Which principle defines capacity management?

The principle that defines capacity management focuses on maximizing potential activities and output. This principle aims to ensure that an organization's resources—such as manpower, materials, and machinery—are effectively utilized to achieve the highest level of productivity possible. By optimizing the use of resources, capacity management seeks to align the capabilities of production with the current and future demand for products or services.

Maximizing potential activities and output is essential for organizations to remain competitive and efficient. It involves assessing existing capacities and identifying ways to enhance them, whether through process improvements, technology upgrades, or better workforce utilization. This proactive approach enables organizations to respond swiftly to market changes, reduce bottlenecks, and improve overall operational efficiency.

The other options do not encapsulate the comprehensive goal of capacity management. Limiting production may save costs, but it doesn't necessarily focus on maximizing output. Equating demands with surplus inventory pertains more to inventory management than capacity management itself. Lastly, while workforce management is a component of capacity management, focusing exclusively on workforce aspects overlooks other critical resources involved in capacity optimization.