The team at Title 2 is often called to look at businesses for the purpose of 'adding capacity'. That makes a lot of sense given that we want to optimize our capacity. We know that running to a certain percentage of capacity (which is different in different industries and business types) is how we make money, right?
Capacity can come in many flavors: warehouse capacity, machine capacity, labor capacity.... In this piece, I'm talking about labor capacity. But keep in mind that each of these three capacities need to be looked at very differently.
Many businesses talk about their capacity in dollars of sales. That's great if you sell homogeneous products at the same price across similar customers. But most companies don't do that. Product mix, customer mix, transportation mix, material content, and other variables make this a dangerous way to view capacity.
Labor capacity can be a tricky beast. Talk about the ability to execute work should be closely monitored to ensure we are all talking about the same work, and that we have defined work adequately.
In our fenestration experience, we have heard a lot about our capacity to build windows. Generally speaking that is an adequate measure of capacity. But when things start to change, that capacity can be adversely affected by product mix. If our demand switches from single hung windows to double hung windows, we quickly find out our capacity isn't X windows per hour, it is Y sashes per hour. Since double hung windows have two sashes, we can't produce X per hour, but some number less than that.
Distribution centers are an even better example. Work capacity there is often stated as dollars per day. In most of the operations we have worked in, that number can swing wildly depending on customer mix, time during a season, and channel. As more distribution moves to Direct To Consumer, work capacity drops dramatically. DTC picking is very different from the core most distribution centers executed for decades. Pick density in DTC is significantly lower. But since we state capacity in dollars, or pieces, we miss that our 'capacity' is diminishing as we move to DTC. DC capacity is limited by 'picks' or 'gets'. That's a trip to pick up product, whether one piece of that product or twenty. The time is the transit, not grabbing one or twenty. When density is high, piece count and dollar throughput are high. When grabbing 'onesy-twosey', piece count and dollar throughput are lower.
By defining work properly, we can see when our capacity is threatened. We can prepare for the impact, or better yet, improve our capacity by redefining how we execute that work.
We can't correct our capacity to do work if we haven't accurately defined that work. If you would like Title 2 to help you define your capacity call us today!