Production Capacity

(of a branch of industry or of an enterprise or its subdivision), the maximum possible output of a high-quality product, or the volume of raw materials processed in a unit of time (usually a year).

In socialist countries the production capacity is determined by a plan, in terms of the production list and assortment, as well as quantitative relationships. The plan is based on the fullest utilization of production equipment, floor space, advanced technology, and organization of labor. The estimate of an enterprise’s production capacity uses the same production-measuring units as the plan. Natural units (goods, parts, pieces, or tons) are the simplest and most accurate measures. The production capacity of a key group of equipment determines the capacity of a production unit, and the capacity of the latter determines that of the workshop, which determines the production capacity of the enterprise. Measures designed to eliminate “bottlenecks” are taken into account in calculating the production capacity. A significant portion of the fixed productive assets is concentrated in the key subdivision, which carries out the principal technological operations in manufacturing the product. The sum of the production capacities of individual plants manufacturing the same type of output constitutes the total production capacity of the branch for the particular type of output.

The primary data used in calculating the production capacity include fixed productive assets operating schedules for equipment and utilization of floor space, progressive standards for the productivity of equipment and for the labor intensiveness of a set or batch of goods (parts), and the skill of the workers. If the productivity of the equipment is known, the production capacity is defined as the product of the rated output of the equipment (per unit time) and the time allotted in the plan for the operation of the equipment. If the output is highly diversified, the production capacity is defined as the quotient of the time allotted in the plan and the labor intensiveness of a set of goods (or parts) produced by the specified equipment.

Production capacity is a dynamic value that changes with improvements in technology, labor efficiency, the organization of production and labor, and the workers’ level of culture and skills. According to methods used in industry in the USSR, production capacity is estimated for January 1 of the year of the estimate and for the following January 1 (capacities at the beginning and end of the year). The average annual production capacity is also estimated. If the production capacity increases at a uniform rate during the year, the average annual capacity represents the average of the capacities for the beginning and end of the year. In all other cases, the average annual production capacity is defined as the sum of the production capacity at the beginning of the year and the average annual capacity of the equipment introduced during the year, minus the average annual capacity of the equipment removed during the year.

The degree to which the production capacity is utilized is expressed by the coefficient of the utilization of capacity, which is the ratio between the annual output and the average annual production capacity of a particular year. A balance of production capacities is compiled to ensure the production of the planned volume of goods and to determine needs for increased production capacity.