Utilization

Utilization (Queuing theory) is a statistics related concept used to measure the business for the rental industry. There are four different models used in queuing theory.  It is the proportion of the system’s resources which is used by the traffic which enters at it. Utilization is represented by ρ symbol. If ρ ≥ 1 then, the queue will be in a loop. 

In the first model of M/M/1 queue is given by the mean arrival rate over the mean service rate that is ρ = λ /µ. Where λ is the mean arrival rate µ is the mean service rate. Generally, ρ = λ /µ x M where λ is the mean arrival rate, µ is the mean service rate, and M is the number of servers.

In many of the cases, the lower utilization will acquire mean less queuing for customers but will mean less queuing for customers but will mean that the system is idle.

Utilization of Rental equipments:

Utilization is the primary method by which performance of the assets is measured and business success determined. The basic terms which used to measure of the actual revenue earned by assets against the revenue earned. Rental utilization is categorized into a number of different calculations, and all the companies do not work precisely in the same way. However there are two key calculations: the physical utilization on the asset, which is measured based upon the number of days available for rental against the number of days rented actually. The second key is financial utilization on the asset which is measured as the rental revenue accomplished over a period of time against the revenue which is based on the target rate.

Physical utilization is also referred as spot utilization, where a rental company looks at its current utilization of assets based on a single moment in time.

Variations in rental utilization calculations:

The calculations of utilization may be varied based on many different factors. Let us take few examples.

A company with equipment which requires preventative maintenance activities for every two weeks decides the number of days available in the month which is decremented as it will be unavailable due to maintenance for two days out of each month.

Some charge minimum rates, for example you may rent a digger for 1 day, but charged around three days minimum. The physical utilization will be 100% and the financial utilization is 300% actually. Finally, you earned 3 days revenue for one day work.

Rental Software is required to assist the management teams in measuring and computing utilization.

Questions:

• What is meant by utilization?
• Explain utilization variations with some examples.