The relationship between productivity and capacity

Some years ago I was invited to work with a window manufacturer that wanted to increase its productivity.  Frustrated to see operatives standing around rather than operating machines, the management team wanted some insight into how to improve throughput.

They were looking at the capacity of the business in terms of the number of operatives and the machine availability and deducing that in order to maximise productivity everyone needed to be busy all of the time.

The reality was different.  The machines were for different processes, so the cutting machine was not required if they needed to extrude metal.  Just because these machines had the capacity, didn’t mean they had the capability to meet the required demand at that point in time.

It’s a common mistake business owners make, particularly where people are concerned.  If I’ve got a team of ten people with, let’s say 220 productive days each (after taking out sick leave, holidays, training etc) and they are able to work at 80% productivity, I have 1,760 days of capacity to meet market demand.  If 5 of these people can provide service x and the other 5 can provide service y, I have 880 days capacity for each service.  If market demand is less than 880 days for service y, I cannot utilise my full capacity, even if I have demand for more than 880 days of service x.

The perennial juggling act for business owners and managers is to find the optimum balance between capacity, the capability of that capacity and market demand.  And when the three don’t align perfectly there are missed opportunities and the productivity of the business isn’t as high as it could be.

The most productive businesses understand this and have strategies to creatively ‘sell’ their excess capacity.