BY:

YUKTI SOOD
MBA Ist YEAR
CAPACITY
 CAPACITY
• The ability of a worker, machine, work center
plant or an organization to produce output per
time period.
• Operation and supply chain managers must
make decisions regarding how much capacity
their organizations need and which types
• In making the decisions regarding capacity
managers must consider several issues:
• How capacity is measured;
• Which factors affect capacity; and
• The impact of supply chain on the
organization's effective capacity.
 Measures Of Capacity
• Measurements vary widely. In general
companies measure capacity in terms of
inputs, outputs, or some combination of the
two.
• In organizations that provide standard
products capacity is likely expressed in terms
of outputs because output does not change
radically from one period to next
• In organizations that provide customized in
terms of inputs.
 Factors that affect Capacity
• Control factor

• Product variation

• Conformance quality
 Supply chain Consideration

• A firm’s capacity concerns certainly aren’t

limited to its activities. In many cases, a firm
must also consider the capacities of key
suppliers and distibutors.
 Capacity Strategies
• There are 3 common strategies that managers
follows for timing capacity expansions are:

• Lead Capacity Strategy

• Lag Capacity Strategy

• Match Capacity Strategy

 Lead strategy
• Lead strategy is adding capacity in anticipation
of an increase in demand. Lead strategy is an
aggressive strategy with the goal of luring
customers away from the company's
competitors. The possible disadvantage to this
strategy is that it often results in excess
inventory, which is costly and often wasteful.
 Lag strategy
• Lag strategy refers to adding capacity only
after the organization is running at full
capacity or beyond due to increase in demand
(North Carolina State University, 2006). This is
a more conservative strategy. It decreases the
risk of waste, but it may result in the loss of
possible customers.
 Match strategy
• Match strategy is adding capacity in small
amounts in response to changing demand in
the market. This is a more moderate strategy