When full utilisation of the potential/capacity of the workforce and resources essential for optimized growth rate is not being practiced, it is termed as underutilisation.
An organization suffering from underutilization issues goes through disturbing input-output ratio, goods supply, and profit management.
Its occurrence can be in so many terms, such as the utilisation of workforce, raw materials, labors, machines, and so forth. In this post, we will dive deep into the world of Underutilisation and understand what it is, what causes such issues and how an organization can prevent it. So, let us get started right away-
Introduction to the Underutilisation
Every firm and company have specific assets that are used by various employees.
If employees are not proficient enough to use those assets and resources up to their full potential, underutilisation occurs.
Also, in other cases, if efficient employees do not have access to the best, latest and upgraded technologies and other resources, organizations will not be able to utilize their workforce to their full capacities.
However, when it comes to technologies and other resources, it is not guaranteed that these assets will be efficient enough for the lifetime. The asset could be any machine or software. However, the key thing to remember here that with time, how much the asset is helpful and efficient?
Generally, assets like machines and software are not meant for lifetime production. After a particular period, they either expire or do not compete with technological advancements. As a result, the equipment is underutilised. In this situation, no one can be blamed.
To maintain the efficiency of the product or the services with the time you need to sacrifice these kinds of stuff. You need to be aware of the true potential of employees and resources, as this will empower your organization to have a system in which workforce and resources, both complement each other for optimizing the outputs and accomplishing the business goals.
In this article, we shall discuss various aspects of underutilisation. Further, we shall also discuss how to minimize underutilisation.
What is Underutilisation?
Underutilisation is not using a particular asset up to its full potential or not entirely depending on an existing asset. This, of course, makes an impact on the costing and losses of a company.
These factors are taken care of by the management of a company.
Underutilisation can be on the workforce, machines, raw materials, and so forth.
The fundamental reason for underutilisation is time. When things or assets cannot compete with the changes, then this type of situation happens. In the next section, we will dive deep into different factors that cause underutilisation issues-
Factors of underutilization
Various factors lead to underutilisation. Here is the list of factors that leads to underutilisation
1. Time
Time is the underlying factor of underutilisation. With time every item decays. The human being also does not retain the same potential with time. Same as with the machines. Raw materials are even innovating day by day.
2. Innovations and Technological Advancement
It is one of the essential factors of underutilisation. Day by day, new technologies are introducing. To make a competition with other firms, you need to be advanced in all aspects. Due to modern technologies, old techniques are getting traditional.
For example, earlier people used to produce handmade costumes. Later on, to minimize the labor charges, the textile firms introduce machines. After that, electronic devices also proposed to meet the efficiency and production rate.
3. Competition and External Environment
Competition is one of the most important factors to run a business. If you observe that any equivalent firm is producing the same product more efficiently, and they are also making more profit, then you have to adopt the same thing.
This will maintain the existence of your business in the market.
4. Digitalization and Advancement of the Employees
If the employees are traditional and didn’t upgrade themselves with the modern equipment and process, then he or she will be underutilised.
5. Shortage of Input Materials
The materials might be backdated or traditional. Hence, it needs to be updated. Therefore, a deficiency of material is one of the biggest reasons for underutilisation. The input might be labor, transport, power, raw materials, etc.
6. Shortage of Capital
If the machinery needs lots of power to perform, but there is not enough money to execute, then the machine would be underutilised. The shortage of capital also includes breakdowns such as failures.
7. Less Demand
If the application is less, then it is genuine that your production will be affected. Eventually, the output will be less. Hence, as a result, the manufacturing items will be underutilised. This includes the labors and the machines as well.
8. Govt Policies
Sometimes, govt introduces new rules and regulations that make the use of a machine ban. In this type of case, you need to withdraw the present process of doing work. As per govt policies, you need to run the business.
9. Labor Strikes
If any harmful practices happen in the company, then it affects the labors of the company. In that case, the job initiates strikes to get their valuable rights. In this type of situation, the machines and other assets of the company are underutilised until they do not get their demands.
Let us now understand what may occur if an organization suffers from underutilization problems-
Consequences of Underutilisation
There are multiple consequences of underutilisation. Here are some of the results of underutilisation.
1. Poor performance
The performance of the employees degrades with time. Similarly, the performance of an individual machine also degrades. As a result, the return or the output of the company also degrades.
2. Unemployment
It is the biggest issue of underutilisation. If a person is not used for company purposes, then it is genuine that she or she will not be paid. As a result, a bunch of employees leaves the job.
3. Loss of Money
If a machine is not used for a long time, then it is evident that the capital of buying the device is wasted. Hence the investment is also lost. There is no other way rather than selling the machine that too at low prices.
4. The Requirement of Training
Due to modern equipment and amenities, the employees need to be trained. More money will be spent to replace underutilised items. If it is human resources, then also the new employees need to be recruited and should be trained.
5. Unstable Working Culture
New introduction of raw materials or employees or any modern amenities or machine will make the working environment disturbed. It takes time to adapt to the newness of the office environment.
6. Burden
It is a significant burden for the company if any underutilisation happens with any assets. If fact if it happens with any labor or worker then also it is a big headache for the company in terms of maintaining the impression of the company.
Prevention from Underutilisation
Underutilisation will not cause any danger if it is prevented on time.
Sometimes business organizations should look on the matter of buying things that can be used for more than one purpose. In this way, the assets will not remain underutilised, even if they stay unutilised, they can be used later or for some other production works.
How to prevent Underutilisation of Assets
1. Using Reusable products
Using reusable products is beneficial both for the organisation and for the consumers.
In this way, the expense of the company will reduce, and the products can be used from time to time.
This will help in the utilization of assets, even for the future if it is not being used at present.
2. Producing products as per government policies
Government policies can be a significant barrier to the utilisation of products.
Therefore every company must produce products as per government policies, changing from time to time.
3. Producing an equal proportion
Every company, after a certain point of time, knows what its demand in the market is, what its consumers want.
Hence, the company should study its customer’s requirements and produce according to that only so that the goods and services or assets are utilised thoroughly.
4. Restructuring of the Asset
A company must keep a check on the plants and machinery it uses, to prevent break downs.
Therefore the company should repair its assets every year or monthly have a check on it so that it doesn’t remain underutilised.
5. It should be adaptable to changing technology
It is crucial, and the only reason because of which most of the assets remain underutilized.
Since the world is changing and technology is getting advanced, it is imperative to produce things flexible to the environment.
That is how a company can avoid underutilization of resources it carries.
6. Assets should be foreseeable in future
Assets are the resources of the company and hence cannot be bought now and then. It cost a considerable amount and is the capital of the business.
Therefore, every organization should know if the asset they are using is worth it for the future or not. The asset they buy today should now be just for the present aspect.
They should always keep in mind the future benefits, as the business environment is never static.
7. Underutilisation of Human Resources
Human resources are the enormous resources of a company.
But sometimes it can be seen that they remain underused due to the advancement of technology but no proper knowledge of the labors for using them. It is crucial that the company focuses on its human resource and provide them with education and development from time to time so that they remain upgraded with the flexible business’s diverse nature.
These is some of the few ways in which the resources of the company can be utilized entirely and reduce the issue of underutilization, which has been the talk of the town in today’s environment.
Underutilisation Wrap Up!
Underutilisation is common for various companies. Some of the companies are severely affected by this.
While some of the companies can cope up with the changes-; however, in the majority of cases, companies take preventative measures to be habituated with the present situation. The company employees need to be trained in such a way that they can work in any environment. The software and machines of the company need to be upgraded regularly.
Have you ever witnessed the underutilization issues in your company? Can you suggest some strategies for preventing the underutilization? Share your views with us in the comments below.
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