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Factory capacity is measured in Standard Capacity Units (SCU). The theoretical capacity of a factory (in SCU) is calculated from the plant (machine) capacity and the number and effectiveness of the workers.
However, effective capacity will prove to be less than this because of various wastage factors (such as rework, setup time, raw material stockout, and machine downtime). A factory efficiency of about 70%-80% is very good.
How Much Capacity Do You Need?
Each product requires a certain number of SCU to produce. Typical products require in the range of 0.1 - 2.0 SCU per unit depending upon the product specifications and the degree of cost reduction incorporated in the design. A good rule is that for each $300 of product prime cost, a product requires 1 SCU to produce. For example your adventurer bike has a product prime cost of $300 so it requires exactly 1 SCU for every unit produced in a given year. See Determining Capacity Requirements for further detail.
Changing Factory Capacity
Your factory is potentially operational for 8 hours x 5 days x 50 weeks per year. There is no shift work or overtime. Besides increasing your factory efficiency, the only way to alter your factory capacity is by changing the size and effectiveness of your workforce AND the amount of plant you have.
The most obvious way to increase capacity is to hire more workers and buy more plant. More workers can be hired almost instantaneously but a change in plant size takes a year before it is completed, so you will need to plan your plant size changes a year in advance.
Changing your workforce size will, understandably(!), have an impact on your workers' sense of job security and workforce morale levels. If you are hiring lots of workers, you may need to increase training levels to bring them up to the skill level of your existing workers.
It is important to remember to alter the levels of maintenance, setup reduction, and quality systems investments to reflect changes you make in plant size.
Funding Changes in Plant Capacity
Funding a large investment in plant will require additional capital to be found. Finance instruments such as share issues and increases in long-term debt may be required.
