#7 Innovative Ways to Improve Capacity Utilization Capacity utilization has always been a challenge for any new capacity installed or for those who are already established.
Opinions expressed by Entrepreneur contributors are their own.
You're reading Entrepreneur India, an international franchise of Entrepreneur Media.
Capacity utilization is said to be the extent to help industrialist yield maximum potential output from it. Utilization of the industrial capacity to the fullest extent is critical for the successful running of a company. An entrepreneur aims to make the most out of the industrial capacity he or she has built, but often faces challenges to ensure that. As far as India is concerned, capacity utilization has always been a challenge for any new capacity installed or for those who are already established. It has been said that the capacity utilization of India varies around 60 to 70%. Some sectors and companies even struggle to achieve 50% of utilization.
There is a dire need of focusing attention on improving the capacity utilization in India. The capacity utilization not only improves fortunes of the industry owners but also help improve job creations. The country has been witnessing a rising number of aspiring young entrepreneurs who have the talent and skill to make it big in the market.
However, they struggle to raise capital to set up their own industrial capacities. In such case, spare capacity available across existing companies can act as a major enabler for young aspiring entrepreneurs to explore their fortune. It will eliminate the need for major capital investment.
According to me below are some of the innovative ways which can improve the capacity utilization.
- Boost Planned Manufacturing
It is always difficult to raise the capital which you think is good enough to start the business. Raising capital from the market is always a time-consuming process and proper planning is a must. Planning ahead always helps you in using your resources in the best possible way. We see a lot of would-be entrepreneurs struggling to adapt sudden changes in production, demand, manufacturing etc. If done from scratch, it always leads to efficiency at every stage. Planning and Scheduling are the two cornerstones for successful operations, including capacity utilization.
- Sharing Capacity
Sharing capacity is emerging as a key way to maximize capacity utilization. It is a win-win situation for both the parties as they both get benefit out of it. It increases their chances to stay in the market with limited capital. One can source desired industrial capacity from an owner, in which both owner and seekers are benefited. This not only improves utilization and avoids duplicity of investment, but also increase profitability and cash flow situations. Sharing capacity not only solves the problems of budding entrepreneurs but also helps to create an ecosystem where capacity owners and capacity seekers can seamlessly interact for better capacity utilization.
- Maximizing utilization = Increasing profits
Entrepreneurs should come up with innovative ideas to make the most of the available capacities. One should always study their capacity thoroughly to determine how it can be best utilized from a particular standpoint. They say you should know your product best before starting your business, just like that, you should be familiar with every tiny detail regarding the capacities in your hand. Consider various situations and create innovative ideas to maximize utilization and therefore, profits.
More importantly, the owner of the capacity should try to extend the reach of his or her capacity in all possible ways. The context and capability of his or her industrial capacity may be relevant to business demand out there in a corner of the country or world. The capacity owner should take all possible efforts and deploy techniques to reach out to the demand.
- Strategic Decision Making
Whenever you are planning to start anything new, strategic advancement is crucial for business development. Successful investors look for businesses which +has clear strategies in hand and strategic decisions have a really high influence on the future of the company. Your strategy should focus on expanding business with low production rates for the maximum capital benefit, which in turn would make your business consistent and provide more customer base.
- Promotions Work Best
Capacity utilization goes hand in hand with product demand. A start up or any company should make constant efforts to improve the quality of their product and increase it's public demand. Engaging in the promotional activities, introducing new ways by which product value can be increased, which in turn increases the production rate which leads to maximum capacity utilization.
- Structured Approach
Start with small capacities to balance your finances. Increase your capacity with an increase in product demand. Paying excessively for less production would hamper your profit rate, as you always have a choice of increasing your space with an increase in demand. You should be flexible for fluctuations in demand.
In subcontracting, you take orders and produce for other businesses. In this way, there is maximum utilization of the capacity and you are making not just for your business but for other businesses as well. In a way subcontracting helps you to maximize the capacity utilization and profit simultaneously.
In a nutshell capacity utilisation plays an important role in the profitability of business and vice-versa. Every manufacturer/business house needs to pay an extra attention on the improvement of capacity utilization. Proper planning, structured approach and strategic decision making can improve the capacity utilization.
Shareconomy, a networked platform is developed for improving the utilization of Industrial Capacities. It enables industrial environment to revolutionize the way they have been deriving value from their investment.