One of the most important metrics to keep watch over is capacity – the maximum amount of whatever it is your organization can presently produce given its infrastructure, personnel, and capitalization. Along with other metrics such as profitability, and margins, capacity is often one of the first indicators available to the common observer that can indicate something is wrong or can be improved. Idle machines and empty desks are not a good sign when it comes to one’s continued employment.
Unused capacity is money left on the table and can result in incremental profits that go directly to the bottom line. If the sales and marketing efforts are lagging, this may be another indication of market conditions.
Assuming that you are faced with increasing demand for your product or service, there are only a few ways to meet the challenge. Use the existing infrastructure but add additional personnel to cover additional shifts. Outsource the overage to a third-party job shop with extra capacity, or outsource the entire process to a specialized company with abundant capacity and who is willing to charge a variable amount that relates to the resources consumed plus their overhead and profit.
You should also take into account that some organizations deliberately build overcapacity into their infrastructure to provide for future operations. Therefore, you may wish to note your visible capacity as it currently exists and watch for any deviations. It could be an indicator of things to come.
An example of this capacity issue can be illustrated by the United States Postal Service whose charter mandates delivery to every address in the United States. Due to the decline in first-class letters in favor of e-mail, the USPS found themselves with increasing spare capacity and rising fixed costs -- mostly labor costs due to union contracts. Hence, they sold some of their spare capacity to Amazon who delivers their packages to a central shipping point and leaves it up to the Postal Service to deliver to the last few miles. A win for Amazon who was able to obtain shipping capacity cheaper than alternative methods. A win for the employees of the Postal Service who still have jobs. And, to be fair, not such a win for the American taxpayer who appears to subsidize a portion of Amazon's shipping costs. But that is a story for another day.
What does this mean for competitors such as FedEx, DHL, and UPS who also carry packages? Will they see a decline in revenue and employees?
Again, being vigilant will often allow you to see the handwriting on the wall before the day when the wall comes crashing down.