Operational efficiency – What it is, definition and concept

Operational efficiency is the result of the application of appropriate actions that are developed in the daily work of a company. This leads to using the minimum resources to deliver high quality products.

In other words, operational efficiency is all the activities carried out by a company with the aim of being able to offer goods and services of the highest quality, and at the lowest possible cost.

Undoubtedly, achieving this goal requires a lot of time and effort from all managers, officers and employees. In addition, all actions must be monitored to verify that the proposed objectives are being achieved.

In sum, the two great benefits to a business seeking operational efficiency are low costs and high quality. On the cost side, production costs are reduced. While, on the quality side, a higher level of quality is offered for internal and external customers of the company.

In operational efficiency, costs and quality are closely related. This, because, if a company wants to operate with lower costs, it will necessarily have to work with high quality standards.

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Operating efficiency
What is operational efficiency?

How is operational efficiency achieved?

Naturally, the operational efficiency of a company is achieved when it performs the same activities that other competing companies do, but in a superior way. This allows you to differentiate yourself and gain an advantage over them.

However, to achieve this, the company must implement a series of activities that allow it to make optimal use of the available resources. All of this can help reduce failures and errors in the products you offer, as well as improve your delivery times and your services in general.

Surely, achieving operational efficiency is a challenge for all members of the organization. Thus, it requires the effort and commitment of all together. In this way, the use of all human, material and financial resources is properly managed.

What aspects are important to achieve operational efficiency?

The most important aspects to achieve operational efficiency are:

1. Knowledge and skill of human resources

Indeed, the knowledge and skill of the human resource that a company has is essential to achieve operational efficiency. If you don’t have skilled and well-trained employees to carry out the activities, you can’t achieve efficiency. Therefore, the human resource is the starting point to achieve the objectives.

2. Inputs and raw materials

On the other hand, the inputs and raw material used by the company must be of high quality. This, so that they comply with the specifications and be able to be sure that the results will be as expected. On the contrary, if poor quality inputs are used, the results will be negative for the company. Therefore, it must be managed that the acquisition of these resources meets the requirements.

3. Procedures and operational efficiency

Likewise, the procedures implemented are important to achieve operational efficiency. This implies that there must be a person in charge of each process, an adequate scheduling of execution times and an evaluation system to help verify compliance. This is best when the procedures are standardized.

4. Evaluation system and operational efficiency

Additionally, there must be an adequate evaluation and recognition system, both of the internal and external activities of the company. Among the most important things to evaluate are:

Evaluation is the basis for knowing what needs to be improved and a process of continuous improvement must be structured accordingly.

5. Innovation

Whereas, innovation is always an important option to achieve operational efficiency. Therefore, it is advisable to innovate products and processes in the company. One of the elements that most helps to improve is that the company evaluates itself to be able to change and generate innovations that add value and differentiation.

6. Benchmarking

However, benchmarking consists in that the company must take as a reference the best competitors in its market. This, with the purpose of implementing best practices and applying higher performance standards. All this together contributes to obtaining higher levels of operational efficiency, which leads the company to achieve a sustainable competitive advantage in the long term.

7. Outsourcing

Finally, outsourcing or outsourcing can be an important element to reduce costs, improve efficiency and increase the profitability of the company. The firm should consider whether it is more beneficial to contract external services to carry out certain activities that are very expensive. Thus, it could focus on those areas of activity that give it a greater strategic advantage.

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Operating efficiency
Important aspects

In conclusion, we will say that operational efficiency allows companies to deliver products to the market of the best quality, managing to produce at the lowest possible cost. To do this, a series of practices must be applied that allow better use of human, material and financial resources. All this in order to generate greater value for the company’s internal and external customers, making the company achieve a superior advantage over its competitors.

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