Utilization is a reflection of how busy an activity or named station is; computationally, utilization is the arrival rate / (effective throughput rate * availability). Utilization is, therefore, a comparison between the rate at which items arrive and the rate at which they can be processed.
Utilization values should be greater than or equal to zero (0.0) and less than or equal to 100% (1.0).
0% < Utilization ≥ 100%
If utilization is greater than 100%, this indicates an inability to keep pace with the rate of arriving items.
Consider the following example:
At the Bluespring Bakery, our customer demand forecast calls for us to produce 32,000 cookies next week. We run a single shift operation for 40 hours each week (8 HoursPerWorkPeriod, 1 WorkPeriodPerDay, and 5 DaysPerWeek). We bake all of our cookies in batches of 120 cookies at a time, each batch takes 20 minutes, and the Bluespring Bakery has 2 ovens.
How fast does work arrive at the Bluespring Bakery?
From this information, we know that the arrival rate to the 'bake' activity is 800 cookies per hour. (We bake 100% of our cookies; we need to produce 32,000 cookies in a week; there are 8 hours in a work period, 1 work period per day and 5 days per work week. [32,000/(8*5*1)] = 800 )
How fast can work be processed at the Bluespring Bakery?
From the information above, we know that the throughput rate at the 'bake' activity is 720 cookies per hour. (Cookies are batched for the 'bake' activity into batches of 120 cookies; there are 2 ovens to perform the 'bake' activity; it takes 20 minutes for each batch at the 'bake' activity. [(120cookies*2ovens)/20 minutes = 12 cookies/minutes = 720 cookies/hour] )
Utilization compares how fast work arrives to how fast it can be processed. The utilization at the Bluespring Bakery 'bake' activity will be 800/720 = 111.1%. Impossible!
The Bakery will not be able to satisfy this forecast demand level, and will have to make process changes. The Bluespring Bakery has several options; the Bakery can:
not bake all the cookies (decrease probability the 'bake' is required). This is likely to be an unsatisfactory solution because the Bluespring Bakery customers want cookies, not dough.
bake the cookies for less time at a higher temperature (decrease the process time). This is likely to be an unsatisfactory solution if it will lower the quality of the finished product.
refuse orders to decrease the demand to a smaller quantity for that week (decrease arrival rate). This is likely to be an unsatisfactory solution because the Bluespring Bakery doesn't want to turn away orders.
increase the batch size from 120 cookies to 150 cookies. Baking 150 cookies at a time would increase the 'bake' throughput to 900 cookies/hour, making the utilization 89%. Though this may satisfy demand for baking, this is only a satisfactory solution for the Bakery if activities upstream and downstream from the 'bake' activity are able to prep the dough and package the cookies faster.
purchase another oven (increase the number of stations). A new oven would increase the 'bake' throughput to 1080 cookies/hour, making the utilization 74%. This is only a satisfactory solution if there is evidence to suggest that this increased demand level will be sustained long enough to justify the investment in an expensive oven.
work overtime (increase the available work time). If the Bluespring Bakery operates 50 hours each week, instead of 40 hours, the available work time would change to 10 HoursPerWorkPeriod, 1 WorkPeriodPerDay and 5 DaysPerWeek. This changes the arrival rate to [32,000/(10*5*1)] = 640 cookies per hour. The throughput rate at the 'bake' activity remains 720 cookies per hour. This would provide a utilization value of 89% at the 'bake' step. This is a satisfactory solution if the resources (human and machine) can be made available.
