First, it ensures that the organization has adequate capacity to meet all demand, even during periods of high growth. This is especially important when the availability of a product or service is crucial, as in the case of emergency care or hot new product. For many new
products, being late to market can mean the difference between success and failure.
Another advantage of a lead capacity strategy is that it can be used to pre-empt competitors who might be planning to expand their own capacity. Being the first in an area to open a large grocery or home improvement store gives a retailer a define edge.
Finally many businesses find that overbuilding in anticipation of increased usage is cheaper and less disruptive than constantly making small increases in capacity. Of course, a lead capacity strategy can be very risky, particularly if demand is unpredictable or technology is evolving rapidly.
Lag strategy refers to adding capacity only after the organization is running at fullcapacity or beyond due to increase in demand (North Carolina State University, 2006). This is a more conservative strategy and opposite of a lead capacity strategy. It
decreases the risk of waste, but it may result in the loss of possible customers either by stock-out or low service levels.
- Three clear advantages of this strategy are;
- Reduced risk of overbuilding,
- Greater productivity due to higher utilization levels,
- Ability to put off large investments as long as possible. Organizations that follow this strategy often provide mature, cost-sensitive products or services.
- Match strategy is adding capacity in small amounts in response to changing demand in the market. This is a more moderate strategy.
- Adjustment strategy is adding or reducing capacity in small or large amounts due to consumer’s demand, or, due to major changes to product or system architecture.
