What is Capacity Management?
Capacity management in the context of this blog refers to when a business or organization maximizes its prospective future enterprises and production output continuously under any and all conditions. The capacity of a business or organization measures how much the company can accomplish, produce or sell within a specific time period. (Gabriel Machado Pureza, read Nov. 2021)
- A doctor’s office can see 6 patients an hour and 50 patients in a day
- Your local coffee shop can brew 1000 cups of coffee a day
- A movie theater can house 200 patrons per movie showing 6 times a day
- A train can carry 60 passengers per car at any one time and have up to 10 cars on a particular run
Understanding the Importance of Capacity Management
Capacity can change for a given business or organization due to changing conditions and/or external influences like seasonal demand, changes in the industry itself, and macroeconomic considerations such as interest rates and national productivity. Companies must be able to pivot to meet these challenges in a cost-efficient manner. For example, in the case of a doctor's practice, if the number of patients that choose a particular doctor’s practice rises substantially due to any number of reasons, steps must be taken to ensure that the capacity in the waiting room is adequate to hold more patients. Additionally, more nurses and Physicians Assistants may need to be hired to see more patients daily while ensuring that the quality of care doesn’t degrade.
In the business realm, a widget maker may need to adjust raw material resources depending on the demand for the widget and the business's current inventory. Also, the implementation of a capacity management strategy may necessitate outsourcing business operations, purchasing additional equipment, leasing or selling commercial property, and overtime for the workforce. Capacity management is crucial to maintaining revenue, customers, order fulfillment, and market share. (Andrew Bloomenthal, Dec. 2020). One possible solution for businesses to implement a capacity management system would be to use an automated SMS system. Automated SMS is a simple way to streamline business communications both internally and externally. In addition, keeping customers informed about activity relating to their account can be handled efficiently with push notifications on a mobile app, or via SMS or email.
If you take another example, like public transport, capacity management principles can be used to maximize the use of available seats/train cars/routes so revenue can be maximized while maintaining riders' comfort, and convenience.
In an article called “Mind the Seat Limit: On Capacity Management in Public Automated Shuttles,” (Mirnig, et al. June 2021) the authors discuss whether automated shuttles would be successful as an option for customers and whether automation would result in a cost-saving with no reduction in safety or convenience for the passengers. Capacity management in this study was done with a ticketing booking app. The majority of participants in the study indicated that the app that was developed for the study was a useful way to book a seat on the autonomous shuttle and that they would use it. It can be extrapolated from the results of this study that most forms of public transportation could benefit from some form of capacity management in ticketing/booking before the ride has taken place for passengers that choose to use an app on either a mobile device or a kiosk.
What are the Main Strategies for Capacity Management?
The comprehensive strategies of capacity management are:
Lag Strategy: Adding capacity only after the business or organization is running at full capacity or more due to an increase in demand. This is a conservative strategy that decreases the risk of waste but may result in a loss of possible customers due to sold-out stock or reduced service levels. The advantages are a reduced risk of overbuilding, greater productivity due to higher utilization levels, and the ability to put off large investments as long as possible.
Lead Strategy: Adding capacity in anticipation of an increase in demand. This is an aggressive strategy with the goal of luring customers away from competitors by improving the service level and reducing lead time. The major advantage of this approach is that it ensures the company or organization has adequate capacity to meet demand even during periods of high growth. A lead capacity strategy can be risky when demand is unpredictable or technology evolves rapidly.
Match Strategy: Adding capacity in anticipation in small amounts in response to changing demand in the market. This is a more moderate approach than a Lead strategy.
Dynamic Strategy: When a business or organization adds or reduces capacity in small or large amounts due to consumer demand, or due to major changes in the product or system architecture (Wikipedia. read Dec. 2021).
Can Capacity Management Benefit Your Company or Organization?
If you are interested in addressing capacity management issues in your company or organization but aren’t sure how to proceed, The Silverlogic (TSL) can help.
TSL, located in Boca Raton, Florida, is a global organization of full-time software engineers, designers, and architects focused on developing and delivering products that help businesses grow. We are a client-focused, value-driven, custom software development company led by founder and CEO David Hartmann. Collaborating closely with you and your company, TSL can help by being an objective third party. We can evaluate the areas of your business you wish to measure or analyze and make evidence-based recommendations for bespoke software that will help maximize your capacity while providing sufficient ROI to justify its implementation. Contact us today!