CTP--New Tools, Old Theories

There is a theory about utilization rates that claims it is a useful measurement 1) before buying equipment to help make good purchasing decisions and 2) to determine if you should keep or sell off existing equipment. Often, however, the use of this measurement is oversimplified.

In practical usage, most companies look at a utilization rate to determine if they should buy a certain piece of equipment or, if they already own it, if they should sell it. The use of utilization rates are based on sound, albeit traditional, financial principles that do not take into account newer management theories, such as the theory of constraint or value-added.