Capacity Planning

For any company, hiring and firing can be considered a trivial everyday practice. Many do it on an ad hoc basis which can be a cause or failure in the long run. The right way to do it is via capacity planning.

Capacity planning is a long term strategy for maintaining the correct number of resources. This means looking back into past data, future demands and trends to figure out adequate resources. E.g. a ski resort may hire more employees during winter or high season. It may offer short term employment during that time. During off season, it may maintain only the minimum number of employees to keep the operations running. To figure out what is that correct number, past experiences can be utilized.

When and how to increase capacity are quite critical decisions for any organization.

The graphs show how to increase capacity in relation to demand.
The inverse can be true too. If the demand is too high and increasing capacity in incremental steps is not possible, mergers and take-overs of companies can be the way to go. Similarly lay-offs can be the reason in an inverse situation.

Reference:
(1). https://is.muni.cz/el/1456/jaro2009/PHOM/um/7463585/Chapter_11short.pdf