The Capacity Model
The Capacity Model demonstrates the importance of identifying and fulfilling current capacity in all areas before investing in new, larger capacity. This applies to plant, machinery, equipment, premises, people and all other resources. Whilst most managers are able to recite current and targeted turnover, there are relatively who are aware of current capacity. Run Rate is the percentage of turnover versus capacity.
Platform strategies are designed to deal with operational inefficiencies and optimise current resources without increasing fixed costs. It is wise to plan the timing of future investments to coincide with the point of optimum capacity of the present “cup”.
Growth Strategies require investment as the effect is to create a bigger “cup”. The size and shape of the new capacity is determined by the business momentum, market growth and penetration, and portfolio planning, e.g. new products, new markets, acquisitions, diversification etc.
Many organisations suffer from the effects of “growing too fast”. This is often because they have not seen the need to fill the existing cup before expanding into a larger one with capacity way in excess of their actual requirements.