Capacity risk is the possibility that available production capability will not be sufficient to meet planned demand, customer commitments, or program schedules. In manufacturing, it usually reflects uncertainty around labor, equipment, tooling, materials, process yield, or supplier capacity.
Capacity risk is commonly used in production planning, S&OP, MRP, finite scheduling, program management, and supplier management. It may appear when demand increases, a bottleneck operation is overloaded, skilled labor is unavailable, equipment downtime rises, or scrap and rework consume capacity that was planned for good production.
The term is related to, but not the same as, a capacity constraint or bottleneck. A constraint is an identified limit in the system. Capacity risk is the forward-looking exposure that those limits, or uncertain changes to them, could affect delivery, throughput, or recovery plans.