What is production efficiency? #
Production efficiency refers to the effectiveness with which a company converts inputs (such as labor, raw materials, and energy) into outputs (such as finished goods or services). It is a measure of how well a company is using its resources to produce the desired results.
How do you measure production efficiency? #
In lean manufacturing, you want to look at the optimal time to complete a task versus the actual time.
The optimal time it takes to complete a task is the time a fully trained employee would take to complete a task when everything goes 100% perfectly. For example, they have all the right tools; the workstation is well laid out, and all sub-components are correct and in the right place. This time trial would represent the optimal amount of time.
The actual time is how long it takes to complete the task during regular operation. It is the clocked time paid to an employee.
To calculate the production efficiency, divide optimal time by actual time. Typically a number below 80% requires immediate attention to improve processes, and a number above 95% is exceptional.
Example
Widget A is a simple assembly that consists of 5 parts. During a time trial, a well-trained employee assembled the widget in 5 minutes. In preparation for the time trial, team members set up the workstation, gathered all the necessary tools, and ensured they had the essential components.
One team member manufactured the same widget during a regular eight-hour production day. During production, they had a couple of defective parts, a broken tool, and a couple of other hiccups. The team member was able to produce 80 widgets during their shift.
Production Efficiency Calculation Example
In this example, the production efficiency is 83%.
Use this simple calculator to estimate your production efficiency
Simple changes can quickly bring production efficiency up to at least 90% by implementing corrective actions to prevent defective parts from hitting the production floor. A simple maintenance program could have kept tools from breaking during production.
Alternate measures of production efficiency #
Output per unit of input #
This measure compares the amount of output produced (such as goods or services) to the amount of input used (such as labor, raw materials, or energy). A high output per unit of input indicates a high level of production efficiency.
Resource utilization #
This measure looks at how effectively a company uses its resources, such as machines, labor, and raw materials. A company that can produce more output with fewer resources is considered more efficient.
Lead time #
Lead time is the time it takes for a company to complete an order or process. A shorter lead time is generally an indication of a more efficient production process.
Quality control measures #
The number of defective products produced or the rate of errors in a production process can also be used as a measure of efficiency. A low rate of defects or errors indicates that the production process runs smoothly and efficiently.
Cost per unit #
The cost per unit of output produced is another measure of production efficiency. A lower cost per unit typically indicates a more efficient production process.
Why does production efficiency matter? #
Increased competitiveness #
Companies with high levels of production efficiency are generally more competitive in their markets, as they can produce goods or services more efficiently and at a lower cost. This improved efficiency can give them a competitive advantage over companies with lower levels of efficiency.
Increased profitability #
Improving production efficiency can help a company reduce its costs and increase its profitability. By reducing waste and inefficiencies in the production process, a company can produce more with fewer resources, resulting in lower costs and higher profits.
Improved customer satisfaction #
Production efficiency can also lead to improved customer satisfaction. By streamlining the production process, a company can reduce lead times and produce goods or services more quickly, leading to happier customers.
Better resource management #
Production efficiency can help a company use its resources more effectively, leading to a more sustainable business model. Using fewer resources, a company can reduce its environmental impact and save money on raw materials and energy costs.
Production efficiency is essential because it can help a company increase its competitiveness, profitability, customer satisfaction, and sustainability.
A company can continuously seek ways to improve production efficiency by using its resources effectively and efficiently to produce the best possible outcomes.
How do you improve production efficiency? #
Identify areas for improvement. #
The first step to improving production efficiency is identifying waste or inefficient areas. The most common bottlenecks in the production process include equipment failure, poor training, ineffective production setup, poor supply chain management, and many others.
Transitioning to a one-piece flow and establishing takt times will drive improvements and quickly bring inefficiencies to light.
Implement process improvements #
Once areas for improvement have been identified, the next step is implementing changes to address these issues. These actions may involve streamlining the production process, automating specific tasks, creating a preventative maintenance program, or introducing new technology.
It is also essential to involve employees in the improvement process and create a system that empowers team members to participate in continuous improvement activities.
Monitor and measure progress #
It is crucial to monitor and measure the effectiveness of process improvements. Establishing clear metrics can monitor process improvement effectiveness. Production output, resource usage, and quality control measures are all valuable metrics to monitor. Frequent metric reviews will allow a company to identify additional areas for improvement and continue optimizing the production process.
Production efficiency is a critical metric for gauging the efficiency of your manufacturing operation. By collecting and analyzing production processes and outcomes data, a company can make informed decisions about optimizing its operations. This analysis may involve using data analytics software, implementing data-driven strategies, or training employees to use data to make better decisions.
