Page 146 - Operations Strategy

Chapter
4 Capacity strategy

Introduction
Capacity is a fundamental decision in operations. That is why it is the first of the opera-
tions strategy decision areas to be treated. After all, the purpose of operations strategy is
to provide and manage the ability to supply demand, and capacity is a vital part of that
ability. Also, capacity strategy decisions affect a large part of the business (indeed capacity
decisions can create a large part of the business), and the consequences of getting them
wrong are almost always serious and sometimes fatal to a firm’s competitive abilities. Too
much capacity underutilises resources and drives up costs. Too little capacity limits the
operation’s ability to serve customers and therefore earn revenues. The risks inherent in get-
ting capacity wrong lie both in having an inappropriately configured set of resources and
in mismanaging the process of changing capacity over time. This chapter will look at the
principles behind how operations configure, and reconfigure, their capacity See figure 4.1.

Key questIons

● What is capacity strategy?
● How much capacity should an operation have?
● How many separate sites should an operation have?
● What issues are important when changing capacity levels?
● Where should capacity be located?

Figure 4.1 this chapter looks at capacity strategy
Resource usage

Quality
Performance objectives Dependability Issues include: Market competitiveness
Capacity levels
Speed
Number of sites
Size of sites
When to change capacity
Flexibility
How much to change capacity
Location
Cost
Supply Process Development
Capacity strategy and
networks technology
organisation
Decision areas

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