Page 70 - DMGT501_OPERATIONS_MANAGEMENT

Operations Management

Notes Efficiency is a measure of actual output over Effective Capacity and is expressed as a percentage
of the Effective Capacity.
The Rated Capacity is a measure of the maximum usable capacity of a particular facility.

Rated capacity = (Capacity) (Utilization) (Efficiency)

Example: One facility has an efficiency of 90 per cent, and the utilization is 80 per cent.
Three process lines are used to produce the products. The lines operate 6 days a week and three
8-hour shifts per day. Each line was designed to process 100 standard products per hour. The
rated capacity is:
Rated Capacity = (Capacity) (Utilization) (Efficiency)
= (100) (3) (144) (0.8) (0.9)

= 31,104 products/week.
The matter of product mix is important, especially while planning for future activities. Top
management often finds it desirable to express addition to new capacity in terms of money
value of sales. Details regarding product mix breakdown, type and number of machines needed,
etc., which are vital to achieve the desired increase in capacity, are left to the concerned engineers.
Thus, the definition of unit of output is closely linked with the product mix, and therefore poses
a difficult problem as regards capacity measurement.

Time poses another problem. Capacity is often defined as the quantity of output in a given time.
However, some manufacturing processes require continuous operation. Thus, a thermal power
generation unit must either operate continuously or not at all, as otherwise the boilers cool
down. So, the capacity of a thermal power generation unit is the total amount of electricity it can
produce by operating 24 × 7. Most factory operations are not, however, like this, since they
operate on a shift basis and hence for a specified period. However, these capacities are measured
by the output per shift.

Individual Machine Capacity

No matter how broadly we may define capacity, in the final analysis, in manufacturing, it has to
come down to capacity of individual machines. The plant usually comprises of a set of work
centers for performing various operations that are involved in the process of transformation.
Each work center consists of machines of a given type like lathes, milling machines, etc. Once the
capacity of an individual machine is determined, it is an easy matter to assess the capacity of the
work center.
However, this is often not so simple, since the individual machine capacity itself will depend
upon a number of factors such as machine utilization ratio, number and type of operations
performed on the machine, the individual operation times as well as machine setup time, etc.
Nevertheless, estimation of individual machine capacity can often serve as an aid in assessing
the capacity of the work center. Knowledge of the individual work center capacity can then
enable us to assess the entire plant capacity.

3.2 Measuring Capacity

A dictionary definition of Capacity is the ability to hold, receive, store, or accommodate. Capacity
is also defined as the maximum output of a system in a given period under ideal conditions.
To estimate Capacity, you must first select a yardstick to measure it. The first major task in
Capacity Measurement is to define the unit of output. In some cases, the choice is obvious.

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