CAPACITY

The capacity of the organization refers to the highest sustainable level of production or
service that can be achieved with the current level of resources.

Capacity Utilization = ____current output_____ X100

Maximum possible output

TECHNIQUES FOR IMPROVING CAPACITY

1. Short term capacity:

a. extend the opening hours.

b. over time.
c. ensure that enough employees and machines during the period of production time.
d. hiring.

2. Long term capacity:

a. increase investment opportunities in the form of new machines.

b. globalization of business.

Advantages of working at full capacity (90-100)

a. Less average cost

b. Staff motivation might be good, if workers will secure in their jobs.

c. a busy operation can improve the company’s images, as a result customers might be more
confident when placing orders.

Drawbacks of working at full capacity

a..The pressure of working at full capacity all the time might put a strain on some of the
resources.eg Workers might be doing too much overtime, resulting in stress; this might cause
accidents, absence, dissatisfaction, negative feelings of employees.

b..There may be insufficient time for staff training, placement and development.

TECHNIQUES OF DECREASING CAPACITY LEVELS

..Producing too much, or having spare capacity, can be a serious problem

..In the short term a business could

a. Stockpile:- in anticipation of an increase in demand.

b. Reducing prices:- In the hope that this will increase demand.

..In the long term a business may have to consider

a. Redundancies:-Reduce the number of workers

b. Closing branches:-Close part of the business.

 PRODUCTIVITY

Productivity means the amount of output which can be produced with the resources available.

Productivity= Number of goods produced

Number of inputs

There are two types of factors affecting the productivity and efficiency of a firm such as labor
oriented and capital oriented industry.

1. Labor Intensive

..Relatively few machines are needed.

..This is common where specialist skills are required.

..Mainly in the service sector. E.g. clerical work.

2. Capital Intensive

..The business is relies more up on machinery.

..This is common where identitical products are produced, eg.chemical industry.

There are a number of factors that will determine whether a business will be capital or
labour intensive.

3. The size of the business

..Capital equipment can be expensive.

..Small firms may be unable to afford to buy machinery.

4. The relative cost of inputs

... New technology is expensive

5. The product or service

Products which can be mass produced will be capital intensive

Importance of productivity How to increase productivity

*Higher productivity enables worker to get higher wages,  Good Product design.
better working conditions.  Packaging.
 New technological changes.
*It helps employers obtain resources for new investment.  Proper management and
organization.
*It provides reasonable rate of products to consumers.
 Production planning and
*Economic development. control.
 More colourful and attractive.
*Increase the welfare of the people.  Economies of scale.
 Good plant layout.
*Increase the employment opportunity.  Experienced professionals.
 Material handling.