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the overall level oF operatIons CapaCIty 123
table 4.1 three levels of capacity decision

Decisions con-
cern provision Starting point
Level Time-scale of . . . Span of decisions of decision Key questions
Strategic Years–Months Buildings and All parts of the Probable markets How much capacity
capacity facilities business to be served in do we need in
decisions Process the future total?
technology Current capacity How should the
configuration capacity be
distributed?
Where should
the capacity be
located?
Medium-term Months–Weeks Aggregate Business – site Market forecasts To what extent do
capacity number Physical capacity we keep capacity
decisions of people constraints level or fluctuate
Degree of capacity levels?
subcontracted Should we change
resources staffing levels as
demand changes?
Should we
subcontract or off-
load demand?

Short-term Weeks–hours– Individual staff Site Current demand Which resources are
capacity minutes within the Department Current available to be allocated to
decisions operation capacity what tasks?
Loading When should
of ­individual­ activities be loaded
facilities on individual
resources?

competitive position. Each of the main factors that will influence the overall level of
capacity will be discussed in this section. Figure 4.2 illustrates them. As usual, some of
the factors are related primarily to the requirements of the market, while others are
largely concerned with the nature of the operation’s resources.

Forecast demand

Only rarely will a business decide to invest in a level of capacity that is exactly equal
to its expectation of future demand. However, it is a starting point in trying to under-
stand why operations finish up the size they are. So, for example, if a leisure business
believes there is likely to be a demand for 500 rooms per night at a newly developed
resort location, then it may build a 500-roomed hotel. If an insurance company’s call
centre is forecast to handle 500,000 calls per week and one operator can handle a call
every 3 minutes, then it may build a 625-station call centre (operators have 40 * 60 min-
utes a week, so can receive 2,400/3 = 800 calls a week, so 500,000#800 = 625 operators
are needed). But capacity decisions are not always as simple as this. Although a ‘single

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