In other words, it's the percentage of actual output to the expected output when limitations in areas like quality control, staffing or material management are factored into production capacity. In manufacturing, efficiency is the ability to produce without wasting materials, time or energy.
PROJECTLIBRE PERCENTAGE UTILIZATION HOW TO
Related: What Resource Utilization Is and How To Calculate It What is efficiency? In this example, ComfySitter produces 80% of what management decided was ideal and shows they don't utilize 20% of their resources. Because of this, their actual output was only 4,000 chairs that week.įinally, they determined their utilization for the period by dividing the actual output of 4,000 by the design capacity of 5,000 and then multiplying the result by 100 to produce an 80% utilization rate. Unfortunately for the company, they had some severe mechanical problems that reduced their production ability.
Therefore, they set an effective capacity of 4,500 chairs per week. However, ComfySitter realizes that perfect conditions are unlikely. Comfysitter manufacturing team reports that under ideal conditions, with no technical or staffing issues, they can build 5,000 chairs every week. Related: How To Calculate Capacity Utilization Utilization exampleĬomfySitter furniture company wants to understand their production utilization rate.
Utilization = (actual output / design capacity) x 100 It's a percentage-based metric, calculated with the following formula: It can be calculated with a simple mathematical formula that demonstrates how well an organization is using resources compared to resources available under ideal conditions. In other words, it's the proportion of time that manufacturing resources are being used. In manufacturing, utilization is the percentage of resources, such as labor, raw materials or equipment, that's being used for its intended purpose.
In this article, we compare utilization and efficiency, including examples of each, how to perform the calculations and tips to improve both metrics. Learning more about these metrics can help you understand how to measure gains, especially when you understand the similarities and differences between the two measurements. They can be helpful in comparing production levels to manufacturing capacities. Utilization and efficiency are two performance indicators that manufacturing companies use to make plans and determine success.