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. Occupational Safety And Health ...

    Law passed in 1970 to encourage safer workplace conditions in ...
Related Articles
  1. Insurance

    Working Capital Works

    A company's efficiency, financial strength and cash-flow health show in its management of working capital.
  2. Fundamental Analysis

    Measuring Company Efficiency

    Three useful indicators for measuring a retail company's efficiency are its inventory turnaround times, its receivables and its collection period.
  3. Fundamental Analysis

    Vital Link: Manufacturing And Economic Recovery

    Manufacturing output is one of the clearest signs that an economy is recovering from a recession.
  4. Mergers are not the same as acquisitions.
    Investing

    What's a Merger?

    Mergers are not the same as acquisitions. In an acquisition, one company buys and subsumes another company, leaving only the buyer in place. In most mergers, both companies merge to form an entirely ...
  5. Investing Basics

    Enterprise Resource Planning System: A How To

    An ERP system won’t transform poor management into good management, but the real-time business analytics can help make good management even better.
  6. As the number of new employees increases, the marginal product of an additional employee will at some point be less.
    Investing

    More is Less: Diminishing Marginal Returns

    In formal economic terms, the law of diminishing marginal returns states that as the number of new employees increases, the marginal product of an additional employee will at some point be less ...
  7. Typically, SPEs are subsidiaries of a larger corporation.
    Investing

    How Special Purpose Entities Help Fight Risk

    A special purpose entity, sometimes called a special purpose vehicle, is a legal entity created for one very limited, particular task. Typically, SPEs are subsidiaries of a larger corporation.
  8. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.
    Professionals

    What is a SWOT Analysis?

    SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. SWOT analysis is a management tool used to identify strategies for success. It may be used to guide individual thinking, group ...
  9. Accounting is the recording of financial transactions of a business or organization.
    Professionals

    What is Accounting?

    Accounting is the recording of financial transactions of a business or organization. It also includes the process of summarizing, analyzing and reporting these transactions in financial statements.
  10. What's a Multinational Corporation?
    Investing

    What's a Multinational Corporation?

    A multinational corporation is just that – a corporation that operates in multiple nations, with a home office that coordinates global management. Being a multinational corporation is a complicated ...

You May Also Like

Hot Definitions
  1. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  2. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  3. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  4. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  5. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  6. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
Trading Center