Capacity is the maximum rate of out

Capacity is the maximum rate of output of a process or a system. Managers are responsible for ensuring that the firm has the capacity to meet current and future demand. Otherwise, the organization will miss out on opportunities for growth and profits. Making adjustments to decrease capacity, or to increase it to facilitate the launch of an expanded product line as Tesla Motors did when planning a lower priced car model, is therefore an important part of the job. Acquisition of new capacity requires extensive planning and often involves significant expenditure of resources and time. Bringing new capacity online can take several years, for instance, in the semiconductor industry or in the construction of new nuclear power plants.Capacity decisions related to a process need to be made in light of the role the process plays within the organization and the supply chain as a whole, because changing the capacity of a process will have an impact on other processes within the firm and across the chain. As such, capacity decisions have implications for different functional areas throughout the organization. Accounting needs to provide the cost information needed to evaluate capacity expansion decisions. Finance performs the financial analysis of proposed capacity expansion investments and raises funds to support them.Marketing provides demand forecasts needed to identify capacity gaps. Management information systems design the electronic infrastructure that is needed to make data such as cost information, financial performance measures, demand forecasts, and work standards available to those needing it to analyze capacity options. Operations is involved in the selection of capacity strategies that can be implemented to effectively meet future demand. Purchasing facilitates acquisition of outside capacity from suppliers. Finally, human resources focuses on hiring and training employees needed to support internal capacity plans. So all departments in a firm get involved with and are affected by long-term capacity planning decisions.