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Capacity Investment Analysis

Appraisal method — instantiates Internal Capacity Deepening

Compares a slate of candidate capacity-relief investments — internal densification and footprint expansion alike — on the capacity they yield, their cost, feasibility, and risk, to decide which to fund.

When capacity is short there are always several ways to buy relief, and the trap is to compare the appealing one against nothing. Capacity Investment Analysis lays every candidate on the same table — debottleneck the existing line, add a shift, pool a resource, or expand the footprint — and scores each on a common frame: the effective capacity it yields, the fixed cost it locks in, and how feasible and risky it is. Its defining discipline is treating footprint expansion as one costed candidate among peers rather than the default, forcing the "just add more" option to earn its place against the internal moves the archetype prefers. The output is a ranked comparison and a recommendation, not an approval — it tells you which investment buys the most relief per committed dollar, not that you may proceed.

Example

An injection-molding plant faces demand up roughly a third. Four candidates go on the table: run a night shift on the existing presses, buy a fourth press, retool the two slowest tools for faster cycle times, or lease a second building. The analysis models each candidate's capacity yield (the night shift and the retool add the most usable output soonest), maps the fixed cost each commits (the second building dwarfs the rest and carries a long lead time), and scores feasibility and risk (the night shift strains supervision and quality; the building is low-risk operationally but a large, slow, irreversible bet). The ranked result recommends the retool plus a partial night shift now, and holds the second building as a fully characterized option to revisit only if the internal moves top out. Expansion loses this round not on dislike but on yield-per-dollar.

How it works

  • Assemble the full slate. Every relief option — including do-nothing and including footprint expansion — is listed, so the favored one competes rather than walks in unopposed.
  • Score on one frame. Each candidate is reduced to capacity yielded, fixed cost committed, and a feasibility/risk read, expressed in comparable units.
  • Rank and recommend. Options sort by relief-per-committed-cost adjusted for risk; the expansion option is characterized enough to fund later without re-analysis if internal moves run out.

Tuning parameters

  • Yield metric — peak capacity or sustainable capacity. Sizing to peak flatters options that can't hold the pace; sizing to sustained is honest but less flattering.
  • Cost scope — fixed cost only, or full lifecycle and off-ledger costs. Narrow scope makes expansion look cheap by hiding the coordination and infrastructure costs that sit outside the project ledger.
  • Risk weighting — how heavily feasibility and reversibility discount a candidate. Weight it up and slow, irreversible bets fall; weight it down and they flatter.
  • Slate breadth — how many candidates, and whether do-nothing is forced in. A wide slate with a do-nothing baseline is the main guard against a rigged comparison.
  • Screening hurdle — the minimum relief-per-cost a candidate must clear to stay in contention.

When it helps, and when it misleads

Its strength is that it makes footprint expansion compete on merits against internal densification, which is precisely the bias the archetype fights: expansion looks simple because so many of its costs lie off the immediate ledger.

Its failure modes are the usual ones for an appraisal. It is easily run backwards — assembled after the favored option is chosen, to manufacture a case rather than test one. It quietly ignores opportunity cost when the slate is narrow: the real cost of funding one option is the next-best relief it displaces, and a comparison that omits the alternatives can't see it.[1] Optimism inflates the favored candidate's yield and deflates its risk. The discipline that keeps it honest is a wide slate with a do-nothing baseline, full-scope costing that pulls off-ledger expansion costs into view, and keeping the rejected options documented so the comparison can be audited.

How it implements the components

  • capacity_yield_model — quantifies the effective capacity each candidate adds; the "value" axis every option is scored on.
  • fixed_cost_map — lays out the fixed-cost commitment each candidate locks in, including the long-lead, hard-to-reverse costs of expansion; the "cost" axis.
  • capacity_expansion_option — characterizes footprint expansion as one costed, risked candidate in the slate rather than the default fallback.

It does not trace the full two-mode lifecycle cost or locate the intensify-versus-expand crossover (two_mode_lifecycle_cost_model, intensification_expansion_crossover_rule) — those are Intensification–Expansion Lifecycle Model and Footprint-Expansion Decision Gate; nor the recurring shadow-value ranking of whichever constraint currently binds (marginal_response_range, opportunity_cost_review) — that's Marginal Capacity Value Review.

References

[1] Opportunity cost — the value of the best alternative forgone. A capacity appraisal that scores one option in isolation cannot see it; the corrective is to always score the slate, including do-nothing. ↩