As a production manager, you’re tasked with making sure production is completed on schedule regardless of any design changes, material shortages, or quality issues that may come up in your way.
To get this done successfully, you need to know exactly how much capacity your shop has so you can allocate it efficiently.
But shop capacity is more than just knowing the size of your operation. Here’s what it is, why it matters, and how to calculate it accurately for your shop.
What is shop capacity?
Shop capacity is a measurement of the outputs you’re capable of producing.
That’s made up of five different key inputs:
1. Resource quantities: How much you have available in terms of materials, machines, and human effort.
2. Output requirements: How many resources are required to produce a single order.
3. Speed: How fast you are able to produce a single order.
4. Resource replacement rate: How quickly you can replace or replenish the resources you need.
5. Upper limit: Clearly identifying your resource constraints for non-renewable resources or any resources that have an upper limit on capacity or speed (like human working hours or hard-to-get materials).
These inputs come together to identify the total amount that a given shop can produce, which can become incredibly complex when you also factor in shortages, emergencies, and balancing the speed of production with the rate of resource replenishment.
Why shop capacity matters to every production manager
Shop capacity is something that feels intuitive, but calculating it is complex. Despite that complexity though, it’s critical for every production manager to know for a few key reasons.
1. Accurate projections: When you know shop capacity, you can more accurately predict when you’ll complete a project and build in buffers for emergencies.
For example, if you know that you need resources for a project, you’ll order them. But if an emergency happens, you could be delayed. When you know shop capacity, you can build in some redundancy so an emergency won’t delay production by much (if at all).
2. Maximizing output: Simply knowing the inputs to shop capacity doesn’t mean you actually know what your shop can produce.
For example, you may have machines that can produce 10 work orders per hour. If you have 10 machines, you might think you have a shop capacity of 100 work orders per hour. But if each widget takes five resources to produce and resources take two hours to replenish, you’ll need an enormous stock pile of resources or you risk not being able to run the shop at full capacity.
3. Preventing resource burnout: All resources have constraints, particularly human effort, and you can’t escape that reality.
While you can automate many tasks, you’ll need to maintain the machines and the humans that run them. Knowing your shop capacity gives you the data you need to plan ahead to allow for adequate breaks and rest so no one - and nothing - burns out.
4. Reporting upward: As you talk with the executive team at your company, they will want to know key metrics that rely on shop capacity.
For example, let’s say you get asked to take part in financial projections for the quarter. If you don’t know your shop’s capacity, you may know the gut feeling around how much it costs to produce something. But with shop capacity data, you’ll have an accurate data point to help drive the business forward.
How to measure shop capacity (3 ways)
Knowing what makes up shop capacity is helpful, but calculating it is a task unto itself. Depending on how much technology you want to use (and time you have), here are three ways to get the job done.
1. The Manual Way
Manual processes, such as whiteboards or clipboards at each station, is a simple, transparent way to get started with shop capacity measurement. Start with a single production process and document inputs and resources required. Repeat this across all production processes in the shop and add them together to get full shop capacity.
● Easy to implement.
● Low cost (zero if you already have a whiteboard and dry erase markers).
● Transparency is easy because you can leave the board up (or clipboard out) for anyone to see.
● Requires significant time and effort.
● Room for error (or someone accidentally erasing something).
● Cannot scale (both process-wise and the physical board itself).
If you want to scale a little more and leverage some technology, spreadsheets are a great first step. They are capable of holding lots of data and, if set up properly, can do the calculations for you.
● More scalable.
● Low cost (free with tools like Google Sheets).
● Sets you up to use more advanced technology later.
● More difficult to set up (you have to know your way around spreadsheet formula building).
● Prone to set up errors which can cause math errors.
If you want a pre-built spreadsheet for shop capacity, check out Building Swell’s Shop Capacity Template .
3. Purpose-built software
Purpose-built software for production shops not only calculates shop capacity for you, it also automatically puts tasks into efficient lists for production teams.
● Scalable to all sizes.
● Automates to-do list creation and other predictive indicators.
● Documents everything so no information gets lost.
● Requires technical know-how OR an imported spreadsheet to set up.
● Costs are higher than other options.
Practical things to keep in mind
When thinking about shop capacity, keep these considerations in mind:
Review data regularly: When you first start, don’t worry about getting too granular on the data. Instead, focus on adding more data as you get it and review regularly to garner more insights.
Always seek buy-in and transparency: Don’t launch this kind of project without talking to your team about it. When you launch, make sure the team can see the data - the good, bad, and the ugly - and give them the chance to help make things better.
Think about the future: This kind of project is about a time investment now to save a lot of time later on.
This journey is iterative: Calculating shop capacity is the first step to understanding bottlenecks and starting your journey to continuous improvement.