Measures of Capacity:

Single measure is not applicable in all types of the situations. A retailer measures capacity as annual sales rupees produced per square metre; an airplane measures capacity as available seat kilometres per month etc. Generally, capacity may be expressed in one of the following two ways :

Output Measures

These are usual choice for high volume processes. If a plant generates only single item (example single type of vehicle), the measuring of capacity is easier. Although, many times this may not be the case, i.e. the plants can be producing different types of products. As amount of customization and variety in the product mix becomes too much, output-based capacity measures becomes less useful.

Output measures are best in use while the firm produces relatively small number of standardized products and services, or when applied to individual processes within the overall firm.

Input measures

These are the usual choice for the low-volume, flexible process. For instance, in a photocopy shop the capacity may be measured as machine hours or number of machines. Just like product mixes have complicated the output capacity measures, same may complicate the input measures also. Demand, which invariably is expressed as the output rate, should be converted to an input measure. After making the conversion a manager may compare the demand needs and capacity on an equivalent basis.