ABSTRACT
The definition of capacity, the scope and time frame of analysis, and the objectives served by its deployment all serve to shape the beliefs and practices that make up the field of capacity cost management. Three major categories of models define the field of capacity cost management: operational, tactical, and strategic. The capacity models being deployed in companies facing short-term capacity challenges reflect these basic concerns. In the mid or intermediate term, the number of variables in the capacity puzzle that management can control increases significantly. Intermediate-term approaches to capacity concentrate on the flow itself— the structure, focus, and management of the processes that create value for customers. The key to capacity cost management in the intermediate term, then, is understanding the difference between the hard constraints embedded in the physical plant and existing product/market strategy of the firm and the soft constraints on action created by management assumptions.
