Do you really know your manufacturing capacity?

This isn't a trick question.

Do you know your real manufacturing capacity?

Many businesses don't really understand theirs and this has a real knock on effect on their ability to profitably meet their customer delivery dates.

Overloaded order books

Having overloaded order book is one of the easiest ways to struggle to deliver to your customers. If overloaded order books don't affect your profit margins then you are likely to negatively affect your quality levels and you will likely experience staff burnout.

Confusion, expediting plans and re-scheduling becomes the norm. This is wasted time and effort for many organisations.

Utilisation and efficiency - know the difference

When trying to figure out the real capacity levels of a business many people that we encounter talk about efficiency levels. This might not always be the right measure to consider and many times utilisation is a better measure.

Efficiency measures the actual time compared to the planned time (e.g. for a manufacturing operation to be completed).

Utilisation measures the productive time compared to the total available time (e.g. the full shift less meetings, queries, breakdowns etc...).

Many people use the terms efficiency and utilisation interchangeably but they are clearly different measures.

If you are actively monitoring your manufacturing operations and keeping your ERP system up to date then efficiency should always be bubbling along around 100%.

So, what is your true capacity?

On top of utilisation you should also factor in your holiday and sickness figures.

For a good chunk of your working year you don't expect your staff to be in attendance. If you offer 28 days out of 52 working weeks (260 working days) holiday, you will expect your staff to be away from the business for approximately 11% of the time (28 / 260).

If there is sickness on top of that, typically speaking, then you will expect even less time spent working on the operational processes.

What you are left with is your real capacity, or something close to it.

And then continuous improvement appears

Raising your available capacity, through reducing the utilisation losses, is a good focus for most continuous improvement programmes.

Being realistic is the key message of this article. If you are kidding yourself about your capacity then you will likely overload your order books and put your business 'on the back foot'.

Most operations managers do not like having these kinds of conversations. Whilst it makes the operation look worse, you cannot plan under false pretences.

Keeping it simple

At Fraction ERP we decided to keep managing capacity simple:

The weekly default capacity can be raised and lowered as part of the forward horizon tool we have included (if you want to decrease it for maintenance or raise it for temporary labour, for example).

Being realistic and keeping it simple are two great strategies for running a manufacturing operation whilst delivering on time, keeping your customers happy and turning a profit.

These are the same principles that we have built in to Fraction ERP.

Are you ready to try something different?

If you are ready to leave behind an overly complicated ERP system, or want to upgrade from your whiteboards and your spreadsheets, then request your free demo account today.

Just get in touch and we'll provide you with a no obligation demo so that you can see just how powerful Fraction ERP is (but without the unnecessary complexity of many ERP systems out there).

To arrange your demonstration - click here.

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