capacity management - the meaning of capacity

Introduction

The capacity of a production unit (e.g. machine, factory) is its ability to produce or do that which the customer requires. In production and operations management, three types of capacity are often referred to:

Potential Capacity	The capacity that can be made available to influence the planning of senior management (e.g. in helping them to make decisions about overall business growth, investment etc). This is essentially a long-term decision that does not influence day-to-day production management
Immediate Capacity	The amount of production capacity that can be made available in the short-term. This is the maximum potential capacity - assuming that it is used productively
Effective Capacity	An important concept. Not all productive capacity is actually used or usable. It is important for production managers to understand what capacity is actually achievable.

Measuring capacity

Capacity, being the ability to produce work in a given time, must be measured in the unit of work.

For example, consider a factory that has a capacity of 10,000 " machine hours" in each 40 hour week. This factory should be capable of producing 10,000 "standard hours of work" during a 40-hour week. The actual volume of product that the factory can produce will depend on:

- the amount of work involved in production (e.g. does a product require 1, 5, 10 standard hours?
- any additional time required in production (e.g. machine set-up, maintenance)
- the productivity or effectiveness of the factory

Constraints on capacity

In capacity management there are usually two potential constraints - TIME and CAPACITY

Time may be a constraint where a customer has a particular required delivery date. In this situation, capacity managers often "plan backwards". In other words, they allocate the final stage (operation) of the production tasks to the period where delivery is required; the penultimate task one period earlier and so on. This process helps identify whether there is sufficient time to meet the production demands and whether capacity needs to be increased, albeit temporarily.

Production Scheduling

A schedule is a representation of the time necessary to carry out a particular task.

A job schedule shows the plan for the manufacture of a particular job. It is created through "work / study" reviews which determine the method and times required.

Most businesses carry out several production tasks at one time - which entails amalgamating several job schedules. This process is called "scheduling". The result is known as the production schedule or factory schedule for the factory/plant as a whole.

In preparing a production schedule, attention needs to be paid to:

- Delivery dates (when are finished products due?)
- Job schedules for each relevant production task
- Capacities of production sections or departments involved
- Efficiency of these production sections or departments
- Planned holidays
- Anticipated sickness / absenteeism / training
- Availability of raw materials, components and packaging

There are two key problems with production scheduling:

(1) Measurement of performance (e.g. should financial performance be most important (e.g. minimise the amount of stock), or are marketing objectives more important - e.g. always produce enough to meet customer demand).

(2) The large number of possible schedules - often caused by too much complexity or variety in the production needs of the business.

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capacity management - the meaning of capacity

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