How To Calculate Production Capacity for a Business

Production line

Business is not only about making sales. To be able to succeed in the field, you need to know very well the capability of your business to meet the demands of the market. One thing that needs to be given great attention is the production capacity.

Production capacity refers to the amount of products or services your business can produce, relying on the available resources. With the proper calculation of the plant capacity, it will open up better decisions in terms of production, consumption, profit, etc. Therefore, it is important that every business owner knows how to calculate the production capacity of his business. Here is how it can be done:

  • Determine some factors in your business that affect the overall production. This includes facilities, number of employees, equipment, and the like.
  • In terms of the employees, identify how many technicians all of the facilities in your business can handle. After this, perform these following calculations:
  1. Determine the number of hours per week the employees are paid to work. Calculate this by using the formula: number of employees multiplied by the number of hours they work.
  2. Then, adjust the flat rate hours of each technician by deducting the hours they lose each week in terms of break times and other work interruptions.
  3. Calculate now the proficiency factor. This is done by dividing the flat rate time of an employee by the actual average time he spends on production. For example, if it takes one employee to finish a one-hour product in 45 minutes, if you divide the two figures, the proficiency factor will be 1.33.
  4. At this point, multiply the number of hours worked by one technician to his proficiency factor. This will answer the production capacity of a single employee. If you add all the calculations up for all employees, the overall refinery capacity of the business is determined. When the figures are high, it only means of a steel capacity for your business production rate.

In terms of the equipment, determine how it performs in regards to production. For example, you are in an embroidery business for shirts. Identify first how long it will take an equipment to finish one product. After this, do the following calculations:

  1. Multiply the time to finish one product to the number of hours or minutes each day the equipment is in operation. For instance, if it takes six minutes to complete one and the equipment is running eight hours a day, multiply six to 480 minutes. The answer is the market capacity of the equipment in a day.
  2. After calculating the capacity of each of the equipment, add everything up and that will result to the total refinery capacity in a day.

Knowing these figures in terms of plant capacity does not only end with these calculations. A lot of other important factors that directly affect the business are determined. This includes production consumption, wages of employees, pricing, and most importantly, profits. Therefore, the production capacity determines the success of your business.


Share this article!

Follow us!

Find more helpful articles: