ABSTRACT

This chapter discusses the strategic importance of capacity and the management of capacity when there is a mismatch between available capacity and customer demand. The aim is to allow organisations to balance demand requirements with capacity availability.

The opening perspective discusses the electricity generation industry and poses the question, ‘How much is enough?’

The chapter then starts by examining capacity hierarchies, which are like the demand hierarchies of the previous chapter. It then proposes three methods to arrive at a satisfactory response to the demand forecast - level production method, chase production method, and demand management process. The executive sales and operations planning process allows organisations to plan at the aggregate level. Several worked examples illustrate the process of planning capacity.

The chapter introduces revenue management - also known as yield management - as a valuable process for maximising the revenue achieved for service organisations with relatively fixed capacity, such as airline, rental car, and hotel companies.

The chapter closes by discussing service capacity, queues, and waiting lines.