Amount of output a system is capable of achieving over a specific period of time.

Efficiency =                Actual output/ Effective capacity

Utilisation =                Actual output/ Design capacity



Capacity planning

Capacity planning is central to the long-term success of an organisation. Capacity plans are made at two levels:

(i) Long-term capacity plans which deal with investments in new facilities and equipments covering the requirements for at least two years into the future.

(ii) Short-term capacity plans which focus on work-force size, overtime  budgets, inventories etc.

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