What it means
The rate is found by dividing the quantity produced by the time taken, using a time base that is clearly defined. It can be measured for a single machine, a production line, a whole factory or even a team of workers.
Several versions are in use. The rated or design rate is the speed the equipment is built to achieve, the standard rate is what management plans for, and the actual rate is what was achieved in practice.
The rate matters because it links directly to capacity and cost. If a line is run at a slower rate than planned, the same labour and overhead produce fewer units, which raises the cost of each one.
Managers also use it to plan delivery times. Dividing the order quantity by the production rate gives the time needed to complete an order, and comparing it with the customer's deadline shows whether more shifts or machines are needed.
Production rate should be read with quality in mind. A line that runs fast but produces many defects has a high gross rate but a lower good-output rate, and the second figure is the one that matters for sales and for the cost of each saleable unit.
Related ideas include takt time, which is the pace at which products must be completed to meet customer demand. If takt time is shorter than the actual cycle time, the factory cannot keep up with orders.
In practice
Real-world examples.
Example
A bottling plant fills 6,000 bottles in 2 hours, a rate of 3,000 bottles an hour. A new order requires 4,000 bottles an hour for a week. The plant considers adding a second filling machine. The finance team compares the cost of the machine with the profit from the extra week of sales.
Example
A clothing workshop has 20 sewing staff, each finishing 5 shirts an hour. The workshop rate is 100 shirts an hour. A shop orders 8,000 shirts, which takes 80 hours at that rate. The manager offers delivery in two weeks, allowing for breaks and machine repairs.
Example
A software team resolves an average of 40 support tickets a day. A sudden increase to 60 new tickets a day means a backlog grows by 20 tickets each day. The manager hires temporary staff to lift the rate. She tracks the backlog daily until it returns to zero.
Formula
Calculation
Production rate = units produced / time taken
Required rate = units needed / time available
Suppose a factory makes 12,000 units in 400 hours. Production rate = 12,000 / 400 = 30 units per hour.
A customer places an order for 9,000 units to be delivered in 250 hours. The required rate = 9,000 / 250 = 36 units per hour, which is higher than the current rate of 30.
To meet the deadline, the factory must raise its rate by 6 units an hour, which is an increase of 6 / 30 = 20%.Case study
Seen in the real world.
Eastgate Electronics is an illustrative, fictional company that assembles circuit boards. Its line ran at a design rate of 60 boards an hour, but the actual rate averaged 45 boards an hour over a 160-hour month.
The operations manager calculated that output was 45 x 160 = 7,200 boards, when the design rate would have produced 60 x 160 = 9,600. The 2,400 board shortfall was worth $7 of contribution each, or $16,800 a month.
In this illustrative story the team found that the placing machine stopped often to be reloaded with components. By preparing reels in advance, the rate rose to 54 boards an hour, adding 9 x 160 = 1,440 boards a month worth $10,080. The manager then set a goal of reaching 57 boards an hour by cutting the remaining stoppages, and reported the rate to the team each week.
Watch out
Common mistakes.
- Using the design rate for planning when the actual rate is lower, which leads to late deliveries, overtime costs and unhappy customers.
- Counting defective units in the rate, when only good units can be sold.
- Ignoring stoppages for changeovers, breaks and maintenance in the time base, which overstates the real rate and leads to promises of delivery dates that cannot be kept.
Questions
People also ask.
Is production rate the same as capacity?
No, capacity is the maximum output possible over a period, while the production rate is how fast the process is actually running, which may be lower.
What is takt time?
It is the time available divided by customer demand, and it tells you how often a unit must be completed to meet orders, so a takt time of 2 minutes means one unit must be finished every 2 minutes.
How can the rate be increased?
By reducing stoppages, speeding changeovers, balancing the line, adding machines or labour, or improving the flow of materials, though each change should be checked against its cost and the effect on quality.
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