Question

Any increase in efficiency also increases utilization. Although the upper limit on efficiency is 100

percent, what can be done to achieve still higher levels of utilization?

Answer 1

ANSWER :

Capacity utilisation = Actual output / Designed capacity

Efficiency = Actual output / Effective capacity.

Effective capacity is the maximum achievable capacity in the current conditions and is less than the designed capacity since designed capacity is the ideal level and effective capacity is the acievable  one.

From the above it can be seen that efficiency increase is the outcome of increase of output. So, it is obvious that increase of efficiency also results in the increase of utilisation. Efficiency reaches 100% when output is equal to effective output.

 At this 100% efficiency level :

Utilisation = Actual output equal to effective capacity  / Designed capacity.

To raise utilisation beyond this level , effective capacity and actual output both are to be raised to as near designed capacity as possible. This may be achieved by removing the bottlenecks and hindrances in achieving higher effective capacity nearest to the designed capacity.

Answer 2

Maximum use of design capacity by proper planning can be done to achieve still higher levels of utilization.