Process of Measurement of Capacity

To estimate capacity one should 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, for example. RIL set up capacity to manufacture250, 000MT of polypropylene and 160,000MT of polyethylene at Hazira plant. This measures the output of end products. Another example is megawatt-hours of electricity for a power generation utility. Finding a yardstick to estimate capacity is more difficult in many service industries where there is no uniform product on which the measurements can be based, e.g. , airlines, hospitals, restaurants etc. However, measures can be devised to assess capacity. For example, airlines can use seat-mileage as a measure of capacity. A hospital can measure capacity as bed-days each year. In a restaurant, this might be the number of customers that can be handled per day.

In a process focused facility, capacity is often determined by some measure of size, such as number of in a hospital, seating capacity in a restaurant, etc. In repetitive process, the number of units assembled per shift, such as number of refrigerators may be the criterion for capacity. And in product focused facility, such as TISCO, tones of steel produced per shift may be the measure of capacity.

Whatever the measure, the capacity decision is critical to the management of an organization because every thing from cost to customer service is measured on the basis of capacity of the process, once the capacity is determined. In general, capacity can be expressed in one of the two ways:

• Output measures
• Input measures

Output measures are the usual choice for high volume processes. Maruti was set up to manufacture 100.000 passenger cars per year. This type of capacity measurement needs to be taken with some caution. The Maruti plant produces many types of vehicles on a single plant.
As the man-hours required producing the different models are not identical. Maruti may be able to manufacture 125,000 vehicles if it only produced Maruti 800, 110,000 vehicles if it produced the Omni and 85,000vehicles if only produced Gypsy. The 100,000 number is an average number to make the capacity measurement easy.

As the amount of customization and variety in the product mix increase, output-based capacity measures become less useful. Output measures are best utilized when the firm provides a relatively a small number of standardized products and services, or when such measures are applied to individual processes within the overall firm.

Let us take another example. We could say that a plastic goods unit turns out plastic goods. Can we, therefore unambiguously make a statement of the capacity as the weight of the processed output or number of plastic goods unit period. Though, the capacity of plastic unit can be expressed as weight of plastic processed, it would not be accurate because the number will differ according to the mix of products being made. A change in product mix will usually mean a change in capacity also. Also, as there are a variety of plastic goods, coming in different shapes and sizes, the number may not be a good measure. Finally, the decision has to be based on judgment or industry practice.

Input Measures are generally used for low volumes, flexible processes, For example, in a machine shop; capacity can be measured in machine hours or number of machines, Demand, which invariably is expressed as an output rate, must be converted to an input measure. This conversion is required to compare demand requirements and capacity on an equivalent basis. Capacity then may be measured in terms of inputs or outputs of the conversion process.
However converting demand into output measures may be quite difficult .In a general business sense, capacity is most frequently viewed as the amount of output that a system is capable of achieving over a specific period of time.


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