Question

What is manufacturing capacity? What impact is manufacturing capacity having on availability of paper products during this COVID-19 pandemic?

Answer 1

Manufacturing Capacity is the volume of products or services that can be produced by an enterprise using current resources. Three commonly used definitions of capacity are as follows :

1.Design capacity: It refers to the maximum output that can possibly be achieved.

2. Effective capacity: Effective capacity is the maximum possible output given constraints such as quality requirements, product mix composition, machine maintenance and scheduling problems.

3. Actual output: It is the rate of output actually attained. It is typically less than the effective output caused by machine breakdowns.

Insufficient capacity will lead to poor delivery performance, increased work-in-process inventories and frustrated manufacturing personnel. This can lead to reduced customer satisfaction and reduced profitability prospects. On the other hand, excess capacity can burden the company with needless expenses. Capacity planning can help in optimal utilization of resources.

The coronavirus (COVID-19) pandemic is causing widespread concern and economic hardship for consumers, businesses and communities across the globe. Manufacturers are facing unique challenges caused by the crisis, and paper and packaging producers are no exception.

Paper and packaging manufacturers will likely face fluctuations in demand as the COVID-19 pandemic intensifies, with potentially disruptive effects on production and revenues. Stockpiling of certain paper products by consumers seeking to allay their concerns about shortages may cannibalize future demand. Meanwhile, a prolonged period of economic uncertainty could reduce customer appetite for other products, such as construction materials.