Operational efficiency is often a top concern in manufacturing. After all, operational efficiency allows businesses to streamline processes so they can achieve the highest output with the fewest resources. This minimizes waste while maximizing productivity, which leads to improved revenue.
This article will focus on operational efficiency and why it’s so important to manufacturers. We will also discuss manufacturing cycle efficiency and six key ways manufacturers are improving their operational efficiency.
What is operational efficiency in manufacturing?
In manufacturing, operational efficiency refers to an organization’s ability to produce goods at maximum output with minimum input. To do this, manufacturers must reduce costs by streamlining processes, boosting productivity, and more.
While every business across virtually every industry emphasizes operational efficiency, it’s particularly critical to manufacturers. That’s because in manufacturing, every step of the production process contributes not only to the amount of product produced and its quality but also how long it takes to produce an item and how much that item must be sold for to generate a profit.
In other words, the manufacturing process offers virtually unlimited opportunities for improved operational efficiency. Simply by optimizing a handful of steps, manufacturers can reap the benefits right away.
What is manufacturing cycle efficiency (MCE)?
Manufacturing cycle efficiency, or MCE, is a ratio used to measure operational efficiency during manufacturing. More specifically, it measures how efficient production is by defining the proportion of time dedicated to activities that directly contribute to a finished product’s value.
This ratio can be used as a benchmark to make manufacturing more efficient. Over time, manufacturers can work towards becoming more and more operationally efficient by reducing the time spent on activities that do not increase the value of manufactured goods.
To calculate manufacturing cycle efficiency, simply divide value-added production time by the total cycle time.
6 ways to improve operational efficiency in manufacturing
Here are six of the most popular ways to strengthen your manufacturing cycle efficiency:
1. Implement lean manufacturing
Lean manufacturing is a production process strategy that emphasizes reducing waste while optimizing response times from vendors and two customers. It’s similar to just-in-time manufacturing.
Lean manufacturing helps manufacturers optimize processes and enhance overall efficiency across the supply chain. To get started, determine which manufacturing activities don’t add value to the goods they create. Try to remove these activities from your manufacturing cycle, or at least streamline them.
2. Optimize your supply chain
Once again, understanding and improving how your supply chain functions can boost operational efficiency. From increasing supply chain transparency to refining the suppliers you contract with, optimizing your supply chain can help create a more efficient and less wasteful procurement and distribution process.
3. Adapt the right technology and use data wisely
To become more operationally efficient, manufacturers should consider integrating technology that enhances and streamlines the manufacturing process. These tools should be intuitive and make tasks simpler, not more complicated. From warehouse drones to inventory management software, look for tools offering critical data and insights into your manufacturing process.
These numbers and figures can be used to inform everything from supplier relations to demand forecasting. Also, if and when your manufacturing organization decides to implement artificial intelligence, the right technology partners can make those next steps even easier and more rewarding.
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4. Ensure proper employee training and collaboration across departments
Regardless of what strategies you implement to create a more operationally efficient manufacturing process, it’s essential that all employees across all departments understand the new procedures. By carving out time to train (and then retrain) employees to properly adhere to these strategies, you’ll not only set up your teams for success but easily identify which portions of training (or what elements of your newly implemented systems) aren’t effective.
On the same token, it’s essential that communication and collaboration between all departments be both encouraged and frictionless. Communication is of utmost importance because the end goal of increasing operational efficiency for manufacturers is to reduce the amount of time wasted on non-value-added processes.
How quickly different teams talk to one another and how rapidly different departments react to new information can significantly improve that manufacturing cycle efficiency ratio.
5. Revisit overhead costs
Another solid way to boost operational efficiency is to ensure that no resources are being wasted on unnecessary overhead. From paying for and managing storage facilities that aren’t essential to operations to keeping too many lights on after hours, go through your organization’s profit and loss sheet with a fine-toothed comb. Chances are, a few things on the ledger aren’t adding value to the goods you manufacture. Consider reducing or eliminating these expenses if you don’t need them.
Many manufacturers also consider more environmentally friendly, energy-efficient processes when reviewing overhead costs. These practices are beneficial for the planet and help keep your organization efficient, too.
6. Standardized operating procedures, set benchmarks, and make small improvements
Finally, whatever your organization decides to do to become more operationally efficient, ensure these new strategies and procedures are standardized in writing for all employees to reference. Creating a clear-cut policy makes it much easier for all team members across all departments to work together toward measurable goals and a more operationally efficient future.
When standardizing these procedures, also take time to set benchmarks. These key performance indicators clarify your organization’s goals about manufacturing cycle efficiency. They can measure whether specific strategies are working and when to revisit those processes. Also, if your organization has multiple manufacturing locations, these benchmarks and KPIs can be used to identify particular locations and facilities that need to catch up.
Regardless of the unique complexities of your organization, every manufacturer of every size should continue to make minor improvements and adjustments to its operational efficiency strategies over time. While making too many tweaks too early can be disadvantageous, it is always helpful to zoom out and review how performance has changed quarterly or once a year.
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