CAPACITY

• Maximum amount of output or input that can be handled by infrastructures, organizations,

teams, processes, services, tools, machines or components.
• The number of units a facility can hold, receive, store or produce in a period of time.
•
CAPACITY TYPES
1. DESIGN CAPACITY
 Maximum obtainable output
 Maximum capacity of a design under ideal conditions such as access to unlimited resources
 Important consideration in capacity planning
o Adding more inputs ≠ more capacity
Examples:
Structure A large organization is poorly structured such that adding more staff only decreases
revenue
Facilities A restaurant is designed for a maximum of 120 seats. In order to achieve its design
capacity, it requires 12 staff and other inputs such as ample food.
Production The batch production line of a bakery can produce 12,000 loaves of bread an hour
on a fully staffed shift.
Transport A subway platform is designed for no more than 12,000 passengers.
Energy A solar module is designed for 20.1% conversion efficiency under ideal conditions
such as intense, direct sunlight when the panels are clean.
Technology A cloud platform is designed for scale such that it could support billions of concurrent
users if it were allocated enough resources such as millions of computing units.
Process A customer support process has a variety of technology and administrative
bottlenecks such that it can’t be efficiently scaled beyond serving 1,000 customers
an hour.
Infrastructure A rain garden can filter up to 40,000 liters of stormwater an hour.
Machines A robot can sort 10,300 recycling items an hour under ideal conditions such as a high
density of objects the robot is able to recognize.
Components A cloud platform designed to scale has a poorly designed component that fails with
more than 2,000 concurrent users. The component represents a bottleneck that
places a limit on the capacity of the software.

2. EFFECTIVE CAPACITY
 Design capacity minus allowances such as personal time, maintenance, and scrap.
 Maximum capacity based on its design capacity and resources available to it.
Examples:
Production Line A production line has an effective capacity of 120 units an hour. This is based on
the design of the production line such as the throughput of each workstation.
It is also based on the resources available to the production line such as labor,
power, materials and parts.
Facilities An office has an effective capacity of 400 employees based on the design of the
building and availability of resources such as power that are required to operate
the facility.
Services A flight has an effective capacity of 220 passengers based on the design of the
aircraft and the availability of staff and other inputs.
Technology A cloud software platform has effective capacity of 20,000 concurrent users. The
design of the software allows for practically unlimited capacity. The firm that
operates the software has reserved access to 200 computing units that are the
basis of the concurrent user limit. The firm can easily increase effective capacity
by adding more computer units.
3. ACTUAL OUTPUT
 Rate of output actually achieved
 Cannot exceed effective capacity
 It is subject to random disruptions: machine break down, absenteeism, material shortages and
most importantly the demand.
Efficiency and Utilization Measures
𝐴𝑐𝑡𝑢𝑎𝑙 𝑂𝑢𝑡𝑝𝑢𝑡 𝐴𝑐𝑡𝑢𝑎𝑙 𝑂𝑢𝑡𝑝𝑢𝑡
Efficiency = 𝐸𝑓𝑓𝑒𝑐𝑡𝑖𝑣𝑒 𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑦 Utilization = 𝐷𝑒𝑠𝑖𝑔𝑛 𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑦

*Measures are expressed in %

*This definition of efficiency is not used very much. Utilization is more important.
Example:
Design Capacity = 100 t-shirts/day 𝐴𝑐𝑡𝑢𝑎𝑙 𝑂𝑢𝑡𝑝𝑢𝑡 85/𝑑𝑎𝑦
Efficiency = 𝐸𝑓𝑓𝑒𝑐𝑡𝑖𝑣𝑒 𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑦 = 90/𝑑𝑎𝑦 = 94%
Effective Capacity = 90 t-shirts/day 𝐴𝑐𝑡𝑢𝑎𝑙 𝑂𝑢𝑡𝑝𝑢𝑡 85/𝑑𝑎𝑦
Utilization = 𝐷𝑒𝑠𝑖𝑔𝑛 𝐶𝑎𝑝𝑎𝑐𝑖𝑡𝑦 = 100/𝑑𝑎𝑦 = 85%
Actual Output = 85 t-shirts/day

Determinants of Effective Capacity/Output

a. Facilities, layout
b. Products or services, product mixes/setups
c. Processes, quality
d. Human considerations, motivation
e. Operations, scheduling and synchronization problems
f. Supply Chain factors, material shortages
g. External forces, regulations

The most significant parts of effective capacity are process and human factors. Process factors
must be efficient and must operate efficiently, if not the rate of output will intensely decrease. Human
factors must be trained well and have experience, they must be motivated and have a low
absenteeism and labor turnover. In resolving constraint problems, all possible alternative solutions must
be evaluated.

Sources:

Notes for MBA. (2018). Determinants of effective capacity. Retrieved August 5, 2018 from
www.notesformba.com/topic/determinants-of-effective-capacity/

Spacey, J. (2017). 3 types of capacity. Simplicable Guide. Retrieved August 5, 2018 from
https://simplicable.com/new/capacity

Spacey, J. (2017). 10 examples of design capacity. Simplicable Guide. Retrieved August 5, 2018 from
https://simplicable.com/new/design-capacity

Spacey, J. (2017). 4 examples of effective capacity. Simplicable Guide. Retrieved August 5, 2018 from
https://simplicable.com/new/effective-capacity