Capacity, in a service system, is the ability to service demand. The structure, form, and functionality of a service system, or the physiology of service capacity, are thus the attributes the service system needs to embody to effectively meet (i.e., service) demand. However, to ascertain the structure, form, and functionality of any service system, one must first accurately ascertain the demand for which capacity needs to be available, and only then create service systems that most effectively match that demand. For dynamic, highly variable demand, we must create a dynamic and variable service capacity capable of flexing to meet the incoming demand as the demand morphs and changes. This requires an in-depth, granular understanding of the demand patterns and their downstream impacts on the demand for specific resources, such as beds and staff in hospitals, as well as the interdependencies and relationships of resources within the system. With this understanding of the demand-capacity dynamic, we can more proactively and efficiently manage the resources within the service system to match the incoming demands. This chapter reveals the thinking and necessary steps and tools required to effectively analyze, predict, and proactively manage capacity to meet dynamic demand within highly variable, complex environments such as emergency departments (EDs) and inpatient bed flow.