# Measuring Capacity: The Basics - PowerPoint PPT Presentation

PPT – Measuring Capacity: The Basics PowerPoint presentation | free to view - id: 4d33e4-NzA3M

The Adobe Flash plugin is needed to view this content

Get the plugin now

View by Category
Title:

## Measuring Capacity: The Basics

Description:

### Measuring Capacity: The Basics By: Cameron Tidwell December 12, 2006 Marriott School of Business - Brigham Young University So What is Capacity? What do YOU think ... – PowerPoint PPT presentation

Number of Views:280
Avg rating:3.0/5.0
Slides: 40
Provided by: local46
Category:
Tags:
Transcript and Presenter's Notes

Title: Measuring Capacity: The Basics

1
Measuring Capacity The Basics
• By Cameron Tidwell
• December 12, 2006
• Marriott School of Business - Brigham Young
University

2
SoWhat is Capacity?
• What do YOU think Capacity is?
• Google the term Measuring Capacity what comes
up?

3
• Possible finds
• Math activities
• Units of measurements
• Cups, Gallons, Ounces etc.
• Ideas for teachers
• Measuring Capacity fisheries and Web Servers

4
What is going to be covered
• What is Capacity?
• Difference Between Measuring and Calculating
• Efficiency
• Utilization
• Real World Examples
• Applications

5
Capacity Defined
• Capacity is the capability of a worker, machine,
plant, organization to provide goods and services
(output) per period of time.

6
An easy way to remember
• Capacity is like a Funnel.
• Wrights Funnel was developed by Oliver Wright
demonstrate the idea of capacity.
• (Blackstone, 1989)

7
However
• The Funnel only focuses on OUTPUTS. Capacity can
also be measured by an organizations INPUTS.
• (Blackstone, 1989)

8
Units of Measurements
• INPUTS
• Number of Labor Hours available in a time period
• Number of Machines Hours available in a time
period
• Seats on an airplane
• Beds in a Hospital
• OUTPUTS
• Number of units produced in a time period
• Cars washed per hour
• Beds assembled per day
• Oil changes per hour

9
What are Possible units of measure of Capacity
for the following?
• A Bottling Company?
• Work Hours, Bottles Filled
• An Car Dealership?
• Cars sold, Cars serviced
• ?

10
Lets Think
• What is the benefit of knowing capacity?
• How could it help an organization?
• How could knowing how to measure capacity benefit
this organization?

11
Measuring/Calculating Capacity
• John H. Blackstones Capacity Management,
distinguishes between the two
• Measuring Capacity
• One averages some set of historical data.
• Calculating Capacity
• One sets capacity equal to the product of time
available (T), efficiency (E), and utilization
(U).
• C T x E x U
• (Blackstone, 1989)

12
Measuring Capacity
• This part is easy
• 1. Take historical outputs from equal time
• (output 1 output 2 output N)
• 2. Divide the total output by the number of
periods.
• (output 1 output 2 output N)/ periods

13
Measuring Capacity
• Example
• Louisville Sluggers factory in Louisville, KY
produced an output of 2700 bats, 2000 bats, 1900
bats, and 2400 bats. What is the measured
capacity?

14
Louisville Slugger
• Step one Add the Historical Data
• 2700200019002400 9000 bats
• Step two Divide the total by the number of
periods, 4.
• 9000/4 2250 bats
• Thus, 2250 bats is the average capacity.

15
Calculating Capacity
• Now it gets a little tricky
• Capacity ( of shifts) x ( of hours a day) x
( of machines) x ( of days a week)
• (Provides Mins and Maxs in the ability to
produce)
• Important! Variables are subject to change
depending on information

16
Calculating Capacity
• Example
• Ford has a factory in Detroit which produces
transmissions. The factory has 2 shifts which man
4 machines, 8 hours day, 6 days a week. What is
the factorys calculated capacity?

17
Ford cont.
• Remember the Equation
• Capacity ( of shifts) x ( of hours a day) x
( of machines) x ( of days a week)
• There were 2 shifts, 4 machines, 8 hours a day,
and 6 days wk
• Capacity (2) x (4) x (8) x (6)
• Capacity 384 standard hours per week

18
Even more Ford.
• As mentioned Capacity T x E x U.
• This calculated capacity is also call Rated or
Nominal Capacity.
• Example cont.
• Say that Ford historically has a utilization of
93 and a efficiency of 98 then what would
their capacity equal?

19
Even more Ford cont.
• Capacity T x E x U
• Time Available 384 hrs Efficiency .98
Utilization .93
• Capacity (384) x (.98) x (.93)
• Capacity 349.98
• Capacity 350 standard hours

20
Efficiency
• Definition
• A measure (usually expressed as a percentage)
of the actual output to the standard output
expected.
• (APICS Dictionary, 1998)

21
Calculating Efficiency
• Efficiency Standard hours x 100
• Hours worked
• -or-
• Efficiency Actual units produced x 100
• Standard rate of production expected

22
Calculating Efficiency
• Example
• At company X work is measured in hours. It took
employees 12.75 hours to produce 12 standard
hours of work. What is the companies efficiency?

23
Calculating Efficiency
• Efficiency Standard hours x 100
• Hours worked
• (Standard Hours 12 Hours worked 12.75)
• Efficiency 12 .9412 x 100
• 12.75
• Efficiency 94.12

24
Lets try a different one
• Example
• Company Y produces a standard of 250 units per
hours. Today, in one eight hour shift the company
produced 1925 units. What was the companys
efficiency for the shift today?

25
Calculating Efficiency
• Efficiency Actual units produced x 100
• Standard rate of production expected
• Actual units produced 1925 units
• Standard rate of production expected ?
• (250 units per hour x 8 hours per shift 2000)

26
Calculating Efficiency
• Efficiency Actual units produced x 100
• Standard rate of production expected
• Efficiency 1925 .9625 x 100
• 2000
• Efficiency 96.25

27
Utilization
• Definition
• A measure (usually expressed as a percentage) of
how intensively a resources is being used to
produce a good or service.
• (APICS Dictionary, 1998)

28
Calculating Utilization
• Utilization Hours available hours down x 100
• Hours available
• Utilization Hours worked x 100
• Hours available

29
Calculating Utilization
• Example
• Your company has 4 machines which are staffed by
2 eight hours shifts 6 days a week. Lately
information has shown that there are about 20 per
week in which machines are not in use due to
utilization.

30
Calculating Utilization
• Capacity ( of shifts) x ( of hours a day) x
( of machines) x ( of days a week)
• Utilization Hours available hours down x 100
• Hours available
• Utilization Hours worked x 100
• Hours available

31
Calculating Utilization
• First step, the companys machine hour capacity?
• Capacity ( of shifts) x ( of hours a day) x
( of machines) x ( of days a week)
• Capacity (2 shifts) x (8 hours a day) x (4
machines) x (6 days a week)
• Capacity 384 machine hours

32
Calculating Utilization
• Second Step
• Utilization Hours available hours down x 100
• Hours available
• Utilization (384 machine hours) (20 hours
down) x 100
• 384 machine hours
• Utilization 364 machine hours x 100 .9479 x
100
• 384 machine
hours
• Utilization 94.79

33
Real World Example
• Fisheries in Europe
• A measure that has gained increase use in
fisheriesis capacity utilization
• (Pascoe, 2004)
• Capacity and Utilization are being determine
based on the same ideas but much more in depth.

34
One final point on Utilization
• Note that
• Over Utilization
• Machine Breakdown
• Decrease in quality
• Lost time injuries
• Under Utilization
• Increase Costs
• Employees downtime (standing around)

35
Applications cont.
• What is the right utilization and efficiency
• Companies need to find their Best Operating
Level

36
Review
• What is Capacity?
• What is the Difference between Measuring and
Calculating Capacity?
• How does one determine Efficiency?
• How does one determine Utilization?

37
• Blackstone, J.H. (1989). Capacity Management.
Ohio South-Western Publishing.
• Bozarth, C.C. Handfield R.B. (2005).
Introduction to Operations and Supply Chain
Management. New Jersey Pearson Education
• Cox, J.F. Blackstone, J.H. eds. (1998). APICS
Dictionary (9th ed.) Virginia APICS

38
• Fare, R., Grosskopf, S., Kokkelenberg, E. C.
(1989). Measuring Plant Capacity, Utilization
and Technical Change A Nonparametric Approach.
International Economic Review, 30 (3), 655-666.
• Newman, M. (2006). Empty wards and
promises. Hospital Doctor, 20-22.
• Mahanti, T. K. (2006, October 2). Higher capacity
utilisation raises global competitiveness. Knight
Ridder Trinbune Business News. pg 1.

39
• Morlok, E. K., Chang, D. J. (2004). Measuring
capacity flexibility of a transportation system.
Transportation Research Part A Policy
Practice, 38 (6), 405-420.
• Pascoe, S., Greboval, D., Kirkley, J., Lindebo,
E. (2004) Measuring and appraising capacity in
fisheries framework, analytical tools and data
aggregation. Rome FAO Fisheries Circular. No.
994
• Ruist, E., Söderström, H. T. (1975). Measuring
Capacity Utilization and Excess Demand. European
Economic Review, 6 (4), 369-386.
• Taverna, M. A. (1998). BMW Rolls-Royce Targets
Development Capacity Issues. Aviation Week
Space Technology, 149 (16), 77.