in the short run. If the demand keeps increasing over time, then long-term capacity must be increased as well to provide some buffer against uncertainties. When average utilization rates approach 100 percent, it is usually a signal to increase capacity or decrease order acceptance to avoid declining ...

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