Does your business operates at full capacity? Have you ever wondered what the advantages of your business working at full capacity are? In this article, I would be sharing with you the advantages associated with working at full capacity.
Though full capacity is a term that is mainly associated with the manufacturing industry, the term is also relevant to other industries with other measurable outputs.
What is Full Capacity?
Full capacity is the maximum possible output a business can produce during a specified period of time using with installed equipment.
It is very helpful to know if your business is operating at full capacity.
Factors to Consider when Measuring your Business’s Full Capacity
To ascertain if your business is operating at full capacity, there are certain factors you have to consider. They include:
This is an important factor when measuring the full capacity of your business. Ascertain the limitations of your workers and installed equipment. Considering your existing equipment’s and staffing, determine the unit you could produce per hour in all stages of production and choose the smallest. For example, if production goes through four stages, and you could produce 400, 550, 600 and 700 units in the 4 production stages respectively.
Your capacity would be 400 units per hour. Multiply this by the hours you can maintain that capacity per day to determine your daily output at full capacity.
Production machinery cannot operate themselves, you require workers to create output. Therefore you have to factor in your workers when calculating your capacity. Here, you calculate the maximum output an individual staff can produce per hour, multiply this by the number of workers you have and by the hours each individual worker works during the given time-frame.
It would be difficult to calculate the accurate full capacity of your business if you do not factor in downtime. If your capacity is 400 units per hour when equipment is running smoothly but takes 10 minutes to maintain equipment every 5 hours. This definitely reduces capacity.
You calculate this by subtracting the fraction of downtime from your potential output.
Here is how you do it; downtime here is 10/240= 0.0417. Due to downtime your output would be 400- (0.0417 X 400) = 383.32. 383.32 would be your full capacity, considering reasonable downtime.
To prevent wasting scarce resources, monitor the performance of your machinery and staffs. Purchase equipment, only when existing equipment is underperforming due to technical issues, machinery depreciation, or an increase in product demand which requires increased production. Adding capacity without a need for it would not only waste resources, it would also reduce productivity and increase costs.
Advantages of Operating at Full Capacity
Now that you already know what full capacity is all about and how you can measure the full capacity. Let’s consider the advantages associated with operating at full capacity:
- It prevents waste of resources
- It ensures productivity
- It increases the profitability of your business
- It curbs costs
- It allows for the employment of resources in the best business endeavors and promotes strategic decision making
- It also allows you ascertain how your business is performing and proffer strategies to improve performance
Why operate on a lower capacity when you can work on full capacity. Measure the full capacity of your business today and start making strategic decisions that would improve your business performance.