In conclusion, adopting measures to increase operational efficiency is not just a winning strategy for manufacturing companies, but a universal approach for any type of enterprise aiming for success. It's not just about acquiring new technologies, but about reviewing and optimizing every aspect of business management, from strategic planning to human resources management, through to process organization and space utilization. Reducing waste and increasing efficiency not only reduce costs and improve profits but also contribute to a more rewarding work environment for employees and greater customer satisfaction.
Companies in any industry can take surprisingly simple steps to reduce waste and make customers and employees happier while improving profits. Imagine that everything in the company runs smoothly. Products and services are always of high quality and on time. Customers love us and employees are motivated and engaged. It sounds unbelievable. This utopia is achievable with the help of operational efficiency.
Operating efficiently means using resources such as time, people, equipment, inventory, and money in an optimized way to serve the business. Efficient companies are leaner, more agile and more productive. Operational efficiency is often mistakenly considered only for manufacturing companies and is about buying better and faster machines. Service and distribution companies also get significant returns from efficiency projects. And it is not necessary to purchase new technology to achieve significant gains (although it can be helpful). In fact, the first step is usually to better manage the team, processes, and information to reduce waste and create more value for customers. Operational efficiency elevates organizations to a level of business maturity that many Italian companies face today. And when they reach the first results from the programs they have started, they say, “We should have done this years ago.”
According to some estimates, in the average small and medium-sized business, only 15 to 20 percent of an employee’s workday is spent on purely productive activities. The goal of an operational efficiency mindset is to reduce or limit the time spent by workers on non-value-added activities or inefficient processes. By maximizing the amount of value-added work done by employees, the exercise of operational efficiency can make a company much more competitive and pro!bile. Business leaders are often amazed to realize how much waste actually exists in their company.
What is waste? And what are the benefits of reducing or eliminating them? Companies are often equally surprised by the simplicity of some of the changes and the substantial benefits, such as reduced costs, lead times, and production rates:
Improving efficiency can (and should) be a key part of business strategy.
Many business owners believe that constantly “fighting” or controlling crises means that their company is being run effectively. In reality, the business owner has become a victim of this “noise,” and crisis management is the norm. Operational efficiency is about reducing the “noise.”
Imagine a company that is running out of space in its facility and is planning to purchase another building. With targeted consulting and the initiation of an operational efficiency program, the company might find that it is wasting a lot of space in the existing facility and then find ways to reorganize production more efficiently. At the end of the project, the new building will no longer be needed and the company will find itself with extra area in the existing facility, which it could sublet by generating additional income.
The typical situation is that a company’s leaders begin to get bogged down or exhausted from continually trying to put out fires, are bombarded with emergency requests, ever-changing customer needs, or employees grappling with constant interruptions to their day. Leaders spend their time being reactive and do not add value by proactively preventing problems before they occur.
Operational problems often accumulate over time, imperceptibly, as companies grow ad hoc, adding new employees, machinery, and processes in a haphazard manner and with inadequate strategic planning. You find that you run out of space in the building, detect a lot of defects and fail to meet customer demand, or work a lot of overtime without meeting targets.
You might suspect that there are inefficiencies in your company if you are experiencing effects such as declining profits, difficulty in meeting demand, or even loss of revenue. The good news is that you can quickly increase productivity with an operational efficiency exercise. Operational efficiency exercises generally follow the following steps:
It is not uncommon for business leaders’ perceptions of how things work to differ significantly from what actually happens in the field. It is important to have a clear view of the entire company, not just the problem areas. If you just try to solve problems without a good understanding of the whole company, you may just make more effort and not get to the root causes. We don’t want to put a band-aid on a problem. We want to solve the fundamental problem. That said, if there is an urgent problem, a temporary solution can be proposed to quickly right the course, and then take the time to work on long-term solutions.
The next step involves using the current state assessment to identify a priority list of solutions that will have the greatest impact in addressing the root causes of problems.
Projects can be divided into two groups:
For both types of projects, it is necessary to create an action plan that specifies who will carry forward each initiative, a timeline for completion, and key performance indicators (KPIs) or milestones to monitor progress and impact.
Among the operational efficiency projects commonly recommended for many SMEs:
Care must be taken not to push the bottleneck, or the challenge, downstream.
To achieve production objectives, ambitious yet realistic performance goals are needed. If goals are achieved, it means the work has been done well and the new approach should be standardized. If the goal is not met, it’s important to understand why and establish a strategy with the team to achieve it. Goals that will never be met create frustration in the team, whereas goals that are achieved every day are too easy, and therefore not stimulating.
These are some of the most common KPIs used to measure operational efficiency:
Changes within a company often encounter resistance from employees. It’s important to give the team the time, resources, and support (including information, training, and tools) necessary for successful implementation.
Good practices for managing change include:
Companies must commit to constantly reviewing their operations and optimization methods, prioritizing their employees, facilitating their work, and ensuring their satisfaction and sense of accomplishment every day.
Companies must consider digital technologies 4.0 from the beginning when embarking on an operational efficiency journey. Thinking of the shop floor, for example, these technologies include digital production dashboards, which provide a real-time visual representation of performance indicators. These data help alert key personnel to situations that require immediate attention, or to detect and analyze the root causes of unplanned downtime and waste. A daily program management system is another type of indispensable software, think of manufacturing companies, but it can also be extended to service companies: it allows managers to monitor the progress of a project, an activity, or a process and can help automate workflow, task assignment, and reminders while ensuring clarity of roles and responsibilities.
In conclusion, adopting measures to increase operational efficiency is not just a winning strategy for manufacturing companies, but a universal approach for any type of enterprise aiming for success. It’s not just about acquiring new technologies, but about reviewing and optimizing every aspect of business management, from strategic planning to human resources management, through to process organization and space utilization. Reducing waste and increasing efficiency not only reduce costs and improve profits but also contribute to a more rewarding work environment for employees and greater customer satisfaction. In a rapidly evolving and increasingly competitive world, operational efficiency is no longer an option, but a necessity. Companies that engage in this path often find that the benefits far outweigh the initial investment, not only in economic terms but also as a continuous improvement of their corporate culture.