Order Placed

Total Cost of
Cost • Availability
Losses: 5%
paper per
carton

Estimation • 10% factory overhead

• Fixed Insurance Charges
Total Cost
with
(Rs.0.25 per carton) overhead

• 5% wastage cost Total Cost

• Freight cost per Carton
 Model: Base Level capacity
Strategy: Capacity Leading demand
Capacity
Management
Installed vs. Operational Capacity
CAPACITY
FY2017 FY2018 FY2019
ANALYSIS
Installed capacity
15,000 15,000 15,000
(Tonnes)
Operating
50% 53% 56%
capacity (%)
Operating
7,500 7,950 8,400
capacity (Tonnes)
 Loading Time or
Available
Operating Time:
100%

Operating • Availability
Losses: 5%
Total
Operating

Time and Time: 95%

Net
Losses • Speed
Losses: 8%
Operating
Time: 87%

• Quality Valuable
Losses: 2% Operating
Time: 80%
Overall Equipment Efficiency
Rate Calculation Value Rate

Availability rate 95%/100% 95.00% Availability rate

(a) (a)
Performance 87%/95% 91.58% Performance
rate (p) rate (p)
Quality rate (q) 80%/ 87% 91.95% Quality rate (q)
Actual Output
i.e. Effective capacity -
Unplanned losses

Effective Capacity
i.e. Design capacity -
Planned losses

Design
Capacity
Design Capacity (FY 2019) 95%
Planned capacity buffer (to reduce wait time) 9%
Unplanned capacity losses (due to less orders) 15%
Planned and unplanned availability losses 5%
Planned and unplanned speed losses 8%
Planned and unplanned quality losses 2%
Actual output 56%
Utilization (Actual capacity/Design capacity) 59%
Assumption: Availability, speed and quality losses have
a ratio of 60:40 for planned: unplanned
Effective capacity 77%
Efficiency (Actual capacity/Effective capacity) 73%