Capacity or Growth: Which Comes First?

Bill Caplan
Business Growth Consultant

It can be a bit of a “chicken or the egg” situation deciding which to pursue first: increased capacity to meet growing demand, or increased growth to fill excess capacity. The best answer is: both, simultaneously; maximizing capacity and responding to growth opportunities for manufacturers should occur in tandem.

Take a Strategic View

Lean Manufacturing improvements are not meant to eliminate jobs, they’re meant to increase capacity, which enables growth. It’s important to understand why you’re increasing your capacity. You don’t want excess capacity sitting idle due to insufficient demand (this tends to makes people nervous over long periods of time). But if you generate demand before increasing capacity, you’ll fall short of customer expectations, fail on meeting on-time delivery (the promise), increase lead times, and probably cost yourself some customers. This is why it’s imperative to pursue both increased capacity and growth initiatives simultaneously.

Sometimes increased capacity isn’t in the product line you’re improving, but rather in the ability to grow and meet demands of new markets through the introduction of new product lines. To plan for this type of growth you need a real understanding of your current capacity, a firm understanding of the demand side of your business, and a clear focus on overall business strategy.

Where are the Growth Opportunities?

Lean enterprise solutions start with the strategic plan and aim to bridge the gap between the current state and the desired future state that the strategic plan establishes. Knowing what areas will grow according to the business’ strategic plan helps to identify where capacity gaps may exist. Employing continuous improvement initiatives and/or strategic initiatives along with driving Lean thinking methodologies throughout the organization ties everything back to the overall business strategy, including the marketing strategy  – that is driving business growth.  Using the Value Stream Mapping tool will help the organization establish and prioritize the required improvements to meet the business objectives.

Value Stream Mapping Tool

Value Stream Mapping Tool (download)

The bottom line doesn’t grow without top line thinking that generates new business. And if you’re not improving your bottom line, you’re not implementing Lean thinking. Where does your strategic plan predict growth and development?  Are you a learning organization?  Do you have an effective problem solving methodology in place?

Meeting the Demands of Growth

Ask yourself what’s happening in your markets. Are they capable of growth? If your market is growing, do you have the capacity to satisfying that demand? Do you need to develop new products, or just tweak your existing products in order to grow?

The whole point of Lean thinking is to make what you need, when you need it, in the right quantities. It’s about doing more with the same resources, increasing capacity by stripping out incremental amounts of waste and planning production carefully. The Lean Manufacturing tools we use help expose areas of waste while matching the current state of demand to precise customer delivery requirements.

If you’re predicting or experiencing growth opportunities in your market, are you capable of meeting that demand? If you need to develop new products, you may need different capabilities and skill sets that you don’t have today.

You can’t sell what you can’t produce. You need to have appropriate capacity to fill orders, or you’ll struggle to get products out the door. This is at the heart of why increasing capacity and planning for increased growth must be parallel efforts. This approach makes success that much more attainable and sustainable.