Capacity utilization rate

How to Calculate the Utilization Rate

Count the number of days the items were in use and divide that by the number of days they could have been in use:

Utilization Rate (%) = days rented ÷ possible days × 100

The possible days are the number of units multiplied by the number of days in the period. If a customer rents two units at the same time, each day counts twice.

Example

You have 2 tents. November has 30 days, so there are 2 × 30 = 60 possible days. One tent is rented out for two weekends from Friday to Sunday, i.e., 3 + 3 days, and the other for one week from Monday to Friday, i.e., 5 days. That makes 11 days rented out, and the utilization rate is 11 ÷ 60 × 100 = 18.3%.

What do you use this figure for?

• Should you buy more units? If the utilization rate is high for long periods, you’re likely turning away customers because everything is booked. In that case, one more unit could be worthwhile. If it’s low all year round, you might have more units than you need.
• Pricing: If items are almost always rented out, the price might be too low. If they sit idle a lot, a lower price or a special offer during slow weeks could lead to more rentals.
• Season: Party tents are in use during the summer and sit idle during the winter. If you look at utilization month by month, you can see when you’re busy and when there’s time for maintenance, for example.

The utilization rate doesn’t tell you anything about your earnings. An item with a high daily rate and low utilization can earn more than a cheap item that’s always in use. Therefore, also look at revenue per unit.

Occupancy Rate

In hotels, vacation homes, and campgrounds, this same figure is called the occupancy rate or occupancy percentage. Here, it’s the number of overnight stays sold divided by the number that could have been sold. When it comes to machines in a production setting, people often talk about capacity utilization.

Utilization Rate in Shoporama

If you have products in a rental profile, under Statistics → Rentals, you’ll find the key metric “Utilization Rate” for the period you select, along with a table showing the utilization rate for each product and each variant. For example, select “Last 12 Months” to view the entire season. Here’s how Shoporama calculates it:

• Rental days are the quantity on the order line multiplied by the number of rental days in the period. Both the first and last days are included. If a rental runs from November 29 to December 2, only November 29 and 30 count toward November.
• Available days are the number of units multiplied by the number of days in the period.
• Unpaid orders are included because the units are reserved, even if the customer hasn’t paid yet. Canceled orders and credit memos are not included.
• Units refer to the current inventory count—that is, the number you own today. If you purchased additional units during the period, the utilization rate for the time before the purchase will be slightly too low.

Products that have never been rented out are listed as 0%. The “Per Unit” column in the table shows revenue divided by the number of units, and the “Booked Going Forward” graph shows occupancy week by week for the next 26 weeks, so you can see what’s already been booked.

Read more about the concept of rentals and see how to set it up in the article on rentals.