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4 Types of Capacity Strategy

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Capacity strategy is an approach to increasing and decreasing business capacity to meet demand. Capacity includes things like labor and equipment that can be scaled to increase business output. The following are common types of capacity strategy.

Lead Strategy

An upfront investment in more capacity that you need. This can be done when capacity is inexpensive or difficult to obtain. For example, a new vineyard anticipates using less than 10 acres of land in its first 5 years but purchases 100 acres of land as a long term investment in the business.

Lag Strategy

Waiting until your current capacity is stretched to its limits before adding more capacity. For example, a call center with 10 staff that doesn't hire more employees until everyone is working overtime. This may serve to boost efficiency and productivity as current resources are heavily utilized. It tends to result in poor performance such as slow response or quality failures.

Incremental Strategy

Adding capacity in small increments when you approach full capacity. For example, a data center that adds 20 servers when its capacity touches 90%.

Dynamic Strategy

Adding capacity, large or small, before it's required based on forecasts. For example, a data center that adds 200 servers based on next month's sales forecasts.
Overview: Capacity Strategy
An approach to scaling business capacity.
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