The production capacity of a chemical plant is a fundamental measure of its maximum economic potential. However, there is no consistent, universally recognized definition for the term production capacity, and there are no systematic rules for how to evaluate it. The failure to clearly define capacity and its measurement can lead to serious financial harm. This article bridges the gap between the operations management literature and the chemical engineering literature on how to define and how to measure production capacity. It discusses the definition of capacity with regard to the chemical process industries; describes how flowsheet structure and function determine the capacity of a chemical plant; explains how to determine capacity from the design basis and empirically; and offers some comments on effective capacity, i.e., the decrease in production due to the impact of downtime.