How would you measure and assess effectiveness of a production capability?
Production capability the total output that a plant or an enterprise produces in a given period with existing capital equipment. It involves the balancing of inputs for the manufacturer to match output demand. Effectiveness is the capability of producing the expected results. It also includes preservation and enhancement of assets. An effective production therefore is production that meets the desired production goal (Blanchard, 2012).
The following methods are used to measure and evaluate effectiveness of production capabilities:
- Overall Equipment Effectiveness (OEE): it was a measure developed by the Japanese in the 1970s under the concept of Total Productive Maintenance (TPM). It is a function of production line availability, quality defect rate and process effectiveness and applied in a commercial factory (Blanchard, 2012).
- Life Cycle Cost (LCC): it gives the total cost of producing a given product. It includes not only the company’s operating cost but also the logistics and maintenance cost as well.
- Total productive maintenance (TPM); it is a holistic approach that ensures equipment maintenance that strive to achieve perfect production. It ensures that there are fewer breakdowns, stoppage in production and machine defects to maximize production.
- Efficiency is the evaluation when the cost of production is minimized. This is when the marginal cost is equal to the average total cost.
- For there to be efficient, all factors of production must be fully utilized, unused resources show that more products is produced and therefore indicates the economy is not at its optimal production function.
In conclusion, therefore, measure and evaluation of production capability generally revolve within the adequate utilization of the factors of production in a factory or an economy. When all factors utilized, production efficiency achieved and the economy said to be operating at its optimal point, then the effectiveness achieved.
References
Blanchard, B. (2012). Logistics Engineering and Management. Englewood Cliffs, N.J: Prentice-Hall.
Eskeland, G. S., & World Bank (2000). Externalities and Production Efficiency. Washington, DC: World Bank, Development Research Group, Public Economics.
