| Best operating level | Output level where average unit cost is minimized.
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| Capacity | The output that a system is capable of achieving over a period of time.
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| Capacity cushion | Capacity in excess of expected demand.
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| Capacity utilization rate | Measure of how close the firm’s current output rate is to its best operating level (percent).
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| Economies of scale | Idea that as the plant gets larger and volume increases, the average cost per unit drops. At some point, the plant gets too large and cost per unit increases.
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| Economies of scope | When multiple products can be produced at lower cost in combination than they can be separately.
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| Focused factory | A facility designed around a limited set of production objectives. Typically the focus would relate to a specific product or product group.
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| Strategic capacity planning | Finding the overall capacity level of capital-intensive resources to best support the firm’s long-term strategy.
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| Plant within a plant (PWP) | An area in a larger facility that is dedicated to a specific production objective (for example, product group). This can be used to operationalize the focused factory concept.
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