2.4.2 Capacity utilisation

• What is capacity?

  Maximum output
• What is capacity utilisation?

  The output that is actually used
• What is the capacity utilisation formula?

  Current output / Maximum output x 100 = %
• What are the implication of over-utilisation?

  • damaged reputation
  • employee overtime - mistakes
  • quality suffers
• What are the implications of under-utilisation?

  • unmotivated staff
  • businesses may need to rationalise: redundancy, asset sale, temp staff, partial shut-down
  • increased flexibility of business: more time to train staff and buy machinery
• How do you improve capacity utilisation

  • Increasing demand - special deals
  • Decreasing capacity - expensive, sell assets,