The relationship between capacity and output shown in bellow.
Design Capacity
Design capacity of a facility is planned or engineered rate of outputs under normal or full capacity of working condition. This should reflect management strategy for meeting demand.
System capacity is less than or may be equal because of the limitations of limitation of product mix,quality specification and breakdowns.
The system efficiency is expressed as ratio of actual output to the system capacity.
Efficiency - Is the ratio of actual capacity to effective capacity of the facility.
Efficiency = Actual Capacity / Effective Capacity
Utilization - Is the ratio of actual capacity to Design Capacity of the facility.
Utilization = Actual capacity / Design capacity
Capacity is the production capability of a faciity. This always measured by units of outputs per period.This is important for managers becuase of,
1, Sufficient capacity requires for meet future demand.
2, Capacity effect the cost fuction.
3, Capacity effects the sheduling system.
Process of capacity planning
Capacity planning is concerned with meeting he longterm and short term capacity needs of an organization and determining these needs how to satisfied.
1, Long term capacity strategies.
This is most diffcult to determine because future needs and technlogies are always changing. This depend on marketing plans,product development and life cycle of the product. Following parameters will affect the long term capacity decisions.
- Multiple products
- Phasing in capacity
- Phasing out capacity
2, Short term capacity strategies.
This is consider about 12 months prodction requirements. Short term strategies are,
-Inventories
-Process design
-Bcklog
-employment level
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