Production Capacity: What Is it and How Can You Improve It?

We all want to avoid unnecessary costs in the manufacturing process, while also meeting production targets and working as efficiently as possible. With new technology, machines, and strategies in place, the manufacturing process can become much smoother and can help you avoid unnecessary bottlenecks.

Production capacity is a metric that helps capture information regarding the output of products and goods in the manufacturing process. Knowing your production capacity and having the knowledge you need to be able to improve it can help you plan better, schedule more efficiently, and give your customers more accurate lead times and forecasts. Let’s take a closer look at production capacity and some strategies to help increase your production output.

What is Production Capacity in Manufacturing?

Production capacity refers to the maximum output of manufactured goods and materials that a business can achieve. As a metric, it helps to track the highest possible output of goods that can be created based on factors like time, labor, materials, and equipment. This allows businesses to see where they can optimize their processes, and where they may be running into unnecessary downtime.

Ideally, every business wants to function at full capacity so they maximize every opportunity to make money. However, the reality is that there are often inefficiencies and areas of improvement in the manufacturing process that lead to a drop in production output compared to the potential capacity.

While there are processes like lean manufacturing that can help you find areas of improvement, another strategy is to take a look at the ways you evaluate and calculate production capacity. This can help you find places to improve in order to meet full capacity.

The 3 Different Ways To Evaluate Production Capacity

Production capacity needs to be accurately calculated in order to provide you with a true metric for your potential targets, and what goals you are capable of meeting. Production capacity is measured and evaluated in three ways:

1) Manually Measuring Production Capacity

You can manually measure your production capacity by calculating the number of machines you have, then multiply that number by the output they have over a specific period of time. For example, if you have three machines that can each produce five goods every hour, at the end of a six-hour shift your maximum output is 90 products.

3 machines x 5 goods per hour x 6 hours = 90 products

While this is a straightforward way to track production capacity, it can sometimes be too simplistic. It’s hard to forecast future output capabilities or evaluate your production process with a large mix of goods with manual measuring.

2) Rough-Cut Capacity Planning (RCCP)

Rough-cut capacity planning, otherwise known as RCCP, is a method of calculating production capacity. It looks at the productive hours on a given day and a product's throughput time — or the entire time it takes to make a product from start to finish. These variables help you understand the maximum output for product mixes.

For example, consider a company that produces metal spoons and forks. While the process for creating the different products is the same, the time it takes to finish one from start to finish is different. It takes 30 minutes to produce a spoon, and one hour to produce a fork. The company has eight employees making the products for six hours per day during the work week. At the end of each week, then, the company has the capacity to create either 480 spoons or 240 forks.

Spoons: 2 spoons per hour x 6 hours per day x 5 days per week x 8 employees = 480 spoons produced each week

Forks: 1 fork per hour x 6 hours per day x 5 days per week x 8 employees = 240 forks produced each week

Based on this information, a company can look at the delivery and production needs and rough-cut their production planning process to meet the expected outcomes. However, there are some downsides to the rough-cut method, namely that it doesn’t take unexpected bottlenecks or materials’ availability into consideration.

3) Capacity Planning and Scheduling

While both manual calculations and rough-cut capacity production can work for a business, to really understand production capacity you need to dive into detailed planning and scheduling for every product that you make. For example, each product needs to be broken down into a planned and measurable sequence of operations, each employee's availability needs to be considered, and material lead times also need to come into play.

Managing this without software is nearly impossible. Thankfully, there are different software applications that can help you reach your desired output, and help you plan when bottlenecks, employee absences, and other interruptions occur.

What Hinders Production Capacity?

Before we can start looking at different strategies that can help to increase production capacity, we first need to examine the different things that can hinder or slow your maximum product output. Once you understand the problem areas that can affect productivity, you can start to plan strategies around those areas.

Understanding the Six Big Losses

The Six Big Losses is a theory created in Japan in the 1970s. It explains the different factors and categories that can constrain production in a manufacturing setting. When taken into consideration, these losses can help to explain a machine’s overall equipment effectiveness (OEE) and the maximum capability for each piece of machinery.

The Six Big Losses are broken into three main categories:

Availability Losses

• Equipment Failure: Mechanical failures and machine breakdowns that will occasionally occur on the line.
• Setup and Adjustment: Setting up equipment and adjusting to new changeovers and dial-ins.
  
  

Performance Losses

• Idling and Minor Stops: Minor jams, bottlenecks, or obstructions that will take place.
• Speed Reduction: Slowdowns from poorly maintained machines and equipment or inexperienced staff.
  
  

Quality Losses

• Process Defects: Defects due to human error or poor workflow management.
• Yield Reductions: Parts and products that are defective and need to be scrapped.
  
  

How To Calculate Production Capacity

As discussed earlier, there are different methods that you can use to calculate and understand the relationship between your product output and your maximum production capacity. Let’s look at a few of the basic principles that you need to understand in order to effectively calculate production capacity.

1) Determine the Machine-Hour Capacity

The machine-hour capacity refers to the number of machines that are in operation on a daily basis and the number of hours that they are in use. Similar to manually measuring production capacity, this is a straightforward calculation that you can then use as a building block for better capacity and product process planning.

For example, if a factory has 10 machines that can run 16 hours per day all seven days of the week, then there are 160 machine-hours available each day, or 1,120 available each week.

10 machines x 16 hours per day = 160 machine-hours per day

160 machine-hours per day x 7 days per week = 1,120 machine-hours per week

2) Calculate Production Capacity With One Product

After determining the machine-hour capacity for each piece of equipment you have, you can then calculate the amount of time needed to produce one unit of product. After calculating each product's capacity, you can divide that by the machine-hour capacity.

Consider the hypothetical factory from our last example. If it took a worker 30 minutes to create a product using a machine, then you would take the 16-hour day and divide it by .5 to determine that a total of 32 products could be made that day, and that 224 could be made in a week on that machine.

16-hour work day / .5 hours to produce one unit of product = 32 units per day

32 products per day x 7 days per week = 224 units per week

3) Calculate Product Capacity With Multiple Products

The final layer that needs to be included in a production capacity calculation is the production capacity when dealing with multiple products. Let’s say that our factory example makes two different products. Product A can be made in .5 hours, and we’ve already calculated the daily and weekly outputs above. Product B can be made in .4 hours, or a total of 40 products a day and 280 each week.

With this information, a business would need to decide how to dedicate the available machine-hours to each product line in order to achieve their goals. For example, they could spend 120 hours a week on Product A and the remaining 1,000 hours on Product B so that both product lines are able to run within the 1,120-hour weekly allotment.

Strategies To Increase Production Capacity

Now that you understand why it’s important to accurately measure production capacity and the steps that you need to calculate it, let’s take a look at some long-term and short-term strategies that you can employ to increase overall production capacity.

Short-Term Strategies for Increasing Capacity

• Adding additional shifts or offering overtime to employees: If you are running short on necessary production output, you can try to get employees to help you out. You can add another shift to your production schedule, or offer overtime pay to keep machines running past regular hours.
• Outsourcing production: If your machines are already running as long as they can, then you might want to look into outsourcing production to another facility or company that can help you meet demand in the short-term.
• Optimizing current equipment utilization: You can also consider ways to get more out of the machines you currently have. That might include looking into some of the features or tools you don’t commonly use, or finding shortcuts in setup that help your current equipment run better.
  
  

Long-Term Strategies for Increasing Capacity

• Improving overall business processes: One of the best long-term strategies involves taking a look at your overall business practices and procedures and examining where there is room for improvement. Everything from material procurement to production times can be optimized and improved.
• Planning and executing tasks more efficiently: Small bottlenecks can snowball into giant production slowdowns and process disruption. By planning your tasks efficiently and making sure they are executed as planned, you can avoid costly shutdowns and slowdowns.
• Implementing techniques from lean manufacturing: Lean manufacturing is a great technique that works to eliminate waste entirely from your manufacturing process. By taking some of the tactics and tips used in lean manufacturing and applying them to all parts of your business, you can create a better system.
• Purchasing new equipment: Sometimes, no matter how accurately you plan and how carefully you execute your strategies, you still can’t reach the output you need. If you have maxed out every other part of production capacity, it may be time to think about investing in new machines and equipment.
• Trying new technologies: If you are still struggling to manage your production capacity and improve your effectiveness on the floor, it may be time to look into new technology platforms that can help you accurately measure and predict your output flow and overall production capacity.
  
  

Metrics To Keep Tracking and Understanding Production Capacity

Accurately calculating and managing production capacity requires you to have some help. Having the right tools and KPIs by your side can be a big help in improving productivity and effectiveness.

Overall Equipment Effectiveness (OEE)

Overall equipment effectiveness, otherwise known as OEE, measures the availability, performance, and quality of your machines. It helps you identify areas to improve within your machinery, including downtimes and quality issues.

For more information, check out our machine monitoring tools and see how they can help pinpoint areas of improvement within your equipment.

Total Effective Performance (TEEP)

Total effective performance, or TEEP, is the next step in OEE. TEEP considers the total capability of a machine, not just its shift runtime. TEEP looks at the maximum availability on each machine for 24 hours a day, 365 days a year.

Utilization

Utilization is the percentage of available production time on a machine during a selected time period when the machine was in operation. This can help when looking at the data for individual machines or machines as a group.

Increase Your Factory’s Production Capacity With Amper

Production capacity is a key metric that can help you understand what your manufacturing process is capable of producing when everything is working optimally. Once you’ve understood where common losses occur and how to calculate your production capacity, you can start to implement both short- and long-term strategies that improve your processes.

Amper is here to help you maximize your potential and create a manufacturing process that flows smoothly, allowing you to optimize every step of the way. From machine monitoring to operational analytics tools, Amper has the applications you need to grow your business and achieve your goals.

Learn more about how Amper can help your business improve production capacity and optimize your manufacturing process — contact us to get started.