4.3 Capacity utilisation and outsourcing

Capacity utilisation is actual output as a percentage of maximum possible output over a stated period. It indicates spare capacity or pressure on resources.

Low utilisation can raise unit costs because fixed resources are underused; very high utilisation can create bottlenecks, overtime, quality problems and lost flexibility.

A clinic running at 70% capacity may accept new appointments, while at 100% it may need more rooms or staff rather than simply adding bookings.

Maximum capacity is an estimate under assumptions; utilisation alone does not reveal profitability or service quality.

Outsourcing contracts an external provider to perform an activity previously done inside the business. It may reduce fixed cost or add specialist capability, but creates dependency and coordination risk.

Assess quality, confidentiality, service continuity, transaction costs and the strategic importance of the activity—not just the quoted price.

A small firm may outsource payroll to gain compliance expertise, while keeping product design in-house because it differentiates the business.

Outsourcing is not automatically cheaper or lower quality; the contract and supplier relationship determine outcomes.