Capacity Utilisation Flashcards
What is capacity?
Maximum output with the resources currently available
What does capacity depend on?
Number of employees and how skilled they are
What also affects capacity?
Type of production process
What is capacity utilisation?
How much capacity a business is using.
How do you calculate capacity utilisation?
Output divided by capacity X100
What do businesses have to consider when they plan their capacity usage?
Operational objectives
What do businesses need to plan production plans to achieve?
Almost full capacity utilisation
How can businesses increase capacity even with high capacity utilisation?
Buy more machines
Increase staff levels
What is outsourcing?
When a business uses another firm to do some work on its behalf
When do businesses most likely to outsource?
Busy periods
What is under-utilisation?
Low capacity utilisation
Why is under-utilisation bad?
Inefficient
Why is UU inefficient?
Because a business is not getting use out of machines and facilities they have paid for
What does UU increase?
Costs
How can businesses deal with under-utilisation? 3 reasons
Stimulate demand by changing marketing mix
Reduce capacity
Outsourcing
