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Capacity Planning

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CAPACITY PLANNING

Measures of Capacity. No single capacity measure is applicable to all types of situations. Hospitals measure capacity as the number of patients that can be treated per day; a retailer measures capacity as annual sales dollars generated per square foot; an airline measures capacity as available seat-miles (ASMs) per month; a theater measures capacity number of seats; and a job shop measures capacity as number of machine hours. In general, capacity can be expressed in one of two ways: output measures or input measures.

Output measures are the usual choice for facilities that produce standard products in high volumes, in a limited number of models using production processes with rigid flow patterns. Nissan Motor Company states capacity at its Tennessee plant to be 450,000 vehicles per year. The plant produces only one type of vehicle, making capacity easy to measure. However, the Navistar plant in Springfield Ohio produces vehicles that range from heavy-duty trucks to school busses. The inherent variation in production time requirements makes a single figure for capacity much less meaningful.

Input measures are the usual choice for facilities that produce custom products in low volumes using processes with flexible flow patterns. For example, in a photocopy shop, capacity can be measured in machine hours or number of machines. Demand, which invariably is expressed as output rate, must be converted to an input measure. Only after making the conversion can a manager compare demand requirements and capacity on an equivalent basis. For example, the manager of a copy center must convert its annual demand for copies from different clients to the number of machines required.

Utilization. Capacity planning requires knowledge of current capacity and utilization. Utilization, or the degree to which equipment, space, or labor is

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