Improving operational efficiency to stay ahead in the game

The Business Standard recently carried a headline about how Bangladesh's apparel sector is lagging behind Vietnam in productivity and operational efficiency. The subject of operational efficiency has been continuously taking the centre of attention whenever Bangladesh and "Made in Bangladesh" products are promoted around the world.

The Covid-19 pandemic has shown us plenty of examples of operational inefficiencies within organisations and suppliers; from moving in-house work to remote working, to a lack of resilience in the supply chain where suppliers are unable to meet demand. 

The uncertainty caused by Covid-19 must be taken as a call to action for organisations to remove their operational inefficiencies and ensure effective allocation of resources to deliver the maximum value.

What is operational efficiency?

Operational efficiency is an organisational ability to deliver a quality product with the fewest possible amount of resources. It is quantified by a ratio between what you put into your project, often referred to as "inputs" and what you get out of it, called "outputs".  

Inputs such as money, people, or hours worked are the resources you invest to achieve a project's success. Outputs are the deliverables you expect to produce at the end of the project timeline

Let us give an example to understand this concept: 

A readymade garment (RMG) manufacturing team of 20 people regularly creates 100 garments in one hour. Implementing an operationally efficient strategy would mean cutting down your team to fewer than 20 individuals while still creating 100 garments in one hour or the same team to produce more.

According to PwC, less than 30% of cost-cutting programmes achieve their goals, and less than a fifth of these can achieve consistent rewards over the following three years.

There are some key strategies to improve operational efficiency in your organisation: 

Identify improvement areas 

First, you need to identify the areas which need to be improved within your organisation. Find out the cost of raw materials, the amount of profit that product generates, the time it takes for staff to produce inventory and the amount of staff needed to fulfil customer orders. 

Then, identify the areas of manufacturing that require improvement. For example, if you are receiving a higher number of orders, though the sales do not generate higher profit, then you may need to increase the price of the product and lower the manufacturing costs.

Standardise business processes

This is a vital strategy where you will begin to increase efficiency within your internal operational processes. Start by looking at your current business operations and how team members are completing their tasks. 

Remember, automation is operational efficiency's best friend. If you are looking to standardise any business processes, identify easily repeatable tasks that can be automated. A study found out that workers are spending 13% of their time on pure duplication of work. 

Creating standardised business processes is an easy and cost-effective way of streamlining operational workflows. This can help create a more uniform end-product while also decreasing the amount of time it takes to deliver results.

Less than 30% of cost-cutting programmes in the RMG sector involving cutting down the number of workers in a production line achieve their goals, and less than a fifth of these can achieve consistent rewards over the following three years. Photo: Mumit M

Improve cross departmental communication and collaboration 

According to Salesforce, 86% of employees and executives acknowledge that a lack of collaboration or ineffective communication is responsible for workplace failures. When dissonance exists between various departments within your organisation, it is impossible to achieve operational efficiency. 

The first thing to do is ensure all team members, departments and groups have open lines of communication between them. It can be done by developing cross-functional hybrid teams that consist of employees from different departments. These teams help remove gaps and give each department representation across the organisation.

Internalise continual improvement

There is a popular saying, "If you are not moving forward, then you are moving backwards". This is now more relevant than ever before. Companies that focus on continuous improvement initiatives, rather than being complacent with their position, tend to outperform their competitors consistently. 

Every aspect of a business has room for improvement and, no matter how small that may be, every little positive change has an impact. You never know how much a procedural advancement will affect things like quality, cost, and production time until you begin making changes and monitoring results.

Boost employee engagement

Behind every successful organisation, employee engagement plays the most crucial role among all factors. According to a study, companies who have higher employee engagement are 21% more profitable than other companies in the same industry. 

Advanced and cutting-edge innovation comes from an organisational culture that encourages employees to make a personal commitment toward the successful future of the organisation. The most efficient manufacturing organisations keep everyone abreast of both immediate and long-term goals, encourage input from every level, and often build reward systems that inspire innovative and out of the box thinking. Contented, productive and long-term employees are critical to continually improving operational efficiency in every organisation.

Measure performance

It is hard to improve your performance if you are not measuring and tracking it at regular intervals. By using a continuous feedback process to guide your business's planning efforts, you can see which improvements will be the most effective and make those changes first. 

These processes can be tracked manually or with system management softwares. By measuring past and current performance, you can see how your methods have improved and where they need to be enhanced further.

Leveraging technology

In this era of continuous changes and new possibilities, technology is the king. It not only helps to measure operational efficiency, but also offloads tons of administrative work from your team's shoulders and adds brains to your operations. 

By integrating service management systems into your operations, you have all the information you need at your fingertips, helping you stay on-time, on-budget, and improving your overall operational efficiency. Operational efficiency is all about enhancing your current methods to stay ahead in the game.

Mamun Rashid is a financial service (FS) partner at PwC. He worked in senior roles for three global banks for more than two decades.

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinions and views of The Business Standard.