Critical Ratio

Critical ratio, typically used in production and manufacturing, is a calculation to determine whether a task is on schedule. It is a type of dispatching rule, which helps prioritize orders that need fulfillment. Critical ratio calculates a priority index number, which determines the allocation of resources, usually in a warehouse or production facility. It does this by dividing the time left until order fulfillment by the expected time it will take to finish the job. The resulting number is the critical ratio. A critical ratio of less than 1.0 means a task is behind schedule, while one that is greater than 1.0 means a task is ahead of schedule. A critical ratio of 1.0 indicates a task is on schedule.

What Small and Midsize Businesses Need to Know About Critical Ratio

SMBs can use the critical ratio formula to determine whether a task is on, behind, or ahead of schedule. This knowledge helps them improve order fulfillment processes by hiring or reducing staff or optimizing inventory and materials.

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