Is Our Capacity?
by Dave Garwood
One of the most frequently asked questions we hear is "How can you
have valid schedules if you don't know your capacity?" You can't!
But knowing your capacity isn't as difficult as it might first appear.
Let's start with a definition of the term "capacity." Capacity
is the amount of work that gets done, or needs to get done, over some period
of time. "Work" can be measured in several units of measure;
some industries use dozens; others use pounds, feet, bottles, units, and
so on per hour, day or week. Standard hours per day is the most common
Every work center or cell has a Required Capacity. This is the amount of
work that needs to get done in the future to keep the customers happy,
regardless if the capability to do it is there or not. If you plan to make
more product, more work must get done. A simple fact! Required Capacity
is a function of the master schedule - how much product you want to make.
Every work center or cell also has a Demonstrated Capacity. The historical
Demonstrated Capacity is the amount of work that has actually been completed
in the past. For example, work center 101 (or manufacturing cell 101) scheduled
10 people to work 8 hours per day for 5 days, for a total of 400 clock
hours last week. During that week, they completed 250 units (or whatever
unit of measure is used). The prior weeks, it was 350, 300, 275 and 325,
respectively. The average amount of work completed over the past 5 weeks
was 300 units of work per week. This is their capacity right now. This
historical demonstrated capacity is reality. And it's sometimes ugly!
What happened during the 400 scheduled hours? Some of them were used to
make product. But many of those hours were soaked up making changeovers,
looking for material, trying to locate tools, fixing broken equipment,
asking questions, reworking defective material, reporting labor, and the
list goes on and on. Will these same interferences repeat in coming weeks?
Probably not all of the same ones, but only an eternal optimist would believe
no interferences will occur in the future.
What is your best guess of work center 101's capability, i.e. Demonstrated
Capacity, in the coming weeks? While it will likely vary each week, I suggest
it will average 300 per week unless they do something different. While
I am not suggesting they are locked into the historical number, the future
Demonstrated Capacity will only be different if they work more hours or
more effectively. The formula for demonstrated capacity is:
Demonstrated Capacity = No. Hours Scheduled x Effectiveness of Hours
What can the Demonstrated Capacity be in the future? The answer is it can
be anything you want it to be! Either increase the scheduled hours or improve
the effectiveness. The only constraints to changing them are time and money
(or our creative limits). Perhaps some innovative problem solving, such
as Kaizen, can improve effectiveness without spending a dime). However,
before accepting a schedule for the future that requires more than 300
units per week, I would insist on a very specific, credible plan for eliminating
some of the interferences or working additional hours. If nothing changes,
i.e. schedule the same number of hours and live with the same volume of
interferences, the output will be the same .... 300 units!
Understanding the concept of Demonstrated Capacity is critical to effectively
managing the Supply Chain. Once understood, the endless, fruitless search
for an answer to the question "What is our capacity?" ends. The
energy becomes focused on a more productive journey to find a way to cost-effectively
change the historical Demonstrated Capacity to meet the customer's needs.
Try the idea out right now. Take a dunk in the reality tank! Start by measuring
the Demonstrated Capacity in a key work center or cell each week. Compare
this reality with how much the customers need. Don't be surprised if you
find a big gap!