Capacity Management

AAA

DEFINITION of 'Capacity Management'

The management of the limits of an organization's resources, such as its labor force, manufacturing and office space, technology and equipment, raw materials, and inventory. Capacity management also deals with the capacity of an organization's processes – for example, new product development or marketing – as well as with capacity constraints that arise when various resources are combined. Since capacity constraints in any process or resource can be a major bottleneck for a company, capacity management is of critical importance in ensuring that an organization operates smoothly.

INVESTOPEDIA EXPLAINS 'Capacity Management'

Inadequate or improper capacity management can affect a company's financial performance and impede its business prospects. For example, a company that has introduced an innovative new product and mounted an aggressive marketing campaign to promote it must ensure that it has enough manufacturing capacity to meet the expected surge in demand. If manufacturing capacity is insufficient, the product may be sold out before it is replenished in retail outlets, which could lead to a shortfall in sales and cause disappointed customers to look for other alternatives.

RELATED TERMS
  1. Production Possibility Frontier ...

    A curve depicting all maximum output possibilities for two or ...
  2. Output Gap

    An economic measure of the difference between the actual output ...
  3. Excess Capacity

    A situation in which actual production is less than what is achievable ...
  4. Capacity Utilization Rate

    A metric used to measure the rate at which potential output levels ...
  5. Capacity

    The maximum level of output of goods and/or services that a given ...
  6. patent attorney

    A lawyer with expertise in intellectual property law as it pertains ...
Related Articles
  1. Working Capital Works
    Insurance

    Working Capital Works

  2. Measuring Company Efficiency
    Fundamental Analysis

    Measuring Company Efficiency

  3. Vital Link: Manufacturing And Economic ...
    Fundamental Analysis

    Vital Link: Manufacturing And Economic ...

  4. Executing A Swot Analysis
    Investing Basics

    Executing A Swot Analysis

comments powered by Disqus
Hot Definitions
  1. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  2. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  3. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  4. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  5. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
  6. Earnings Before Interest After Taxes - EBIAT

    A financial measure that is an indicator of a company's operating performance. EBIAT, which is equivalent to after-tax EBIT ...
Trading Center