The most common use of the word capacity is in the static, physical sense of the fixed volume of a container or the space in a building. This meaning of the word is also sometimes used by operations managers. For example, a pharmaceutical manufacturer may invest in new 1000-litre capacity reactor vessels, a property company purchases a 500-vehicle capacity city-centre car park, and a ‘multiplex’ cinema is built with ten screens and a total capacity of 2500 seats. Although these capacity measures describe the scale of these operations, they do not reflect the processing capacities of these investments. To do this we must incorporate a time dimension appropriate to the use of assets. So the pharmaceutical company will be concerned with the level of output that can be achieved using the 1000-litre reactor vessel. If a batch of standard products can be produced every hour, the planned processing capacity could be as high as 24,000 litres per day. If the reaction takes four hours and two hours are used for cleaning between batches, the  vessel may produce only 4000 litres per day. Similarly, the car park may be fully occupied by office workers during the working day, ‘processing’only 500 cars per day. Alternatively, it may be used for shoppers staying on average only one hour and theatre-goers occupying spaces for three hours in the evening. The processing capacity would then be up to 5000 cars per day. Thus the definition of the capacity of an operation is the maximum level of value-added activity over a period of time that the process can achieve under normal operating conditions.

Source: Operations Management. Nigel Slack, Stuart Chambers, Robert Johnson.