How to Calculate Production Rates
The production rate is the ratio of the number of goods produced and the time spent producing them. Production rates can measure the efficiency of production processes, whether those processes involve manufacturing, software development or food service. Production rates can rise or fall based on many variables. Managers can analyze how production rates can fluctuate, boost parts of the process that contribute to higher rates and address problems that are causing lower rates.
The first step in determining the production rate lies in determining what makes up a production unit. A manufacturer may choose to define a production unit as an entire machine or as a single part for that machine. For instance, Fictional Computers manufactures hard drives for desktop and laptop computers. The hard drive is Fictional's production unit.
The production cycle is the amount of time that the producer requires to create a production unit. Fictional Computers requires six minutes to produce a complete hard drive, so the production cycle for hard drives is six minutes. The maximum production rate is the production rate of a manufacturing process with no defects and no downtime. With a production cycle of six minutes, the maximum production rate for Fictional Computers is 10 hard drives per hour.
In the real world, no production process creates perfect products every single time. Also, processes can break down, leading to production slowdowns and stoppages. The defect rate measures how often the production process results in a defective product. A defect rate of 1 percent means that an average of one product will be defective for every 100 that come through the process.
The formula for a production rate for a process with a known defect looks like this:
Rp = Rmax (1-Rd)
In this equation, Rp is the rate of production, Rmax is the maximum rate of production and Rd is the defect rate.
If Fictional Computers has a 5 percent defect rate in its hard drive manufacturing process, the production rate calculation would look like this:
Rp = 10(1-0.05) = 10(0.95) = 9.5.
The manufacturing process would produce an average of 9.5 hard drives per hour.
Managers can examine the production rate to determine if they need to increase productivity, decrease the defect rate or adjust how they allocate their resources. As a real-world example, the airplane manufacturer Airbus announced in June 2015 that it would increase the production rate of its A350 passenger planes from 10 to 13 planes per month.