What Is Your Production Capacity?
Your production capacity is one important aspect of your production system. The capacity has to match your demand. If your demand is higher than your capacity, then you will not be able to supply the customer. On the other hand, if your capacity is higher than the demand, then you will have lots of idle workers and machines, which is not good either. The name is actually a bit of a misnomer, since capacity is the ability to contain things, whereas for a production system we are much more interested in the number of parts that are completed. In any case, capacity is important! Your production capacity is one important aspect of your production system. The capacity has to match your demand. If your demand is higher than your capacity, then you will not be able to supply the customer. On the other hand, if your capacity is higher than the demand, then you will have lots of idle workers and machines, which is not good either
The Easy Way: Total Production Quantity During a Time Period
One of the easiest ways to measure capacity is to simply use the total production quantity for a given time period. For example, if your plant can produce an average of 20,000 gizmos per week, then your total capacity is 20,000 gizmos per week. So far, no surprises.
You can also divide the total time by the total quantity, and get what I call the line takt or system takt (see also How to Determine Takt Times). Hence, this system takt is also a measure of the capacity, which has to match the customer takt, a measure of the demand. Confusingly, many practitioners also call this the (average, total, …) cycle time, which I find confusing, as for me the cycle time is without losses, but the takt time includes losses.
What Is My Quantity?
The quantity should be the quantity that you can realistically produce, including all time lost for changeovers, maintenance, breakdowns, missing parts, and other delays. Hence, for a system working at full capacity, it is the average quantity produced in a given time period.
If your system is working at less than capacity, however, you cannot take the total production quantity. For example, if you produced 20,000 gizmos per week, but half of the time your people were idling, then you cannot use the 20,000. Same goes if only half of your people work while the other half idles, or if you fill their time with some secondary tasks like weeding the parking lot (yes, I have seen a plant doing just that).
Now, you could just assume that if half of your people are idling when making 20,000 gizmos per week, then your total capacity would be twice that: 40,000 gizmos. This is probably not true. If there is not enough work around, then people automatically work slower than normal. Hence, your total capacity would be quite likely more than 40,000 per week. This could be 30% on top or more, but this is hard to estimate. The best way is still to take a fully loaded system and count the parts during a given period.