Capacity is the amount a given group, team, or individual can produce. It is determined by factors such as productivity, staffing, hours of operations, equipment limitations, defects/scrap, setup time requirements, number of shifts, equipment maintenance requirements, and a host of other factors.
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When does capacity become most important? As any traveler knows, it becomes most critical when you are running out of it. If you are going on a short overnight trip, your suitcase is seldom stuffed. The longer you are going, though, the bigger the suitcase has to be—up to a point. If you keep loading things, it will get too big to lift. Nowadays, you even run into constraints about how much the airlines will let you carry on. As a result, you have to leave things home. Often, leaving these things home has a cost—you might have to rent snorkeling equipment, for example, if your fins don’t fit in your suitcase.
In business, capacity poses a similar problem. When you get near capacity, you have to start making decisions. You have to decide whether to expand your capacity, or lose business. Being close to capacity also tends to compound other problems. You will probably start falling behind on deliveries. The closer an operation gets to capacity, the less chance it has to ‘catch-up’ to overcome random problems. As a result, you may anger your customers. You also tend to have more activity in a plant, leading to more clutter, and raising the risk of injuries.
Being close to capacity also has the potential to lower quality. People get more rushed, and the pressure goes up. There is less time for double checking one’s work, so more defects escape.
On the flip side, if you have too much capacity, you are wasting money. Imagine a big automated car factory that only rolled out one or two cars per day. Barely enough to cover keeping the lights on, much less pay for all the equipment and labor.
So, how do you determine capacity? There is not a single set method, but the overall approach is the same. It is generally easiest to first determine how many hours your processes will actually be running. Figure out how many hours your team typically runs in a shift (take out breaks, meeting, etc). Then gather information. Learn how reliable your processes are—use historical data to figure out how often you should expect to be down. Determine your model mix, if appropriate, and take out your setup times from your available time. Look at historical data on poor deliveries that shut the line down. Look at anything else you can think of that will affect your operation’s availability.
Then, understand the productivity of your team. In some cases, you look at people individually. Basket weaving is an example of this. Since it is an individual task, all you have to do is add more people, and you get more baskets.
System productivity is harder to estimate. You might have an assembly line with ten people working on it. If you add one, do you increase productivity by a tenth like you would in the basket weaving example? No. In fact, if you don’t adjust how the assembly line is configured, you may get no extra output at all. This normally happens when there is a bottleneck that constrains the line.
You might also have to determine if you have a machine that is, or will become a capacity constraint at higher production levels.
There’s not a simple answer to the question of how to determine capacity. The key is just to account for all of the different aspects that affect capacity, and use your math skills to get a good estimate of what you can produce in different situations. Once you have that information, you will be ready to move on to the next, far more challenging task: capacity planning.