Capacity Utilisation & Outsourcing

Vocabulary flashcards covering the definitions, formulas, impacts, and outsourcing concepts from the Capacity Utilisation & Outsourcing lecture notes.

Capacity utilisation

A measure of how effectively a business uses its assets to produce output, comparing current output to the maximum possible output.

Capacity utilisation formula

$$\text{Capacity utilisation} = \frac{\text{Current output}}{\text{Maximum possible output}} \times 100$$

Under-capacity utilisation

A situation where resources are being underused, potentially leading to inefficiencies, lost potential output, and higher unit costs.

Unit costs (under-capacity)

Costs that are likely to be higher because fixed costs are spread over fewer units of output when capacity is not fully used.

Operating over maximum capacity

A state where staff are under pressure, machinery is prone to breakdowns, and the flexibility to respond to new orders is lost.

Outsourcing

The process where a business delegates specific business activities, such as IT, customer support, or HR, to external service providers.

Core competencies

The essential areas of a business where it can add the most value and concentrate its efforts by outsourcing non-essential functions.

Specialised skills (outsourcing)

The knowledge and experience of industry specialists that a business can access through external service providers.

Increased flexibility

The ability to scale operations up or down based on demand fluctuations, which is a benefit provided by outsourcing.

Quality control (outsourcing)

A disadvantage of outsourcing where it becomes harder to ensure consistent quality and adherence to company standards.

Data security and confidentiality

The risk introduced by sharing sensitive information with external businesses during the outsourcing process.

Redundancy fears

Concerns workers may have about losing their jobs when they are under-deployed or when staff are not fully occupied, affecting morale.