Capacity output a company makes, the average

Capacity utilisation is a measure of
the degree to which an organisation is using its maximum possible capacity is
usually shown as percentages.

supermarket checkouts, queues build creating the shop to have them be over 100%
capacity utilisation, which can add stress and an unneeded extra workload for
the employee. It will create the employee to rush, giving a bad impression to
the customers. Whereas at some supermarket checkouts, you can have employees
sitting idly with no work to do. Creating them to be working under 100%
capacity utilisation. Companies try to combat having a low capacity utilisation,
for example B&Q operate a ‘over 60s’ discounts’ on Wednesdays, as it is
classed as a quieter period and to hopefully increase their capacity utilisation.
Another example, cinemas offer discounts Mondays as they are their quietest
period, which they’d hope to increase their capacity utilisation. It isn’t possible,
or wanted, to keep all resources fully employed. Majority of companies aim to function
at just under full capacity, such as 90%. It is important to run a business at around
90%, as it is a measurement of efficiency and all organisation will want to be
as efficient as possible. The more output a company makes, the average
production cost fall, therefore a higher utilisation makes the business more

is a capacity utilisation issue with MowRite, as they can’t always keep their
production level at 90,000 because they do not have the storage (80,000)/demand
to hold the stock. As the demand increased for MowRite they clearly couldn’t
produce enough stock to keep to their minimum (buffer) stock level at 40,000
units. This is shown in the table from the stock at the end of the April-July,
as the stock was below their 40,000 thresholds. Capacity utilisation is substantial,
as it is used as a measure of productive efficiency, also the average
production costs tend to fall as the output rises, thus higher capacity
utilisation can reduce the unit costs, making a company more competitive and
more efficient. Therefore, organisations usually aim to produce as close the
full capacity (100% utilisation) as possible. 

Go Top