Downward trend in capacity utilization means more restructuring needed

This chart of capacity utilization shows a consistent downward trend.  This suggests that there is a significant amount of production capacity that needs to be taken out of the system, that has been idle for a long time.  Running production systems at lower capacity utilization results in higher fixed cost per item produced; put another way, lower capacity utilization equals lower efficiency.  Restructuring(elimination of excess capacity) is needed to allow remaining production capacity to operate at profitable utilization rates.

In contrast, the trend in US management of inventories shows that businesses have restructured how inventory is managed to reduce both inventory carrying costs and the risk of being stuck with excess inventory when economic conditions worsen.


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