OPERATIONS MANAGEMENT
TERM PAPER
STRATEGIC CAPACITY PLANNING AT GENERAL MOTORS

NAME: Abheek Tarafdar ROLL NO: 2014SMF6502 MBA 1ST YEAR

CAPACITY
The dictionary definition of capacity is “the ability to hold, receive, store, or accommodate”. In a general business sense, capacity refers to the amount of output that a system is capable of achieving over a specific period of time. The measure of capacity lets firms know of its potential in achieving the promised target, to ensure that future growth of the company is safeguarded and contingency plans are put in case some targets are not met.
STRATEGIC CAPACITY PLANNING
Strategic capacity planning is to provide an approach for determining the overall capacity level of capital-intensive resources-facilities, equipment, and overall labor force size – that best supports the company’s long term competitive strategy.
BEST OPERATING LEVEL
The best operating level is the level of capacity for which process was designed and thus is the volume of output at which average unit cost is minimized. This is a better measure as compared to the capacity, as capacity does not provide us as to what is the time frame with which it is mentioned. It only implies the rate at which the company currently works.
CAPACITY UTILIZATION RATE
The capacity utilization rate reveals how close a firm is to its best operating level. It is the ratio between the capacity used and the best operating level of the firm. It is important