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capacity utilisation
A LevelBusiness~4 min read
Overview
This lesson explores capacity and capacity utilisation, fundamental concepts in operations management that determine a business's ability to produce goods or services. Understanding these concepts is crucial for efficient resource allocation, cost control, and meeting customer demand.
Understanding Capacity
Capacity refers to the **maximum output** a business can produce within a specific timeframe, given its current resources. These resources include machinery, labour, raw materials, and factory space. Capacity is a critical factor in determining a business's ability to meet customer demand and its po...
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Key Concepts
- Capacity: The maximum output a business can produce in a given period with its current resources.
- Capacity Utilisation: The proportion of total capacity that is actually being used.
- Under-utilisation: Operating below full capacity, leading to idle resources and higher unit costs.
- Over-utilisation: Operating above optimal capacity, potentially leading to stress, quality issues, and burnout.
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Exam Tips
- →When calculating capacity utilisation, always state the formula clearly and show your working. Ensure your answer is expressed as a percentage.
- →Be prepared to analyse the advantages and disadvantages of both high and low capacity utilisation for a given business context. Don't just list them; explain *why* they are advantages or disadvantages.
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