Capacity Management

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capacity management - the meaning of capacity
The capacity of a production unit (e.g. machine, factory) is its ability to produce or do that which the customer requires. In production and operations management, three types of capacity are often referred to: Potential Capacity| The capacity that can be made available to influence the planning of senior management (e.g. in helping them to make decisions about overall business growth, investment etc). This is essentially a long-term decision that does not influence day-to-day production management| Immediate Capacity| The amount of production capacity that can be made available in the short-term. This is the maximum potential capacity - assuming that it is used productively | Effective Capacity| An important concept. Not all productive capacity is actually used or usable. It is important for production managers to understand what capacity is actually achievable.|  

Measuring capacity
Capacity, being the ability to produce work in a given time, must be measured in the unit of work. For example, consider a factory that has a capacity of 10,000 " machine hours" in each 40 hour week. This factory should be capable of producing 10,000 "standard hours of work" during a 40-hour week. The actual volume of product that the factory can produce will depend on: - the amount of work involved in production (e.g. does a product require 1, 5, 10 standard hours? - any additional time required in production (e.g. machine set-up, maintenance) - the productivity or effectiveness of the factory

Constraints on capacity
In capacity management there are usually two potential constraints - TIME and CAPACITY Time may be a constraint where a customer has a particular required delivery date. In this situation, capacity managers often "plan backwards". In other words, they allocate the final stage (operation) of the production tasks to the period where delivery is required; the penultimate task one period earlier and...
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