Chapter 25- Capacity utilization and outsourcing

Maximum (full) capacity

the highest level of sustained output that can be achieved

Capacity utilization

the proportion of maximum output capacity currently being achieved

outsourcing

using another business to undertake a part of the production process rather than doing it within the business using firms’s own employees

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

rationalization

reducing capacity by closing factories/ production units

capacity shortage

when demand for a business’s products exceeds production capacity

Business process outsourcing (BPO)

a form of outsourcing that uses specialist contractors to take responsibility for certain business function, such as Human Resources and finance