Asset Utilisation B.2.6.

Creating and Presenting Strategic Plans

•The biggest cause of profit problems in all firms

•A major driver of Internet transformed businesses

Poor Asset Utilisation

50

100

150

2000

10

20

30

40 40

28

20 18

8

Investment/Value Added (%)

RO

CE

(%

)

No 1

Kille

r of

profi

ts

How Fixed Investments Can Kill Profits

62

72

81 90

0.0

7.0

14.0

21.0

28.0

15

2122

25

28

Capacity Utliisation

RO

CE

(%

)

How Great Capacity Utilisation Boosts Profits

Must Keep Plant Loaded

62

72

81

90

0.0

6.5

13.0

19.5

26.0

1920

24 24

26

Value Added/Employees (%)

RO

CE

(%

)

Personal Productivity Boosts Profits

Personal Productivity

Vital

23 29 37

20 19 25

7 10 15

Investment/Value Added

Value added/Employee Low High 25% 60%

High

Low

-10%

10%

ROCE(%)

High Productivity Cures Investment Intensity

Implication?

Poor capacity utilisation: Solution: use 24/7 - Internet

universities

Poor personal productivity: Solution: relentless drives - Internet

agglomeration

Very high spend on buildings and equipment:Solution: rent don’t buy - Use Internet - Cloud

Poor Asset Utilisation: Causes and Solutions

Year 201X 201Y 201Z % change Strategy

Plant & Equip

Sales/Total Assets

Number employees

Sales/Employees

Capacity utilisation

Measuring Asset Utilisation

The End

The End

Competitive position

Asset utilisationInvestment intensity: lowest

Productivity, people + assets: #

1

Fixed Vs Liquid assets:

lowest Capacity utilisation: # 1

Markets addressed

Leadership