Brianna has a masters of education in educational leadership, a DBA business management, and a BS in animal science.
A First Look at Capacity
Meet Bob! Bob runs a car factory that employs 100 people to run the factory's various machines. Each month, there is a demand for new cars, and Bob understands that in order to fulfill that demand he needs to produce a certain number of new cars. However, what happens when a machine breaks, or an employee gets sick and can no longer operate a machine? Can the factory still meet the demand? What Bob may be tempted to do is run at capacity.
Capacity is the highest capable output of a good or service when a machine or employee is working at full maximum potential. This maximum output at full potential occurs over a specific amount of time and can be measured in hours, days, weeks, etc. While Bob may be tempted to run at capacity, it is important to point out that this cannot happen for extended periods of time, as machines can break, employees get tired, and other factors involved in the production process can interfere. For example, if Bob decides to run at capacity, he might be able to produce 15 cars in one week. However, because the machines need to be serviced, and employees might have scheduled days off, Bob can only reasonably expect to produce just 12 cars a week. If, however, Bob decides to purchase more machines and hire more employees, the factory may be able to produce even more cars.
Types of Capacity
Theoretical capacity occurs when output is at its highest maximum output without any scheduled downtime for issues such as scheduled maintenance of the machines. In other words, in order to fulfill theoretical capacity, supervisors like Bob would have to produce as many goods as possible without any scheduled services or shutdowns of the machines. An example of this would be in a perfect world where machines never break, and employees never get tired of working. Both would continue to work at full potential without any stops.
Rated capacity is utilized more when actually trying to establish a quantity, specifically when computing calculations. Basically, rated capacity is used when a company wants to actually do the math and analyze the actual value for capacity. For example, a company that makes washing machines may know that their machines have a two-year warranty and thus should last on average of two years. So, out of 100 washing machines, some will last longer then two years, and some will last fewer then two years. Therefore, the company may try to design the machine so that a greater percent of their machines fall within the longer than two-year range.
Measurements of Capacity
Capacity is measured by considering two different concepts: inputs and outputs. Input is defined as what is put in, such as resources and employee productivity. Output is what is produced, or the end product. For example, if Bob measured capacity utilizing inputs, he might measure the productivity of his workers or how fast his machines can run in a given amount of time. However, if Bob wants to measure capacity in terms of outputs, he may measure the actual number of cars produced in one day. Keep in mind, the way capacity is measured is unique to each business. For example, an amusement park may measure capacity as the number of tickets sold in one day, whereas a daycare facility might measure capacity by the number of children enrolled.
Capacity is the highest output possible when machines and employees are working at their full potential. However, this does not happen for long periods of time because eventually machines may break or need servicing, and employees need to rest, take days off, or get sick. Theoretical capacity is a measurement used when capacity is at a maximum without any scheduled downtime, whereas rated capacity refers to an analysis of capacity and utilizes actual math calculations.
- capacity: the highest capable output of a good or service when a machine or employee is working at full maximum potential
- theoretical capacity: occurs when output is at its highest maximum output without any scheduled downtime for issues such as scheduled maintenance of the machines
- rated capacity: occurs when actually trying to establish a quantity, specifically when computing calculations
- input: what is put in, such as resources and employee productivity
- output: what is produced, or the end product
Upon completing this lesson, you should be able to
- Define capacity
- Explain the difference between theoretical capacity and rated capacity
- Identify the different measurements of capacity
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