Capacity management

Capacity management is the ongoing adjustment of an organization’s resources so that the entity can meet customer demand. Those resources may include the machine or labor capacity of a business, as well as its on-hand inventory balances. Capacity levels can be altered by adding equipment, outsourcing work to suppliers, altering work schedules, changing staffing levels, authorizing overtime, and so forth. The main focus of an effective capacity management program is the bottlenecks in an organization; all other operations typically function with excess capacity, and so require little ongoing management. A potential risk of tight capacity management is that a firm does not retain sufficient excess capacity to deal with sudden spikes in customer demand.