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Capacity and Forecast

Capacity and Forecast
Capacity and forecasting are utilized when determining the optimum production levels and
utilization of resources. These factors play a crucial role in decision making processes for
instance when making decisions to expand the existing factory premises or during planning and
modification of product lines or during the introduction of new product lines.
A company’s long term capacity is based on other design capacities like production and
sustainable capacity and effective capacity. The design capacity of a plant is the maximum total
output that the plant can produce in particularly ideal situations.
In the Plasti-Brack department, the production capacity of the Blanking machine is 3529.3 hours
while its design capacity is 4000 hours. The machine two machines each utilize only 88.2% of its
design capacity. The molding machine are four in numbers each with a design capacity of 8000
hours but it utilizes only 6886.8 hours amounting to 86.1% of its design capacity. The Assembly
plant has 8 machines each with a design capacity of 16000 hours but the production rate is only
15200.3 hours which amounts to 95% of the machines total capacity. The Bulk pack machine is
shared among the other three sections and Plasti-Brack utilizes only 17.9% of the machines
design capacity. The production capacity is 329.9 while the design capacity for Plasti-Brack is
The total production of the labour or peoples hours is 1399.52 hours against the maximum
possible hours of 1999.77 hours for the blanking machine. The molding machine utilizes a
production capacity of only 1578.95 people’s hours against a maximum of 1999.95 hours while

the assembly plant utilizes a production capacity of 13995.26 people’s hours against a maximum
total of 15200.26 people’s hours.
The major goal of the capacity and forecasting exercise is to analyze the capacity of the
machines and man power to effectively implement an increase of 5% in the production
department. Increasing production by a margin of 5% will result in most of the departments and
sections working to almost their maximum levels. The following are the estimates for the
proposed increment.

n Setup




Hrs 3,529.29
4 260
9 176.46 176.46  

Hrs 1399.52
4 130
4 69.98   69.98

Hrs 6886.81 371 200
5 344.34 344.34  

Hrs 1578.95 371 50 2078.9 78.95   78.95


Hrs 15,200.26 0 1205
3 760.01 760.01  


Hrs 329.91 0 50
6 16.50   16.50

Hrs 839.72 0 150
1 41.99   41.99

Additional hours required        

2 207.41

The machine hours will increase by 1280.82 hours while the people hours will increase by
207.41 hours. The machines will have added capacities which will be close to their design
maximum capacity. The blanking machine will be working at 93.2% of its design capacity while
the molding machine will be working at 91.1% of its capacity and the Assembly plant will be

working at 1005 of its design capacity. The bulk pack will increase its share of the Plasti-Brack
to 22.9%.
To increase the production by 5% it would require an additional labour force or people’s hours of
207.41. This increment cannot necessitate the addition of a full shift to cover for the increase
production target however the inclusion of extra hour’s overtime per day would suffice for now.
This increment will offset the targeted growth of 7 to 10% as forecasted by Mr. Mike Finch for
the short term growth strategy. The pieces per productivity people’s hour is also targeted to
increase from 332.73 per hour to 349.37 per hour. To achieve this goal, the company has to
motivate the employees to work harder and their rates should also have a token of appreciation
for their work besides all the departments that meet their monthly targets should be rewarded.
To increase the total hours for the Plasti-Brack department, then the estimated 105 employees
working at the factory will only have to work for additional one hour every day to compensate
for the increase on production. The total number of machine hours expected is 1280.8 hours
while the additional number of people’s hours is estimated to be 207.41. The total units per
people’s hour are 349.37 units hence the additional units would be 72462.83 units. The storage
for these units will not provide a challenge as the demand is also expected to increase almost at
the same rate or even at a much higher rate.
The aim of implementing and meeting all the set objectives is that the company will have a way
of evaluating its performance and its ability to satisfy the growing needs and demands of the
market. The expansion plans would be a big achievement for the company as it would provide
an opportunity for the company to grow. The cost implications would be relatively affordable

during the short term period but the long term growth forecast of 12.5% annual growth which is
expected to compound for the next five years will be very costly as most of the machines have
almost reached their design capacity.

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