Question

A production facility has a design capacity of 500 units a day and an effective capacity of 480 units. Which of the following are potential “determinants” of its effective capacity, accounting for the gap between 500 and 480?

        I. The need for periodic maintenance of the equipment in the facility.

        II. The actual output of the facility.

        III. Lunch breaks and coffee breaks taken during a typical day in the facility.

Answer 1

Design Capacity: Design capacity is the maximum output of a production facility in a given period of time under ideal conditions.

Effective Capacity: Effective capacity refers to the actual capacity expected from the production facility at current operating constraints. Effective capacity will lesser or equal to design capacity.

There is a difference between design capacity (500 units) and effective capacity (480 units) which is 20 units.

The potential determinants of its effective capacity, accounting for the gap between 500 and 480 are as follows:

i. The need for periodic maintenance of the equipment in the facility: Equipment and machinery are very essential in production planning and any issue with equipment and machinery could reduce the production for any production facility. So time to time, equipment and machinery should be maintained properly and updated as per the industry standard.

iii.  Lunch breaks and coffee breaks are taken during a typical day in the facility: Human factors affect the effective capacity in any production facility. Employee motivation, turnover, overtime, and absenteeism all affect the effective output. So the employee spends more time on production facilities will have more output for the firm. Employees spending more time in lunch breaks and other tea-coffee breaks will actually reduce the capacity. So managers should take care of productive hours of employees in the production facility.