This video provides an overview of the concept of capacity, capacity utilisation and some of the issues facing businesses operating at low or high utilisation.
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VIDEO CHAPTERS
0:00 Introduction
0:06 What Do We Mean by Capacity?
0:24 Examples of Capacity
1:29 Capacity is a Dynamic Concept
2:36 What is Capacity Utilisation?
2:53 Capacity Utilisation Formula
3:09 Capacity Utilisation Example
4:01 Why Capacity Utilisation Matters
5:21 Costs of Capacity
6:05 Why Most Businesses Operate Below Capacity
7:18 Evaluation: Dangers of Operating at Low Capacity Utilisation
8:22 Evaluation: Problems Working at High Capacity
VIDEO SUMMARY
In this video, Jim explains the concept of capacity and capacity utilisation in business.
Capacity is a measure of how much a business can produce or sell over a given period. It can be measured in different ways, such as the number of customers served per hour or the number of units produced on a production line. Capacity is an important measure of a business's operational capabilities.
Capacity utilisation is a measure of how much of the business's capacity is being used. It is calculated as a percentage of the actual output compared to the maximum possible output. A business generally tries to operate at as close as possible to full capacity to minimize unit costs. However, there are several reasons why a business might not operate at full capacity, such as lower than expected demand, seasonal variations in demand, or the need to maintain and repair capacity.
The video also discusses the risks of operating at low capacity utilisation, such as higher unit costs and difficulty achieving break-even output. Additionally, the video discusses the potential problems of trying to push capacity utilisation too high, such as reduced quality, overworked employees, and less ability to deal with unexpected increases in demand.