What Is Capacity?

Capacity is the maximum level of output that a company can sustain to make a product or provide a service. Planning for capacity requires management to accept limitations on the production process.

Dependi꧒ng on the business type, capacity can refer to a production process, human resources allocation, technical thresholds, or several other related concepts.

No system can operate at full capacity for a prolonged period; 澳洲幸运5官方开奖结果体彩网:inefficiencies and delays make it impossible to reach a 📖theoretical level of output over the long run.

Understanding Capacity

Capacity ties into🤡 the fact that all production operates within a relevant range. No piece of machinery or equipment can operate above the relevant range for very long. Assume, for example, ABC Manufacturing makes jeans, and that a commercial sewing ♛machine can operate effectively when used between 1,500 and 2,000 hours a month.

If the firm sees a spike in production, the machine can operate at more than 2,000 hours for a month, but the risk of a breakdown increases. Management hasꦦ to plan production so that the machine can operate within a relevant ⛎range.

Capacity Level Differences

Capacity assumes a constant level of maximum output. This production level assumes no machine or equipment breakdowns and no stoppages due to employee vacations or absences﷽. Since this level of capacity is not possible, companies should instead use practical capacity, 🌟which accounts for repair and maintenance on machines and employee scheduling.

How the Flow of Manufacturing Cost Works

Managers plan for production capacity by 澳洲幸运5官方开奖结果体彩网:understanding the flow of costs through the manufacturing process. ABC, for example, purchases denim material and ships the material to the factory floor. Workers load the material into ma൲chines that cut and dye the denim. Another group of workers sews parts of the jeans by hand, and then the jeans are packaged and sent to a warehouse as inventory.

Capacity Managers

Sometimes, especially at larger ✤companies or those with a highly technical focus, dedicated capacity managers who often have specialized education and training in logistics, handle capacity management.

A capacity manager might deal with external g💦oods or services like outgoing and incoming freight; they might manage a more technic🌌al type of capacity, like knowing the output capacity of a computer network; or they could manage employees on hand at any given time for a large customer service provider. 

Factoring in Bottlenecks

A manager can maintain a high level of capacity by avoiding 澳洲幸运5官方开奖结果体彩网:bottlenecks in the production process. A bottleneck is a point of congestion that slows the process, such as a delay in getting denim mate♈🐠rials to the factory floor or producing flawed pairs of jeans due to poor employee training.

Any event that stops production increases costs and may delay a shipment of goods to a customer. Delays may mean the loss of a customer order and possibly the loss of future business from the client. Management can avoid bottlenecks by working with reliable ven✅dors and properly training employees.

Every business should budget♌ for sale🍎s and production levels and then review actual results to determine whether production is operating efficiently.