What is the main purpose of a "capacity cushion"?

A capacity cushion is an important concept in operations management that refers to the amount of reserve capacity a company maintains to handle fluctuations in demand. The primary goal of establishing a capacity cushion is to account for variability in demand. This allows a business to be more flexible and responsive to changes, such as unexpected increases in customer orders or changes in market conditions.

When organizations understand that demand can fluctuate, they create a capacity cushion to ensure that they can meet customer expectations without overstretching their resources. By maintaining this cushion, companies can better accommodate peak demand periods without the risks of delays or backorders.

The other choices do not address the fundamental purpose of a capacity cushion. Maximizing inventory levels focuses on stock management rather than capacity. Minimizing shipping costs relates to logistics efficiency, and reducing labor costs emphasizes workforce management. These aspects, while important for operational efficiency, do not specifically relate to the objective of a capacity cushion, which is primarily about managing capacity in response to demand variability.