Int. J. Production Economics 69 (2001) 215}225 Long-term capacity management: Linking the perspectives from manufacturing strategy and sales and operations planning Jan Olhager*, Martin Rudberg, Joakim Wikner ( ( Department of Production Economics, IMIE, Linkoping Institute of Technology, SE-58183 Linkoping, Sweden Received 2 April 1998; accepted 2 February 1999 Abstract E$cient long-term capacity management is vital to any manufacturing "rm. It has implications on competitive performance in terms of cost, delivery speed, dependability and #exibility. In a manufacturing strategy, capacity is a structural decision category, dealing with dynamic capacity expansion and reduction relative to the long-term changes in demand levels. Sales and operations planning (S&OP) is the long-term planning of production levels relative to sales within the framework of a manufacturing planning and control system. Within the S&OP, resource planning is used for determining the appropriate capacity levels in order to support the production plan. Manufacturing strategy and sales and operations planning provide two perspectives on long-term capacity management, raising and treating di!erent issues. In this paper, we compare and link them in a framework for long-term capacity management. 2001 Elsevier Science B.V. All rights reserved. Keywords: Capacity management; Manufacturing strategy; Sales and operations planning; Production planning; Resource planning 1. Introduction city is most often treated at an aggregate level, dealing with key work centres rather than all indi- The management of capacity in a manufacturing vidual resources and based on forecasts of product "rm is often divided into three or four stages, families rather than of individual products. More ranging from long-term capacity planning to speci"cally, long-term capacity management is short-term capacity control and execution. Inter- most interested with the capacities that take a long mediate capacity management is related to rough- time to change, either to acquire new capacity or to cut capacity planning, linked to the master sched- reduce capacity levels. Typically, the planning hor- ule, and capacity requirements planning, linked to izon is 1}5 years and the planning period is the material requirements plan. In this paper, we a month, at least for the "rst year, and then possibly deal with the longest-term perspective. The relevant quarters or even longer periods. issues treated at the long-term capacity manage- The input to long-term capacity management is ment level are related to determining when and by a sales plan, based on a demand forecast. Such how much the capacity levels should change. Capa- a sales plan must at least cover the time perspective for acquiring new capacity or reducing the relevant * Corresponding author. capacity. The sales plan can be translated into E-mail address: firstname.lastname@example.org (J. Olhager). a corresponding capacity plan. However, decisions 0925-5273/01/$ - see front matter 2001 Elsevier Science B.V. All rights reserved. PII: S 0 9 2 5 - 5 2 7 3 ( 9 9 ) 0 0 0 9 8 - 5 216 J. Olhager et al. / Int. J. Production Economics 69 (2001) 215}225 regarding the production plan, in terms of e.g. pro- category from a manufacturing strategy perspect- duction smoothing, means that production will not ive. Nowadays, many MPC systems support the be identical to the sales plan. Furthermore, capa- MRPII structure, i.e. manufacturing resource city may be acquired or reduced at times or quant- planning, from where the term sales and operations ities other than those required by the sales plan. planning originated. In early MRPII terminology, Such issues are treated from two separate perspect- the term production planning was used instead of ives, on the one hand the manufacturing strategy S&OP, but today the latter is being used to a larger perspective and on the other the sales and opera- extent. At the S&OP level, a production plan is tions planning perspective, representing the highest developed based on a sales plan. Here the issue is planning level in a manufacturing planning and related to the production level relative to the de- control system. mand level in various periods. The principal op- In a manufacturing strategy, capacity is con- tions available are level, chase and mix (or sidered as one of approximately seven decision cat- combination). These are sometimes called planning egories, for which the manufacturing "rm must strategies. Level means that a production rate is have some policies. The other decision categories established over the planning horizon, whereas are facilities, production process, vertical integra- chase implies that production matches demand in tion, quality, organisation and personnel, and a manner such that all demand in a period is "nally information or planning and control systems produced in the same period (typically month). In (see e.g. [1,2]). Capacity, facilities, production the mix option a production rate is used for a few process and vertical integration are considered periods and then changed. Any di!erence between structural decision categories, dealing with the the sales plan and the production plan will result in long-term manufacturing operations structure. The a corresponding inventory or backlog plan * an latter three decision categories deal with the manu- inventory plan in a make-to-stock situation and facturing infrastructure. The capacity issues are re- a backlog plan for make-to-order or engineer-to- lated to the strategic relationship between capacity order environments. The production plan is trans- and demand levels, speci"cally translated into ca- lated into a capacity requirements plan in terms of pacity expansion or reduction strategies. The basic aggregate resources in the so-called resource plann- foundation for such a strategy is that capacity ing. Then, under- and over-capacities are identi"ed comes in large, discrete steps rather than in small in the resulting capacity plan. Thus, the focus of increments. Therefore, it is of strategic importance capacity management from an S&OP perspective is to decide whether capacity should come "rst, i.e. on the rate of production relative sales. prior to expected changes in demand, or if capacity Both perspectives deal with the long-term man- should be acquired "rst when the corresponding agement of capacity, i.e. how to best utilise &slow- level of demand has been acknowledged. There are moving' resources for manufacturing operations. three di!erent strategies in principle: lead, lag or Still, the issues, objectives and options di!er. Ac- track. Lead means that capacity is added in antici- cording to the decision categories identi"ed by pation of increasing demand, whereas lag means Hayes and Wheelwright  we have structural the opposite. Track is a switching strategy, where decisions related to capacity (expansion or reduc- the di!erences between capacity and demand levels tion strategies) and infrastructural decisions related are kept to a minimum. There is a corresponding to MPC systems (e.g. sales and operations plann- discussion for capacity reduction. Thus, the main ing). This paper links these two decision categories focus on capacity management from a manufactur- traditionally treated as belonging to di!erent ing strategy perspective is the timing of capacity groups of categories. This raises interesting ques- changes. tions regarding the integration of capacity issues Sales and operations planning (S&OP) is the and whether they should be treated in sequence or longest-term planning level in a manufacturing not. The purpose of this paper is to discuss the planning and control (MPC) system. Thus, S&OP relationships between the two perspectives, in order belongs to a manufacturing infrastructure decision to integrate strategic and planning/control issues J. Olhager et al. / Int. J. Production Economics 69 (2001) 215}225 217 into a framework for long-term capacity manage- amount of capacity changes as given (which it typi- ment. To start with, we treat each respective per- cally is), the timing of capacity changes remains to spective, "rst the manufacturing strategy view and be decided upon. then the S&OP view. Thereafter, we study the rela- tionship and the interaction between the two per- 2.2. The timing of capacity changes spectives, and "nally we propose a framework for how to link them. The timing variable in a capacity strategy is concerned with the balance between the (forecas- ted) demand for capacity and the supply of capa- city. If there is a capacity demand surplus the 2. Manufacturing strategy perspective utilisation will be high, thus enabling a low cost pro"le, but there is also a risk of loosing customers Hayes and Wheelwright  use three variables due to e.g. long delivery lead times. A capacity to describe a capacity strategy: the type of capacity supply surplus on the other hand creates a higher needed, the amount of capacity that should be ad- cost pro"le but due to the surplus capacity it is ded (or reduced), and the timing of capacity easier to maintain high delivery reliability and #ex- changes. Since the type of capacity strongly in#uen- ibility. The capacity strategy can thus be ex- ces the amount that is to be added or reduced, the pressed as a trade-o! between high utilisation "rst two are normally discussed together in the (low cost pro"le) and maintaining a capacity so-called sizing problem. cushion (#exibility). Based on this, two &pure' types of capacity strategies can be identi"ed, 2.1. The sizing of capacity changes usually referred to as leading demand (capacity supply surplus) and lagging demand (capacity A central part of the sizing problem is scale demand surplus) in line with the framework in . considerations, where economies as well as dis- In their framework capacity strategy is, however, economies of scale are weighted against each other, only de"ned for increasing demand. Our frame- which leads to concepts such as optimal step work contains both increasing and decreasing de- change, optimal plant size, etc. Due to the inherent mand patterns. In many cases it is not possible (nor properties of most resources, capacity can normally desirable) to maintain a pure strategy and a middle only be changed in discrete steps with a consider- way is chosen which contains aspects of both lead- able lead-time. Adding a new machine or facility ing demand and lagging demand. This approach would probably mean a signi"cant capacity expan- aims at "nding an e$cient trade-o! between the sion making the capacity changing step-wise as pure strategies and is here referred to as tracking illustrated in Figs. 1}3. Assuming the type and demand. Fig. 1. Capacity leading demand (capacity supply surplus). 218 J. Olhager et al. / Int. J. Production Economics 69 (2001) 215}225 Fig. 2. Capacity lagging demand (capacity demand surplus). The objective of the lead strategy approach is to taken when the utilisation is still high. The guiding maintain a cushion of capacity that e.g. can be used rule in this case is that capacity should never exceed to support volume #exibility and reliable lead demand, as illustrated in Fig. 2. Again, the reason is times. If there is a positive trend in demand, capa- to support the same order winning characteristics city should be added in anticipation of demand, as independently of the demand pattern. As discussed shown in Fig. 1. A corresponding negative trend in above in the case of the lead strategy, the lag label is demand would mean that capacity should be de- also somewhat misleading. In a situation where creased to the demand level when eliminating demand is declining, the decision to decrease capa- a &step' of capacity. The guiding rule in this case is city must be taken when the utilisation is still high that the capacity always should be larger than or and thus capacity is leading demand. equal to demand, thereby supporting the same or- In some cases one of the two extreme strategies der winning characteristics both in positive and described above may be desirable and achievable, negative trends of demand. Traditionally, this ap- but in most cases there must be a trade-o! due to proach has been referred to as a lead strategy since e.g. di$culties in forecasting the future demand. capacity leads the increase in demand to maintain This combined approach is usually labelled track- a capacity cushion. But, as can be seen in Fig. 1, ing strategy. The objective is to track the demand as when there is a decreasing demand pattern the close as possible, hence putting more emphasis on objective of keeping a capacity cushion by necessity the sizing problem. Reducing the size of the step creates a lagging behaviour, not reducing capacity changes facilitates a track strategy, which conse- until a reduction can be conducted without endan- quently minimises the deviations between demand gering the maintenance of a capacity cushion. and capacity. An example of the tracking strategy is Therefore, the label lead strategy may be mislead- shown in Fig. 3 indicating the presence of both ing, but it is used below anyhow since it is well under- and over-capacity under this strategy. established in the literature. The three capacity strategies discussed above can The lag strategy is based on the objective of be described as di!erent positions on a spectrum. maintaining a high utilisation of resources. This is The end-points of the spectrum would at one end of particular interest in environments where price is correspond to a situation where low cost, through an order winner and thus the focus on a low cost high utilisation, is the norm, and at the other end to per unit is central. The basic principle is to produce a situation where #exibility, based on over-capa- as much as possible and still maintain full capacity city, prevails. In between the end-points combina- utilisation. Capacity should thus be added in reac- tions, based on trade-o!s between the end-points, tion to increasing demand. The lag strategy is, are found. Below, we discuss a corresponding spec- however, challenging when demand is declining trum from a manufacturing planning and control since the decision to reduce capacity should be perspective. J. Olhager et al. / Int. J. Production Economics 69 (2001) 215}225 219 Fig. 3. Capacity tracking demand. 3. Sales and operations planning perspective long-term capacity planning via feedback from the execution of the sales plan and production plan. In recent years the term sales and operations Within the S&OP process the resource planning planning (S&OP) has been more frequently used in translates the production plan into a resource articles and textbooks, although mostly related to requirements plan, thereby reviewing the required authors discussing MRPII or similar systems. capacity strategy for conformance. As tactical and Some authors use S&OP interchangeably with the operational decisions are made each month, the terms aggregate planning or production planning. capacity plan gets executed or the need to review However, we want to distinguish S&OP from the the capacity strategy becomes apparent. others, where we see aggregate production plann- The issue in the S&OP process is to create a bal- ing (APP) as a part of the S&OP process, which is ance between the sales plan and the production the long-term planning of production and sales plan. In doing this, planners must make decisions relative the forecasted demand and the supply of on marketing activities, output rates, employment capacity. levels, inventory levels, backlogs, subcontracting, etc. The decision options can roughly be divided 3.1. The S&OP process into two types; those trying to modify demand to match the production constraints, and those S&OP is often referred to as a fundamental that modifying supply to match the sales plan (some- maintains the balance between aggregate supply times referred to as aggressive and reactive alterna- and aggregate demand, through monthly updates tives, see e.g. ). The supply option is normally of the annual business plan, see e.g. . Roughly, further derived into the well-known methods where S&OP can be divided into a sales plan (based on production is trying to either level production or forecasted demand) and a production plan, which chase sales (i.e. forecasted demand), or some kind of of course both a!ects inventory and/or order back- combination or mix of the two (see Fig. 4). We label log, and capacity requirements. The S&OP process these methods planning strategies. is the forum where di!erent functional strategies meet for establishing a production plan that eco- nomically serves the needs of the market, while supporting both the strategic and "nancial plans of the "rm. One of the most interesting features of S&OP is its part strategic and part tactical nature . S&OP is on the one hand constrained by the capa- city strategy, but on the other also in#uences the Fig. 4. Tactical decisions in the S&OP process. 220 J. Olhager et al. / Int. J. Production Economics 69 (2001) 215}225 3.2. Modify demand Modifying demand will not be discussed in any detail in this paper. Nevertheless, using a set of marketing tools to in#uence the sales pattern can be seen as a way to achieve a more levelled produc- tion. Such tools can for instance be campaigns, new product introduction, complementary products, Fig. 5. The production plan is levelling the sales plan (in the pricing, etc. MTO case, an initial backlog is assumed). 3.3. Modify supply this sense is the inverse of the inventory curve. The supply option can be divided into three However, #uctuations in sales can also be managed categories } level, chase and combination/mix by in- and outsourcing, subcontracting, etc , planning strategies. The two extremes (level and without changing the internal production rates. chase) are seldom used in isolation. The process When the sales plan is chased, output rates are industry, however, is normally using a pure level adjusted to match sales each period during the strategy, and a pure chase strategy can for instance planning horizon. Buxey  de"nes chase as entail- be found in engineer-to-order environments. When ing exact synchronisation between (forecasted) de- discussing planning strategies, it is of great import- mand and supply, while Pan and Kleiner  de"ne ance to distinguish between di!erent market envi- it as matching forecasted demand period by period. ronments: engineer-to-order (ETO), make-to-order The aim is to minimise investment in inventories (MTO), assemble-to-order (ATO) (sometimes refer- and/or the order backlog by producing to the ac- red to as "nish-to-order, FTO) and make-to-stock tual sales plan or customer orders. In the ideal case, (MTS) all call for di!erent approaches when the with very short lead-times, the MTS and the MTO supply is modi"ed. In the following, we let the environments collapse into a &make-to-require- MTO case to also cover for the ETO case. ments' (MTR) environment without any inventory When production is levelled, constant output or order backlog. In the normal case inventory rates are maintained during the planning horizon. and/or backlog do exist, but are kept on a stable Buxey  de"nes level as e!ectively decoupling level. Flexibility and adaptability are achieved at supply from demand. A similar de"nition is also the expense of low utilisation of production re- found in Johansen and Riis , where they state sources and at higher costs associated with changes that production is decoupled from forecasts and in output rates. The literature suggests numerous actual market demand for a period of several ways of adopting the chase option; changing em- months. The aim is to achieve a uniform and high ployment levels (hire/"re), using overtime or idle- utilisation of production resources, including time (excess capacity), #exible working hours, etc. a minimisation of costs related to changes in pro- As mentioned above a combination of the two duction rates. In an MTS environment, the tactics extremes will commonly be observed in practice. In can roughly be described as maintaining a steady this combination/mix strategy, output rates are production (output) rate throughout the planning changed during the planning horizon, but not as horizon, absorbing #uctuations in the sales plan by frequent as when the sales plan is chased. Produc- changes in inventory level. In MTO environments tion can for instance be levelled over a couple of #uctuations are managed by changes in the order periods, followed by a chase strategy, then altered backlog, i.e. increasing or decreasing the backlog, back to a level strategy, and so forth (see Fig. 6, which of course a!ects the delivery lead times and showing an example of the combination/mix strat- reliability (see Fig. 5 for an example of a level egy). The combination/mix option requires some strategy). Note that the backlog can be seen as anticipation inventory build-up during slack peri- &negative inventory', and that the backlog curve in ods (in an MTS environment), or increases in the J. Olhager et al. / Int. J. Production Economics 69 (2001) 215}225 221 right option, but also suggests a couple of support- ive methods that can be used in connection with these. A more hands-on tool is the S&OP reports (see e.g. ), where past and current performance as well as future plans are easily visualised. How- ever, the cost trade-o! mentioned above has been an object of research for several decades, wherefore the largest portions of articles in the S&OP/APP Fig. 6. The combination/mix planning strategy (in the MTO case, an initial backlog is assumed). area focus on mathematical models trying to opti- mise the choice of planning strategy. The basic mathematical models can be described as follows: order backlog during peak periods (in MTO envi- given a set of forecasts (F ), determine production, R ronments), but only a few changes of output rates inventory/backlog, and workforce levels (P , I , and R R are necessary. This planning strategy thereby en- = , respectively), t"1, 2, 2, N, which minimises R ables a better correspondence between sales and cost subject to appropriate constraints. N is the production output than does a level strategy, more- time horizon, normally reaching over 6}18 months over it creates a more stable production environ- . In choosing P , I , and = relative to F , the R R R R ment than does a chase strategy. Decisions decision-makers choose the desired trade-o! be- regarding how often production rates shall be alter- tween the important cost parameters. Nam and ed during the planning horizon, is based on the Logendran  made a comprehensive survey of trade-o! between costs associated with maintain- APP models containing 140 journal articles (from ing a steady output rate and costs associated with 17 journals) and 14 textbooks, ranging from the changes in output rates. early 1950s to 1990. However, all mathematical As in the case of capacity strategies, the planning models for aggregate planning depend on the estima- strategies can be described as di!erent positions on tion of a number of relatively uncertain cost para- a spectrum, with level and chase as the endpoints. meters, and despite the numerous approaches and Level would correspond to a situation where uni- techniques covered in the literature, only a few have form and high utilisation is the norm, while chase been implemented in an industrial situation . would correspond to a situation where (volume) #ex- ibility is the norm. Along the spectrum di!erent types of combination/mix planning strategies are to be 4. Interaction of the two perspectives found, where the choice of strategy is based on the trade-o! between the endpoints. After a short descrip- As mentioned in the introduction the capacity tion of models and methodologies used in S&OP, we strategy mainly focuses on the timing of capacity then turn to discuss how the two perspectives (capa- changes, whereas the S&OP's primary focus is on city strategy and S&OP) interact with each other. the rate of production. Both perspectives do deal with long-term capacity management, but since 3.4. Models and methodologies they belong to di!erent decision categories they are traditionally treated in sequence, where the S&OP Johansen and Riis  provide a framework for has to work within the frames set by the capacity choosing appropriate demand management de- strategy. Yet, there is a strong interrelationship pending on the strategy focus. In their framework between them, which is discussed below. a number of company speci"c factors (like forecast accuracy, intensity of season, process complexity, 4.1. Manufacturing strategy's impact on sales and etc.) and political and social factors (like interest operations planning rates, rate of unemployment, etc.) are used to guide managers in the S&OP process. The framework The decision on when and how to acquire new aims at helping managers not only to choose the capacity strongly in#uences the action space for 222 J. Olhager et al. / Int. J. Production Economics 69 (2001) 215}225 Fig. 7. Typical capacity strategies and planning strategies for di!erent product/process environments. S&OP. This strategic manufacturing decision de- overtime at some instances and have over-capacity termines whether capacity is adjusted before at others, typically for MTO situations, or build a change in demand, or only once a demand change inventory in MTS environments. has been experienced. Consequently, the planning strategy of S&OP will be more or less forced to 4.2. Sales and operations planning's impact on work within the capacity levels set by the capacity manufacturing strategy expansion or reduction strategy. Still, should a pro- duction plan be chosen that will need extra capa- The decision on how to produce also in#uences city, then that decision will implicitly imply that the need for new capacity. Production smoothing this extra capacity is of temporary nature, and not will keep the maximum capacity requirements to a new capacity acquisition. a minimum, whereas more capacity is needed in If a lead strategy is followed, then S&OP is left one form or another if production volumes vary with much freedom. However, using a lag strategy a lot between periods. Also, in capacity reduction will force the S&OP to act within much tighter situations a level production rate will facilitate the capacity levels, restricting the use of a chase plann- decision on capacity levels. ing strategy. If a chase strategy is desirable, then If products can be produced in a long-term stable there is a need for extra capacity in terms of sub- production rate and there is an upward demand contracting, short-term overtime, or capacity #ex- trend, then new capacity can be postponed. The ibility. A track strategy usually means that capacity option to use a level production rate is usually quite can be acquired in smaller steps, allowing for good in an MTS environment. On the other hand, a closer "t between capacity and demand. Such if products are made or engineered to order and a capacity expansion strategy would still imply that a chase planning strategy is pursued, then new the planning strategy will use sub-contracting or capacity will be needed earlier as demand increases J. Olhager et al. / Int. J. Production Economics 69 (2001) 215}225 223 relative to an MTS situation. A mix or combination work, it is necessary to treat the lead strategy as strategy would lead to a situation between these corresponding to a capacity supply surplus situ- two other (extreme) planning strategies. ation, and the lag strategy must correspond to Even in MTO situations, new capacity invest- capacity demand surplus. Hereby, the capacity ments can be delayed if production can be levelled strategies support the same order winning charac- rather than be chasing demand. The reason is that teristics both for expanding and declining demand the maximum capacity requirements are reduced, patterns. thereby reducing the need for extra capacity until the If capacity resources are acquired in large dis- average capacity requirements indicate such a need. crete steps, then it is important to distinguish be- In one case, where one of the authors was involved, tween capacity acquisition (or reduction) and a company would have been able to delay a new capacity control. The former is dealt with from investment by approximately one year, should they a manufacturing strategy perspective, whereas the have adopted a production smoothing option. latter is treated in the sales and operations plan. However, these decisions need to be taken in an 4.3. A framework for combining the two perspectives integrated fashion, and not in sequence. The reason is that there is interdependency between these deci- The product/process matrix  can be used to sions, such that both in#uence the decision space of illustrate the correspondence between capacity the other. strategies and planning strategies (see Fig. 7). Typi- The main results from linking the perspectives of cally, manufacturing "rms are found along the di- capacity expansion strategies and planning strat- agonal from the upper left-hand corner to the lower egies are summarised in Fig. 8. right-hand corner that is roughly represented by The upper left-hand corner and the lower right- positions 1}4. Low-volume manufacturing of non- hand corner both indicate situations where the two standard, one-of-a-kind products is typically per- perspectives are mutually supportive. Lead and formed in a job shop. In such an ETO environment chase focus on resource availability and #exibility (see e.g. ), a typical order winner is #exibility to provide order winners such as #exibility, design (see e.g. ). Then, a lead strategy (according to and quality. Lag and level combine their respective our de"nition of capacity supply surplus) is prefer- focus on resource utilisation, in order to support able, to allow for volume #exibility. Also, due to the competition on price. The lower left-hand corner inherent nature of ETO not to manufacture to illustrates a situation that is neither supportive nor a forecast, a chase strategy is preferable. At the con#icting. Using a combination of lead and level other end, high-volume, standard commodity items means that production rate changes can be accom- are typically manufactured in continuous pro- modated if needed, i.e. a possibility to move to- cesses. Such items are typically made-to-stock (see wards a mix or chase planning strategy. Also, using e.g. ) and the predominant order winner is price a level strategy means that the maximum capacity (see e.g. ). Due to the focus on price, resource requirements are kept to a minimum and thereby utilisation is most important leading to a lag strat- new capacity acquisitions can be postponed. The egy (capacity demand surplus), in order to avoid real problem is the upper right-hand corner where over-capacity. Also, the MTS situation and the the strategies are con#icting. Using capacity de- importance of cost-e$ciency lead to a level produc- mand surplus means that there are very limited tion rate. The main reason is again to avoid unnec- opportunities to execute a chase strategy. Instead, essary temporary over-capacity. In this paper, we the company must rely on other, external sources add capacity strategy and planning strategy to the for additional capacity when needed to support list of characteristics related to the integrated a chase plan. Still, the company is likely to face choice of product/process environment. frequent overloads and subsequently major deliv- As can be seen in Fig. 7, there is a correspond- ery problems. The positions for track and mix/com- ence between, on the one hand, lead and chase, and bination can be viewed as intermediate relative to on the other, between lag and level. In this frame- the other extreme compositions. 224 J. Olhager et al. / Int. J. Production Economics 69 (2001) 215}225 Fig. 8. Illustration of the e!ects of combining capacity and planning strategies. 5. Summary and extensions strategy is synonymous to capacity supply surplus, whereas a lag strategy assumes capacity demand In this paper we have linked a structural and an surplus. infrastructural decision category from the manufac- An extension to this research is to relate the turing strategy framework. The structural perspect- long-term capacity management issues to the prod- ive deals with capacity in terms of capacity levels uct life cycle, to investigate the sensitivity relative to and expansion/reduction strategies. The infrastruc- the various life cycle stages, e.g. taking market tural perspective deals with S&OP in terms of growth rate into account. Furthermore, the design planning strategies for production relative to sales, of decision support systems for long-term capacity inventory and/or backlogs. Together they provide management, i.e. how to combine and integrate two perspectives on long-term capacity man- these issues, needs further attention. agement. The decisions related to capacity ac- quisition/reduction and planning/control are inter- related in such a way that they must be integrated Acknowledgements and cannot be dealt with in sequence. We have plotted these two characteristics relative to the The research is supported by grants from the product/process matrix  and found a strong Swedish Foundation for Strategic Research, Eric- relationship. Typically, lead and chase are related sson Radio Systems AB and Volvo Research Foun- because they both put a strong focus on resource dation, Volvo Educational Foundation and Dr availability and #exibility. Moreover, lag and level Pehr G Gyllenhammar Research Foundation. both strongly focus on resource utilisation. When discussing capacity reduction strategies relative to the lead, track and lag strategies suggested by References Hayes and Wheelwright  for capacity expansion strategies, we suggest that these three strategies,  R.H. Hayes, S.C. Wheelwright, Restoring our Competitive related to the capacity level relative sales, should Edge } Competing Through Manufacturing, Wiley, New be interpreted in the following manner. A lead York, 1984. J. Olhager et al. / Int. J. 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