What is Capacity Utilization, why measure it?

Capacity utilization is a metric that measures the extent to which a manufacturing facility's production capacity is being used. It is calculated as the ratio of actual output to potential output over a specific period. In the context of Overall Equipment Effectiveness (OEE) across multiple shifts, measuring capacity utilization helps identify underused resources, optimize production schedules, and improve overall efficiency by ensuring that equipment and labor are effectively leveraged to meet demand.