Utilisation: Utilisation is the share of available time a machine or a shop spends doing paid work, and it decides how much each productive hour must charge to cover fixed costs.
Utilisation (utilization in US spelling) compares the hours a machine actually works on sold jobs with the hours it could have worked. It is the single most important input to a machine hour rate, because fixed costs (depreciation, rent, insurance) are spread over productive hours only.
utilisation = productive hours / available hours
Example: a printer is available 24 hours a day, 7 days a week, about 8,760 hours a year. If it runs paid jobs for 3,500 of those hours, utilisation is about 40%. If fixed costs for that printer are €3,500 a year, each productive hour must carry €1.00. At 20% utilisation, it must carry €2.00.
Two mistakes are common. The first is setting rates from an optimistic utilisation figure that the shop never reaches, which under-prices every job. The second is assuming that higher is always better. A shop running at 95% utilisation has no room for rush work, breakdowns or a big new customer, so lead times stretch and expedite fees become impossible to honour.
Utilisation is also different from OEE, which looks at how well the machine performs while it is scheduled to run, including speed losses and scrap. Read the machine hour rate guide for how utilisation enters the rate.
Go deeper: How to calculate a machine-hour rate