Production capacity = minimum of (stock of material ÷ amount of that material per unit)
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Production capacity: how to calculate it and what to do with it
Production capacity is the maximum number of finished units you can complete with the materials, time and equipment available. For recipe or BOM based production the material ceiling is calculated by dividing the stock of each material by the amount used per unit and taking the smallest result. That material is the bottleneck.
The three ceilings that decide capacity
Material capacity is stock divided by per unit usage, taken at its lowest. Time capacity is available production hours divided by hours per unit. Equipment capacity is cycles available before your deadline multiplied by units per cycle. Real capacity is the lowest of the three.
For small producers the material ceiling usually binds first, and it is the one that responds to a purchase rather than to hiring or new equipment. That is why capacity work normally starts with materials and only moves to time once supply is steady.
Theoretical capacity versus what you can actually deliver
Theoretical capacity assumes nothing goes wrong, nothing is wasted, and every gram on the shelf is usable. Practical capacity subtracts waste, unusable remnants, material already committed to accepted orders, and the time lost to changeovers and cleaning.
Quoting from theoretical capacity is the most common cause of missed dates in small production. Build waste into the per unit requirement and deduct committed stock, and the number you quote becomes one you can keep.
Capacity utilisation, honestly measured
Utilisation is actual output divided by capacity for the same period. It is only meaningful if the capacity figure was calculated from real stock and real time, rather than from an aspiration.
Low utilisation with a material bottleneck is a purchasing problem. Low utilisation with plenty of stock is a demand or scheduling problem. The two look identical on a sales report and completely different on a capacity calculation.
How Makeable fits
Makeable is production capacity and inventory planning software for small businesses that make goods from recipes or bills of materials. It stores materials and recipes, keeps stock current as orders arrive, and recalculates capacity and bottlenecks continuously.
It is deliberately not an ERP, an accounting system or a warehouse management system. It answers one question well: what can you actually make right now, and what is stopping you making more.
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Common questions
What is the production capacity formula?
Capacity equals the minimum, across every required material, of stock divided by the amount used per finished unit. Where time binds first, capacity is available hours divided by hours per unit, and the lower of the two figures applies.
How do you calculate production capacity for a small business?
List materials with current stock, write the per unit requirement for each product, divide and take the lowest result per product. Recalculate whenever stock moves, because accepted orders consume capacity immediately.
Is production capacity the same as production planning?
No. Capacity is a number describing what is possible now. Production planning is the decision about what to make, in what order, with that capacity.
Put it to work
Makeable does this calculation live from your own materials and recipes, every time an order comes in. Start free, no card needed.
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