The Capacity
Planning Practice

Body of knowledge · The seed paper · Request for comments

The Coefficient Is an Agreement

Cost drivers, step changes, and the operating discipline that turns capacity plans into commitments

Guillermo Martinez

Version 7.9 · October 2026 · a working draft

How this paper is built

Each layer stands on its own and goes one level deeper. The abstract is for the expert, and the executive summary for a busy leader in finance, engineering or supply chain. Then come a one-page version to pin up and the deep dive (Sections 1–14) for planners. Appendix A holds a worksheet with a full walk-through; Appendix B, the public record on supply behind Section 6. Each appendix stands on its own and can be printed or handed over separately.

The two claims are the part meant to last. The method, the thirteen mechanisms, the stages and every illustrative number are expected to change as people use them.

Layers: stop at the depth you need

  1. Abstract 1 minute
  2. Executive summary 5 minutes · 2 figures
  3. One page 2 minutes · 1 figure

The deep dive: Sections 1–14 · about 2 hours

  1. 1Introduction: a close forecast and a wide miss A team can land within 4% of its forecast and still be 30% over its bill. That's because two of the three numbers behind the bill belong to someone else.
  2. 2Why cost drivers exist: the service doesn't cause its own load A shared service doesn't cause its own load; its callers do, so the cost signal has to reach them.
  3. 3What is published, and what it leaves open The formula is published. What this paper adds, as far as the sources I could read show, is a rule tying each supply order to how firm a launch is. It also adds the governance that keeps the numbers true.
  4. 4Three prices, three questions "what does capacity cost?" is three questions (who pays, should we build, who gets it now), and each needs its own price.
  5. 5Coefficients are agreements One coefficient forecasts the service's load and prices the caller's growth, so it needs an owner, versions, and restating when the hardware or the meter changes. Demand with no history enters as a declaration that firms up in stages.
  6. 6Approval is not allocation Approving an ask in a common unit doesn't deliver machines of the right shape, in the right place, on time, and the gap needs an owner.
  7. 7A worked example (all numbers illustrative) One service, one caller, invented numbers. The forecast lands within 4%, the bill lands 30% over, and each piece of the miss goes to whoever moved it.
  8. 8The commit-point method One launch, every supply layer, eight steps on one page. For each layer, ask when it must be ordered in a slow case, and how firm the launch will be by then. Then ask what to commit, in what form, with whom owning the rest.
  9. 9The operating discipline: keeping the agreement Thirteen mechanisms, each an artifact with an owner, keep the agreement true from one cycle to the next.
  10. 10People: the room around the math Capacity is a handshake among capital, supply and demand, and the planner brokers it. Then come the seams, overrides, reorganizations and gaming.
  11. 11What changes in the AI era The structure holds for AI fleets. The units move toward megawatts and tokens, and a busy chip isn't necessarily a productive one.
  12. 12For mid-sized companies At mid-size, your long-lead supply is the cloud commitment, and your list of launches and big customers may already exist as the sales pipeline.
  13. 13Where this breaks, and what is unknown Where this paper's approach breaks, and what hasn't been measured in public, as far as I can find.
  14. 14A minimum viable discipline Six roles, and the promises each one keeps.
  15. Terms used in this paperAlso merged with the appendices' terms in the glossary.

Appendices: each stands on its own

  1. AA worksheet for one declaration 15 minutes · 7 figures
  2. BWhat the public record says about supply 9 minutes · 5 figures

Back matter and other ways in

  1. ReferencesThe full list, each [n] in the text links here.
  2. The visual tourAll 61 figures in order, with captions.
  3. DownloadsPDF, iPad PDF and EPUB.
  4. About the author; disclaimer