The degree of capacity utilisation describes the proportion of the capacity used by resources/operating resources (plant, machinery, employees, energy) measured against the total available capacity – always in relation to the completion of a work step. The degree of capacity utilisation can also affect individual processes.
For many companies, the degree of capacity utilisation as a warehouse indicator is one of the central indicators of resource management. Depending on the objective, there are different approaches to optimising the utilisation rate. However, these are exclusively commercial.
- Increase in sales volume through price reduction or discounts
- Increase in sales volume through clever sales promotion
- Increasing sales volumes through price discrimination/price differentiation
Utilisation rate in the ideal case:
The following applies: A high degree of employment, i.e. a increased utilisation of the machinery, leads to lower manufacturing costs/productivity costs. As a rule, these lower costs also correspond to higher profits for the company in question. Utilisation of capacity thus indicates to what extent the available storage capacity is used. However, it is not yet clear whether sufficient output will be achieved through the use of this capacity. In individual cases, the key figure productivity is used for this purpose. In the project planning/order enquiry, one speaks of the optional performance or possible capacity performance. It usually deviates from the actual activity. The closer the theoretical value approaches the real value, the better the actual degree of capacity utilisation during the real project phase.
Criticism of the capacity utilisation indicator
Dr Lukas Rieder and business graduate Markus Berger-Vogel from CZSG Controller Zentrum St. Gallen AG criticised the system: “Due to a lack of planning and control systems, many companies put a lot of energy into calculating and tracking capacity utilisation. Just as there are underutilised but still profitable companies, there are also well utilised unprofitable ones. Using utilisation levels as a basis for decision-making leads to wrong decisions.” The term “lean” should be mentioned here as a counter-example, where the aim is to avoid wasteful production and conserve resources.
According to the two experts from the CZSG Controller Zentrum St. Gallen AG, bottlenecks with different effects are relevant. In addition to commercial backgrounds, they also have industrial problems. These can be among others:
- Production capacity
- resource
- liquidity difficulties
- pricing policy
- Demand from customers
For more information on the topic, check Warehouse location management as well as Process-oriented warehouse planning.
Picture rights: Author – Maxim_Kazmin – Fotolia.com
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