Efficiency is the battle cry of modern business when seeking improvements, and on the surface it appears to be a worthy goal. However, pursuing efficiency for efficiency’s sake and ignoring the effectiveness of the process behind it can be misleading. This is especially true in job shops where processes—not necessarily efficiencies—drive productivity and, ultimately, profitability.
What’s the difference?
Efficiency is one part of an overall process that, along with effectiveness and productivity, improves machine lines. While all of the terms are associated with the same general process, they are not interchangeable:
- Efficiency is a total of the time, money, and energy—collectively, the resources—needed to execute a process and achieve a goal.
- Effectiveness refers to the difference between anticipated results—based upon what’s projected—a process will produce and what it actually produces.
- Productivity measures actual production (effectiveness) against the resources invested to obtain those results (efficiency). Productivity gives you a gauge to measure if your effort is equivalent to output, or if you can achieve more with less and boost the bottom line.
Which matters most?
Prioritizing one aspect of the process—in this case efficiency—over others can be counterproductive and, in fact, compromise your service level or ability to meet customer needs. For example, cost containment and utilizing worker capacity on the line is important to deliver services. However, if you’re doing it at the expense of quality and your customers are leaving because of it, your business isn’t succeeding. Your process is broken.
To elevate your job shop or contract manufacturing business, you must focus on the overall process—and you must go beyond understanding the interconnectivity of efficiency, effectiveness, and productivity.
What’s the solution?
Commit to getting your employees involved. Ongoing training gives them the knowledge they need to approach and solve problems in ways that align with your job shop’s goals, and empowers them to identify and overcome shortcomings that continue to erode progress. Your workers are on your line. They are uniquely positioned to tell you what’s lacking in the process so you can streamline it and give your job shop a competitive advantage in adhering to the customarily tight project deadlines.
In addition, your process must be supported by decisions based on data and facts like knowing what jobs cost you, your margins, and your employee capacity. An Enterprise Resource Planning (ERP) system can readily provide this information. The software integrates and automates back office technology, services, and personnel functions so you have a “big picture” view of your shop that helps you accomplish real time quoting, scheduling, strategic planning, and other business-critical functions. An ERP system is foundational to a job shop process that is efficient, effective, productive, and profitable.
Ready to take your process and job shop to the next level? Reach out to Wipfli today to discuss the many benefits of an ERP system.