Determining Capacity

Determining Capacity

BRIAN WILLCOX

ACTION MRPII

Capacity available is the capability of a system or resource to produce a quantity of output in a particular time period. (APICS Dictionary 9^th Edition).

The question we are often faced with is how to establish how much capacity we have available in our plant.

There is two different ways of determining this.

Capacity can be calculated by taking into account the number of machines, the hours worked etc. This is termed rated capacity. The alternative is to measure capacity by averaging the performance in previous periods. This is termed demonstrated capacity. We will examine the two methods in turn.

Calculating Rated Capacity

Traditionally, to calculate the rated capacity you require the following information; l The number of hours per shift the work center will work.

l The number of machines or men in the work center.

l The number of shifts worked per day.

l The number of days per week the work center will work.

l How many hours overtime is scheduled as a percentage increase to a normal scheduled shift or work week.

l The utilization of the work center. This is usually taken from history.

l The efficiency of the work center, again taken from history.

Example:

If a work center works two eight hour shifts per day, five days a week, with six machines, 10% planned overtime, a machine utilization of 90%, and an efficiency of 90%, what will be the rated capacity per week in standard hours?

These factors are multiplied together to calculate the available rated capacity

Rated capacity = 2 x 8 x 5 x 6 x 1.1 x 0.9 x 0.9

= 427.7 Std Hrs per week.

With the introduction of the theory of constraints, rated capacity is calculated in a different way.

Rated capacity = hours available x efficiency x activation.

where activation is a function of scheduled production and availability is a function of up time. The differences are: l Availability

Traditionally the hours that are available equals the clocked time scheduled, whereas with the TOC principle availability is the time the machine is actually available and fit to be used.

l Activation

This replaces the traditional utilization and is the number of hours we need to use the machine for scheduled production, versus the time it is available.

Measuring Demonstrated Capacity

Other names for demonstrated capacity are the measured capacity, or the actual capacity. Demonstrated capacity is the real world. It is established by averaging the actual output, in standard hours, produced during previous periods.

Demonstrated capacity is defined as the proven capacity calculated from actual performance data, usually expressed as the average number of items produced multiplied by the standard hours per item.

Demonstrated capacity is the capacity that has been proven time and time again; it is not just the standard hours that can be produced, but also the standard hours that historically have been produced repeatedly.

Example:

To determine the actual capacity of a printed circuit board assembly line you do the following:- l Record the actual standard hours produced per week for the last ten weeks. This could be tabulated from output reports.

l Total the standard hours for the ten weeks.

l Average the ten weeks; this indicates the average output. This can then be used as the demonstrated capacity. See the table below.

Demonstrated capacity is the average of the total standard hours produced over a number of periods.

Week Standard Hours

No. Produced

1 370

2 401

3 395

4 400

5 380

6 403

7 414

8 375

9 412

10 390

Total 3940

Average per week = 3940

= 394 Std Hours

We have said demonstrated capacity is the real world. It is the proven capacity. It is what we know we can produce time and time again. Therefore it is the capacity that we use for loading the shops. It is the figure we load into the work center file. It is the capacity available, thus it is the figure we use for calculating the capacity plan. When you consider the real world it is pointless loading a workshop to the rated capacity if it is different from the demonstrated capacity. It is only practical to load the shops with the amount we know we can get out. If you put more in on a regular basis, the work in process would just increase, the lead times would get longer and chaos would eventually reign. We have to be practical whether we like it or not. Demonstrated capacity is what we should use for loading the shops. Rated Vs. Demonstrated Capacity

If the rated and demonstrated capacity are worlds apart it means we have a problem. Either the rated capacity is incorrectly calculated, or there is something wrong in manufacturing. It means that we ought to get our industrial engineers to sort out what has gone wrong. The one thing we do know is that we must continue using demonstrated capacity until we have resolved the problem. Then of course, we will see the standard hours produced gradually start improving and gradually equal the rated capacity. We continue to use the demonstrated capacity figure as this reflects reality.

A further point worth considering is the assumption that the demonstrated output will continue, but that is only true if the circumstances at the manufacturing work center remain the same. For example, if the product mix changes, or if we upset the labor force, then the volume of standard hours we do produce will change. We need to apply the knowledge of these factors to the capacity figure before using it.

July 2000