Capacity Utillisation Flashcards
Capacity utilisation formulla
Actual output per annum / max possible output per annum. X 100
Define capacity utilisation
Measures the extent to which the company’s max possible output is being reached
Reasons for full capacity utilisation
Average cost reduced therefore more profit
Workers feel secure - improved motivation
Improves image - busy well liked business
Reasons against capacity utilisation
Strain on resources and overworked staff
Machines overworked
Insufficient time for training if working flat out
Orders may be lost if no spare capacity
Boston matrix
A model that analyses product portfolio according to growth rate and market share
Benefits of holding lots of stock
Production fully supplied - no delays
Less likely to run out of stock
Lower unit costs when ordering in bulk
Easy to deal with changes in demand or need for higher output
Benefits for low stock
Lower storage costs
Consistent with operating lean production
Less cash tied up in working capital can be used elsewhere within business
Lower risk of stock onsolescence
Lead time define
The period of time between placing an order and the receipt of stock
Buffer stock
Stock held as a contingency in case of unexpected orders so that such orders can met and in case of any delays from suppliers
Whats JIT
Business holds no stock
Stock is ordered and delivered when needed
Eg car manufactures
Need reliable suppliers
Whats lean production
An approach to management that focuses on cutting out waste, whist ensuring quality.
Methods of lean production
Kaizen
Cell production
JIT
Advantages of lean production
Raises productivity
Reduces cost
Increases efficiency
Less defected products
Lead times cut improved quality
Lean production requires…
Good relations with suppliers
Commited, skilled and motivated employees
Culture of quality assurance and continous improvemnet and willingness to embrace change
What is kaizen
The japanese term mesning continuous improvment
