Increasing Capacity Utilisation

Understanding How to Increase Capacity Utilisation

Capacity utilisation as the percentage of output level being achieved from the potential output that can be reached. If a business wants to raise its capacity utilisation, it primarily means increasing its level of output.
Businesses have a variety of strategies to increase their capacity utilisation, which basically boils down to either increasing demand for their products or improving the efficiency of their operations.

Marketing and advertising efforts can be ramped up to attract more customers. This can entail sales promotions, social media campaigns, or other forms of strategic marketing planning to pique customer interest and thus, increase demand.
Businesses can expand their target market to reach out to new potential customers. This could mean entering new geographical markets, creation of products for different demographic segments, or diversifying into new product markets.
Another strategy is reducing prices to make the products more attractive to consumers. This might aid in selling more units, thereby increasing capacity utilisation. However, the drop in price must still allow the business to make a profit on each unit sold.

Companies can enhance their operational efficiency, allowing them to produce more units with the same resources. This might involve better training for workers, upgrading technology or machinery, or refining the production process.
Implementation of lean production techniques, such as just in time (JIT) or six sigma, can help a business cut down on waste, reduce costs and increase efficiency.
The organisation can also work on better resource planning and scheduling, ensuring the smooth flow of production, minimizing downtime, and optimising the use of their facilities and workforce.

Firms need to consider their ability to handle sudden increases in demand or emergencies while increasing capacity utilisation. High utilisation leaves little room for flexibility and increases the risk of inability to meet unexpected surges in demand.
Persistently high capacity utilisation can lead to overwork of employees and machinery, which might result in reduced productivity, increased maintenance costs, and higher defect rates in the long run.
Companies should aim for an optimum level of capacity utilisation, often considered to be around 80-90%, to ensure long-term sustainability and profitability. The right level of capacity utilisation depends on the nature of the industry and the specific circumstances and strategy of the business.