Why Improving Operational Efficiency is Important For Your Business

Major Points of the Article

• Improving operational efficiency requires consistent effort in refining the processes within your business.

• Improving operational efficiency can benefit you in a multitude of ways.

• Every business is different, requiring different focus areas and goals.

• A process roadmap is an extremely useful tool to assist you when looking to improve your operational efficiency.

What is Operational Efficiency?

Before we begin, we must first establish what and why improving operational efficiency is important for your business. Operational efficiency is a metric used to measure resource allocation by comparing the business outputs to its inputs. By gradually improving the processes, again and again, your business's operational efficiency can be improved overall. It can even turnaround your business in times of stress.

Putting it simply, if you are looking to improve your use of resources, it is in your best interest to improve your operational efficiency. But again, why is it so important?

Why is Improving Operational Efficiency So Important?

As I’m sure you are aware, allocating resources effectively within a business is vital to increasing not only revenue but also your profits while still maintaining a high level of quality and service. Essentially, you can increase your profits without sacrificing your customers' experience. Some other direct benefits you could experience are:

• Reduced waste

• Increased revenue

• Improved use of employees' time

• Delivering/completing your product/service faster

• Better use of technology, reducing costs

• Reduced costs in other areas

• And much more…

It may sound good, but don’t just take our word for it. Who else has been improving operational efficiencies? Well, literally any big business you can think of, but we will just list a few such as Nike, Domino's and Amazon to get you started.

• Nike's human resource strategy, demand-based vs constant employment basis so they are never short staff and provide consistent quality

• Domino's increased its profitability by implementing mobile app-based technology

• Amazon improved its logistic technology to increase the speed of delivery

Any business looking to improve its operational efficiency will ask questions such as how much inventory should be ordered? When should it be ordered? Should we order larger quantities to reduce our total shipping costs? Are we able to source this product for a lower price from another supplier? and more... Businesses will consider all options so that they can forecast the best future alternatives.

It becomes overwhelmingly obvious that improving operational efficiency is a constant process and unique to each business, which may become extremely complicated.

What Are Major Factors Affecting Your Efficiency?

This depends greatly on your business such as type, size, industry and more. The most common factors you should consider improving are:

• Planning and control

• Inventory management

• Warehouse capacity

• Job design

• Benchmarking

• Maintenance

• And more…

While you can improve your efficiency by focussing on just one of these elements, you must look at how it affects your business as a whole. For example, if you were to increase your maintenance speed, which will require twice as many workers, has that really increased your operating efficiencies? What has that done to your profitability?

You should look to improve these factors and monitor the effect they have on all of your processes. Knowing how the symbiotic relationship amongst all of these factors affecting your business can be tweaked to improve it, can get confusing. So how can you evaluate it?

Business Process Improvement Plan

You can improve your business by using a Business Process Improvement Plan. Essentially, it is a document that helps you identify the steps necessary to enhance the efficiency of your processes and procedures within your company. This plan has 6 simple steps:

Step 1: Define & Create Goals

Identify the specific jobs, tasks, or processes being targeted by the plan and establish what goals you want to achieve. Setting the goal is the most important factor, as you need to know what and how much you want to improve. Utilise your project managers and those responsible for implementing and completing the tasks.

Step 2: Gather Inputs & Analyze

Gather information around your focus area and analyze it by breaking the process or task down into simple steps. Identify the weak points in the process and the reasons for these inefficiencies.

Step 3: Redesign

Change the steps within the process to eliminate the weak points. This could be through technology, employment, or even removing the step altogether.

Step 4: Implement

Put the new process in place.

Step 5: Communicate

Let your employees know that a new procedure has been put in place and why it is important for your business. Include training if need be.

Step 6: Monitor & Update

Establish a timeline for conducting this analysis and determine if you have reached your goal or if it requires additional tweaks.

How Will A Business Process Improvement Plan Benefit You In Improving Operational Efficiency?

Essentially, it is a very useful tool that can assist you in improving your operational efficiency. For example, let’s pretend you own a bakery that has gained a lot of recent traction and has become very crowded. You can create a Business Process Improvement Plan to reduce the waiting time for customers by improving your store layout. You could then go about setting a goal for your new desired waiting time and identify how you will do this, when you will do this, and what resources you will need. Once completed, you can come back to evaluate how successful you were in completing your original goal, and re-strategise to find ways that could further improve your operational efficiency.

Who Can Help You Through This Process?

Does this process sound a little too challenging or would you like some help along the way? You should consider Paradelta Strategy, a business strategy and brand equity building company that specialises in improving operational efficiency through planning, roadmapping and much more. Over the years, we have helped businesses across Australia to grow and expand, nationally and internationally and grow significantly in profits. To get assistance with your business, simply email us at hello@paradeltastrategy.com.au or schedule a no-obligation discovery call here