Madison Duncan
Mgmt 401-01
Essay #25
Discuss various definitions of Capacity and their relevance from TOC/TQM perspective.
Capacity is defined as the highest reasonable output rate that can be achieved with the
current product design specifications, product mix, work force, plant and equipment
limitations. There are three general types of capacity that are used today that relate to
TOC/TQM. There is: design capacity which is the maximum possible output rate that can
possibly be attained under ideal conditions; it is almost impossible the system will produce
at designed capacity. Effective capacity, which is the rate of output a firm can realistically
achieve, given process limitations; this is always less than or equal to design capacity.
Then there is actual output/capacity, which is the rate of output actually obtained taking
into consideration production losses; this is always less than or equal to effective capacity.
TOC becomes relevant to capacity and its various definitions when discussing the capacity
constraint. Simply put, the capacity constraint is a situation where market demand for a
product exceeds the amount of the product that the system is able to supply. The Theory of
Constraints focuses on identifying the constraint, aka, the bottleneck, in the system that
does not allow the plant to produce at its desired design capacity or sometimes effective
capacity. In class, we discussed the dice game that we were assigned for homework. The