Capacity utilisation and outsourcing
| English | Chinese | Pinyin |
|---|---|---|
| capacity utilisation | 产能利用率 | chǎn néng lì yòng lǜ |
| fixed costs | 固定成本 | gù dìng chéng běn |
| average cost | 平均成本 | píng jūn chéng běn |
| idle | 闲置的 | xián zhì de |
| slack | 余量 | yú liàng |
| maintenance | 维护 | wéi hù |
| outsourcing | 外包 | wài bāo |
| control | 控制 | kòng zhì |
Using what you've got
- A factory built to make 1,000 units a day but making only 600 is wasting expensive capacity.
- Capacity utilisation 产能利用率 measures how fully a business is using its resources.
Capacity utilisation lab
utilisation = output / capacity
Change output and see how close the firm is to full capacity.
A firm can make 4,000 units but makes 3,000. What is its capacity utilisation (%)?
3000 / 4000 × 100 = 75%.
Higher capacity utilisation lowers average cost because it:
Fixed costs per unit fall as output rises.
Actual output as a percentage of maximum possible output is capacity ______.
Capacity utilisation = actual ÷ maximum × 100.
Capacity utilisation
- Capacity utilisation = (actual output ÷ maximum possible output) × 100.
- High utilisation spreads fixed costs 固定成本 over more units, lowering average cost 平均成本.
Worked example. A plant can make 2,000 units but makes 1,500. Capacity utilisation = 1500 ÷ 2000 × 100 = 75%. The other 25% of capacity sits idle 闲置的, still costing money.
Capacity utilisation: how much of its maximum possible output a firm actually produces
A risk of operating at nearly 100% capacity is:
Running flat-out leaves no room for breakdowns, maintenance or extra demand.
Too high or too low
- Too low: fixed costs spread over few units → high unit cost, wasted capacity.
- Too high (near 100%): no slack 余量 for maintenance 维护, breakdowns or new orders → stress and quality risk.
Capacity utilisation: how much of the maximum output is used
Outsourcing can cut costs but reduces a firm's control over quality and timing.
You gain flexibility and lower cost but lose direct control.
Outsourcing 外包
- Outsourcing means paying another firm to do part of the work (e.g. components, IT, payroll).
- It can cut costs and add flexibility, but reduces control over quality and timing.
Outsourcing trades cost for control. Handing work to another firm is cheaper and more flexible, but you depend on their quality and reliability — a real risk if they let you down.
You've got it
- capacity utilisation = (actual ÷ maximum output) × 100
- low utilisation wastes capacity; near-100% leaves no slack for problems
- outsourcing cuts cost and adds flexibility but reduces control