Dangers of Capacity Utilisation

Last updated Dec 7, 2022 Edit

1. Capacity utilisation is calculated as used capacity/total capacity x 100

2. 13,000 capacity 11,500 produced (2020) 14,000 produced (2021)

11,500/13,000 x 100 = 88.46%

14,000/13,000 x 100 = 107.69%

Utilisation change = 19.23%

3. Running at high capacity utilisation means high efficency, so you are maximising profits.

4. Running at high utilisation does not protect against contingencies. So you are vulnerable to faults.

• No downtime, high defects
• Equipment wears out faster
• Increased stress for employees
• Unexpected demand increases can cause a loss of sales

• High unit costs
• Wasted resources
• Difficult to compete effectively
• Reduced job security

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