How to improve your company's operational efficiency: practical strategies and success stories
Whether you're a local grocery store or a multi-million dollar corporation, improving your operational efficiency is critical to optimizing your business, increasing your profit margins and the viability of projects in the long term.
This ability to produce more with less, for example, was the key for Apple to recover after losing $1 billion in 1997 and nearly going bankrupt.
In fact, inefficiencies can cost a company a lot. After all, every minute wasted on a poor process or system is a minute that can't be spent adding value to the customer. Compliant IDC data, companies lose up to 30% in revenue each year due to lack of operational efficiency.
In the words of Taichi Ohno, considered the father of the Toyota production system and the system Kanban:
“The costs don't exist to be calculated. The costs are there to be reduced.”
But, after all, what is this concept and where did it come from?
What is operational efficiency: definition and origin
Broadly speaking, operational efficiency is the capacity that a company has to carry out its activities effectively and efficiently, that is, to carry out the correct tasks with the least possible expenditure of resources.
Simply put, if your costs are x and your revenues are y, then your operational efficiency is x/y.
This involves both the analysis of each stage of the production or delivery process of a service, as well as the identification of bottlenecks and the search for solutions to improve them.
The history of operational efficiency dates back to the late 19th century, when Frederick Winslow Taylor published his book “Principles of Scientific Management”.
Taylor, who is often considered the father of scientific management, believed that operational efficiency could be achieved through the application of scientific methods to production processes.
His method involved the careful analysis of such processes, the identification of potential bottlenecks and wastes, and the application of standardization and training techniques to ensure that each worker could perform their task as efficiently as possible.
The scholar also argued that if the production chain were optimized in this way, the productivity of the entire organization would be significantly increased.
Another important contributor to the development of operational efficiency was Henry Ford, founder of the Ford Motor Company.
The entrepreneur realized that, by dividing the production process into simple and sequential steps, and using standardization and labor specialization techniques, it would be possible to reduce the time needed to produce each vehicle.
With these observations, Ford was able to produce cars at an affordable price for the average consumer, revolutionizing the automotive industry and creating a model that served as the basis for many other industries.
How to measure operational efficiency?
Measuring operational efficiency is crucial for determining whether a company is operating at peak efficiency or if there is room for improvement.
There are several measures that can be used to assess operational efficiency, such as:
- OEE (Overall Equipment Effectiveness): assesses the overall efficiency of a company's production equipment. It takes into account three main factors: equipment availability, performance rate, and product quality. The OEE is calculated by multiplying these three factors. An OEE of 100% means that the company is operating at maximum efficiency;
- cycle time: is the time needed to produce a product or service, from the moment the order is received to the final delivery to the customer;
- throughput: how an organization uses its resources, including labor, equipment, and raw materials, etc. It can be measured in several ways, including the number of units produced per hour or the number of services provided per employee;
- cost of production: directly affects the profitability of a company and includes the cost of labor, equipment, raw materials and other costs associated with production;
- stock level: is the amount of inventory that a company has in hand at a given time. Maintaining excessive inventory levels may be a sign of inefficiency, as the company may be spending money on unnecessary inventory or suffering from inventory obsolescence. On the other hand, maintaining inventory levels that are too low can negatively affect a company's ability to meet customer demand.
By carefully monitoring these measures, companies can identify deficient areas and implement changes to improve their efficiency.
3 practical strategies to increase operational efficiency
Operational efficiency is an important performance indicator for companies. According to Bain & Company, all businesses should incorporate an efficiency mentality into their culture to avoid adding excess resources that provide only limited benefits.
In this article, we will explore three practical strategies that can help your company increase its operational efficiency.
1) Automation
A automation is one of the most effective ways to increase operational efficiency. It allows tasks to be completed quickly and with greater accuracy, eliminating human errors and reducing the time needed to perform the tasks.
In addition, automation also allows employees to focus on more complex and strategic activities, increasing productivity and overall team efficiency.
” The first rule of any technology used in a business is that automation applied to an efficient operation will increase efficiency. The second is that automation applied to an inefficient operation will increase inefficiency.”
Bill Gates, founder of Microsoft
Some areas that can be automated include customer service, inventory management, invoicing, accounting, and contracts.
In Clicksign, for example, it is possible to create and manage documentation in a simplified way through automation solution starting from a model, eliminating friction points and giving traction to the signing of important terms and agreements.
https://www.youtube.com/watch?v=6-K4IqyVqwU
2) Standardize processes
Standardizing processes is another important strategy to increase operational efficiency, as it ensures that activities are executed in a consistent manner, regardless of the responsible collaborator.
In this way, the possibility of errors is reduced and tasks are guaranteed to be completed effectively. In addition, standardization makes it easier to identify and correct potential problems, which helps increase the quality of the product or service offered.
3) Adopt a culture of continuous improvement
A culture of continuous improvement is a culture that encourages employees to identify areas for improvement and to constantly seek ways to improve existing processes.
By adopting a culture of continuous improvement, your organization can identify and eliminate Gaps that hinder operational efficiency, constantly improving the quality of the product or service offered.
More than that, it helps create a more collaborative work environment and encourages innovation, which can result in new growth opportunities for your company.
Cases of successful implementation of this strategy
Operational efficiency is critical to ensuring that a company is competitive and can offer a quality product or service at an affordable price.
In addition to Apple, countless other institutions have benefited from this concept to improve their business. Among them are:
🚘 Toyota
Toyota is one of the most well-known companies for its quest for operational efficiency. The company is a pioneer in the lean production method, also known as”Lean Manufacturing“, which aims to eliminate waste and maximize the efficiency of the production process.
Toyota's lean production method is considered one of the most efficient in the world and the company is often cited as an example of excellence in operational efficiency.
📔 Amazon
Amazon has invested heavily in technology and automation to optimize its logistics and customer service processes.
As an example, it adopted the use of robots to separate and package orders, reducing the time needed to process and ship orders.
In addition, the company uses artificial intelligence and data analysis to understand customer preferences and offer a personalized shopping experience.
🍟 McDonalds
McDonald's has developed a standardized production process to ensure that food is prepared quickly and consistently in all of its stores around the world.
The company uses technology to optimize its order processes and customer service and has implemented the self-service kiosk model to reduce queues and provide a faster and more efficient shopping experience.
Maximize your operational efficiency with Clicksign solutions
Clicksign solutions offer a range of features to help maximize your company's operational efficiency.
From electronic signature to integration and automation, these solutions can help simplify processes, save time, and increase profitability.
With Clicksign Subscription, it is possible to send documents to be signed remotely, eliminating the time and resources that would be required to print and send physical records.
Already with Clicksign Integration, reduces the need to switch between multiple applications (Google Drive, Zapier etc.), connecting business tools, via API, to help reduce human errors and deliver a positive customer experience.
Finally, with the Clicksign Automation, documents are created based on standard content, in which only some variable data of the signer (who signs) is changed through the flow with a form or a flow with a spreadsheet.
If you are interested in operational efficiency and want to know more about how Clicksign can revolutionize your processes, click here and talk to an expert.
