AS Business - Capacity utilisation and outsourcing

Capacity utilisation

The proportion of maximum output capacity currently being achieved

Outsourcing

Using another business (a third party) to undertake a part of the production process rather than doing it within the business using the firm's own employees

Maximum (full capacity)

The highest level of sustained output that can be achieved

Excess capacity

This exists when the current levels of output are less than the full-capacity output of a business; also known as spare capacity

Rationalisation

Reducing capacity by closing factories/production units

Capacity shortage

When demand for a business's products exceed production capacity

Business process outsourcing (BPO)

A form of outsourcing that uses specialist contractors to take responsibility for certain business functions, such as human resources and finance