Discuss the differences between utilization and efficiency as measures of system performance. Which (if any) is the most useful measure for an operations manager? Why?

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15-06-2022
Business

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Discuss the differences between utilization and efficiency as measures of system performance. Which (if any) is the most useful measure for an operations manager? Why?

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vtalishathapar vtalishathapar · Answer 1 · 2022-06-24T15:02:10+02:00

The capacity utilization rate is an important indicator for companies because it can be used to assess operating efficiency and provides an insight into cost structure. Fixed costs remain unchanged. It can be used to determine the level at which costs per unit go up or fall.

What are the differences between Utilization and Efficiency measures?

Capacity utilization is a measure of how well an organization uses its productive capacity. On the other hand, Efficiency is normally expressed as a percentage of the actual output to the expected output.

Thus, utilization measures are necessary for measuring operational managers because the capacity utilization rate is an important indicator for companies. After all, it can be used to assess operating efficiency and provides an insight into the cost structure.

Learn more about Efficiency measures here:

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