Definition: Capacity is referred to capability of an object, could be a machine or operations centre, to produce its output for a specific time period, which can be an hour, a day, a month, a year etc. Companies measure capacity in different ways by using input, output or a combination of both to calculate capacity. 

Example:  A recycling company would calculate its capacity based on the amount of material they clear from the inbound material received (input) at their plant whereas a textile manufacturer will calculate based on the units produced (output)

Business Insight: There are 3 common strategies used by companies to manage their capacity: Lead Capacity Strategy (capacity adjusted before the demand occurs), Lag Capacity Strategy (capacity adjusted after demand occurs to meet the demand) and Match Capacity Strategy (increase capacity in smaller increments to coincide with the increases in volume). There are several softwares available that help companies optimise their capacity like ERP (enterprise resource planning) and WMS (warehouse management system).