Review Profitability Before Expanding Capacity

When faced with the need to expand manufacturing capacity and the inherent investment required, first perform a thorough profitability analysis (a profit map) of each product produced from the capacity-constrained factories (this includes profitable products being sold unprofitably to selected customers). Since many companies have a significant amount of unprofitable business, it is quite possible that stopping the unprofitable sales can free up enough capacity to avoid or at least postpone the necessary investment. Alternatively, finding ways to convert that unprofitable business to profitable business may make capacity expansion much more economical.

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