In operations management, the capacity of an operation is the maximum level of value-added activity over a period of time that the

process can achieve under normal operating conditions. It is the facilitys maximum productive capability, usually expressed as volume of output per usually expressed as volume of output per period of time. Capacity is measured by: Input rate capacity Output rate capacity Capacity utilization percentage Capacity cushion Capacity cushion, which is an amount of capacity in excess of expected demand when there is some uncertainty about demand. Capacity Planning Decisions Assessing existing capacity. Forecasting capacity needs. Identifying alternative ways to capacity. Evaluating financial and technological impacts on capacity. Selecting a capacity alternative most suitable to strategic mission.

Forecasting capacity demand One of the strategic choices that a firm must make as part of its manufacturing strategy. There are three commonly recognized capacity strategies: lead, lag, and tracking. A lead capacity strategy adds capacity in anticipation of increasing demand. A lag strategy does not add capacity until the firm is operating at or beyond full capacity. A tracking strategy adds capacity in small amounts to attempt to respond to changing demand in the marketplace. LONG-TERM CAPACITY DECISIONS

Estimate future capacity requirements Identify gaps by comparing requirements with available capacity Develop alternative plans for reducing the gaps Evaluate each alternative, both qualitatively and quantitatively, and make a final choice.