Wednesday, 2 January 2019

Production Capacity Planning

A Production Capacity Planning is one of the important processes within a production system. Capacity can be defined as the ability to reach, keep or produce while the production capacity is the maximum number of units that can be produced in a specific time period by using the resources available. In operations management and production, production capacity needs to be determined and well planned so that it can meet the demand of customers.

Production capacity is usually express with the number of units produce (Volume) per unit of time. Some factors affecting production capacity among others such as the amount of labor that was used, the capabilities and expertise of the workforce, the number of workplace machinery and equipment used, engine maintenance, waste products, the level of disability in the process of production, the supply of raw materials and materials support and work productivity.

So by definition we can interpret that Production capacity planning is the process of determining the production capacity need by a company manufacturing to meet necessary changes the demand for each product. The process of planning production capacity is very important to do because with this production capacity planning management can determine optimal resource utilization as well as assist management in decision-making process with regard to production capacity such as the addition of production facilities, modifications to the production line, the addition of labor, working machinery and equipment purchases.

Performance measurement on Production capacity planning

As previously mention, the units of the unit's production capacity are usually measure by "number of units" generate (Output) per unit of time or per given period. However, in the conditions and specific products, production capacity can also be measure in the units of another unit such as tons, Liters or working time.

To assess and determine the effectiveness against the production capacity planning, management in General can use two performance indicators capacity efficiency (Capacity Efficiency Performance Indicators) that Ratio and efficiency Ratio Utilization of Capacity design (Design Capacity) and the effective Capacity (Effective Capacity).

Through the calculation of the ratio of efficiency and the constellation of utilization this, management will know how far the capacity planning is running properly. Determinants of the effectiveness of capacity planning include factors like facilities (machines, equipment, layout), the labor factor, factor in operations, supply chain and factor external factor.

Both these indicators express by Percentage (%).

The Formula of Production Capacity:

Efficiency = (Actual/Effective Capacity Output) x 100

Utilization = (Actual Design Capacity/Output) x 100


  • The design Capacity is the maximum level of output or service capacity of an operation, process or facility. Design capacity can also be said to be the maximum ideal output that does not have output disable or damage.

  • The effective Capacity is the capacity of a design that is reduce by the number of units. That are disable, the capacity of the care and time lost. Due to the turnover of models that use the same production facilities.

  • Actual Output Real Output is generate by production facilities, usually not exceeding the amount of capacity efficiency. However, should be sought wherever possible to approach or equal to effective capacity.

Example of calculation of Performance capacity planning

A company engage in the transportation of freight ground set Design Capacity by as much as 50 trips per day. Even and its Effective Capacity by as much as 45 days per trip. While the actual Output is only about 40 trips a day. What is the ratio of efficiency and Utilization Ratio of capacity?


The design Capacity = 50 trips per day
Effective Capacity = 45 trip per day of
Actual Output = 40 trip per day


The efficiency = (Actual/Effective Capacity Output) x 100
= Efficiency (40/45) x 100
= Efficiency 88.9%

Utilization = (Actual Design Capacity/Output) x 100
= Utilization (40/50) x 100
= 80% Utilization

So the ratio of the efficiency of the production capacity of the company is 88.9% and Utilization Ratio was 80%.

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