Scenario
Sales took an order for 10,000 units per month, then asked the production manager: "Is the capacity sufficient?" The manager glanced at the machine's nameplate: "The equipment produces 150 units per hour, with 720 hours in a month, it can make 108,000 units, no problem."
The order was accepted, but only 6,200 units were delivered in the first month. The customer was furious.
Problem: The manager used Theoretical Capacity, not actual capacity.
Definitions of Three Types of Capacity
Theoretical Capacity
The maximum output designed for the equipment, assuming continuous 24/7 operation without any losses.
Purpose: Specification reference when purchasing equipment, not a basis for production commitments.
Practical Capacity
Theoretical Capacity after deducting planned downtime (PM, changeovers, holidays).
Usually 75-85% of Theoretical Capacity.
Demonstrated Capacity
The average of past actual production data. The most reliable basis for capacity planning.
Only Demonstrated Capacity can be used to commit to customer delivery dates.
Finding the Lost Capacity
A certain machine has a Theoretical Capacity of 100 units/hour, but actually only produced 72 units/hour. Where did that 28% go?
Analysis Framework (corresponding to the three elements of OEE):
| Loss Type | Example | Loss Percentage |
|---|---|---|
| Availability Loss | Machine breakdown, waiting for materials | 8% |
| Performance Loss | Speed below rated, minor stops | 12% |
| Quality Loss | Scrapped defective products, rework | 8% |
| Total Loss | 28% |
OEE = 0.92 × 0.88 × 0.92 = 74.5% (approximately equal to 100% - 28% = 72%)
Only by identifying the cause of each loss can we know what can be improved.
Steps for Capacity Planning Calculation
- Confirm Demonstrated Capacity (average actual output over the past 3-6 months)
- Add expected improvements (e.g., an ongoing OEE improvement plan is expected to increase by 5%)
- Set capacity buffer (typically leave a 10-15% buffer to cope with fluctuations)
- Deliverable Capacity = Demonstrated Capacity × (1 + Expected Improvement) × (1 - Buffer)
Bottleneck Identification
The capacity of a multi-process production line is determined by the bottleneck station.
Methods to find bottlenecks:
- Observe which station has inventory accumulating in front of it
- Which station's Cycle Time is closest to or exceeds Takt Time
- Which station has the lowest OEE
Only by improving the bottleneck will the capacity of the entire production line truly increase. Improving non-bottlenecks will only increase WIP in front of the bottleneck.
Golden Quote
"Accepting orders based on Theoretical Capacity is promising customers based on ideals. Demonstrated Capacity is your real leverage – those are the actual figures your factory has delivered in the real world, no vanity, just facts."