What is production efficiency in manufacturing and how to achieve it?

Saurabh Singh August 11, 2023
enterprise software development

How many times have you, in your manufacturing business, faced the issue of spending a lot in production and then not getting the desirable amount of returns back? Or instances where you are unable to decide whether your employees are being productive or not? If you are like hundreds and thousands of manufacturers across the world, I am sure you would have thought about your efficiency of production factor. 

Production efficiency in manufacturing is a crucial issue that manufacturing houses grapple with. While the ultimate aim is always to keep the efficiency of production at its largest, it is not the easiest task. 

In this article, we are going to look into the concept of production efficiency in manufacturing and ways businesses can improve it to better their bottom line. However, let us start with the basics first. 

What is production efficiency?

Production efficiency is a condition where the system doesn’t produce additional goods without interfering with the production of another product. This happens when the production of materials is happening at the lowest possible cost with the help of an optimal amount of capital and labor. 

Usually the production efficiency is measured in terms of the Overall Equipment Effectiveness – a metric that highlights the percent of planned production time which is genuinely productive. While the ideal OEE score is 100% – where the production line produces only the good parts with zero downtime, in an expedited manner, generally manufacturers are able to achieve anywhere between 60-85%. 

How to calculate production efficiency?

The formula for estimating the production efficiency is:
Actual output rate / Standard output rate X 100% = Production efficiency

Actual output rate: It is calculated as the number of products divided by the unit of time.

Standard output rate: It is the average rate of performance that a trained worker can produce per unit of time. 

Now that we have answered what production efficiency is, it is important to look into the why part of it. Why is it important for a manufacturing house to improve production efficiency?

What is the benefit of production efficiency?

Production efficiency helps production and manufacturing companies determine their maximum capacity which they can achieve through their current set of assets. It helps them in determining if they are being efficient with the available resources or if there is a scope to improve production efficiency.  

The importance of production efficiency in manufacturing can be seen in how it:

  • discovers the resources needed for production
  • eliminates the production waste
  • reduces the energy used in creating products
  • lowers the production costs
  • improves competitiveness and trade 
  • produces greater wages for staff

improve production efficiency in manufacturing

We have now come at a stage where we, after knowing the importance of production efficiency, have to look into ways of improving it. 

How to achieve production efficiency?

Production efficiency as you must have gathered till now plays a huge role in bettering the standards for a manufacturing house. Here are some steps into how it can be achieved. 

Production efficiency steps

Evaluate the production line

The first step in bettering the production efficiency lies in gathering an understanding where it stands today. This is where production line efficiency analysis comes in. You should start with evaluating every aspect of the production line – the number of units your company produces in X time period. 

Another key metric would be reviewing what your capacity utilization is. It involves estimating the capacity of manufacturing output per factory in X time period. It enables you to measure which factory is performing at their highest output. 

Update technology

Working on obsolete technologies is one of the biggest issues that businesses face today. Only with the right set of technologies like AI in manufacturing, will you be able to give your team the competitive edge they need to become more efficient.

While technologies often call for heavy upfront investments, it can help when you make the move. Let me highlight this better with an example. Suppose your computer hangs for 5 minutes, it would lead to a 5 minutes delay in the information to reach the production line – an event that can lead to employees initiating the wrong process. 

Identify the bottlenecks in production

Bottlenecks occur when there is a breakdown in the production line. These bottlenecks can happen because of deficiencies in any of the two factors – equipment and humans. For a manufacturing house it is important to know how to identify the real bottleneck creator and then take suitable decisions on how it can be eliminated. 

Improve production efficiency with Appinventiv

Identify and remove wastefulness

In a manufacturing house, waste happens in multiple forms, some of which might not even be visible to the employees. It can be ineffective cooling/heating, poor ventilation or something else. Moreover, waste also happens in terms of unnecessary labor cost or mismanagement. Whatever the reason may be, the result is often always the same – negative impact on the production efficiency. The first step to this is identifying what the wasteful element of your manufacturing process is. 

The solution to this issue then lies in creating standards. The standards should be different for every team, depending on what their individual KRAs are. Once those standards have been established, it comes down to someone in the management role to ensure they are getting met. 

Improve the training process 

Unlike the generic assumption, it is not equipment but humans that cause a greater percentage of bottlenecks  and inefficiencies. And most of the time it is not even their fault. There should be proper training provided to the employees, ensuring that it meets the company’s standards. You should also make standardized operating procedures (SOP) once you have identified lack of training as the problem area. 

These SOPs can act as a manual for employees to follow as a way to measure and improve their processes. 

Optimize the inventory

The inventory of any manufacturing house is ripe for optimization, both in terms of raw material and the finished product. It is crucial that you partner with a custom enterprise software development company and build a manufacturing efficiency software. These solutions will enable you to create automated notifications for material billing, inventory tracking, and invoicing. Moreover, it would streamline the inventory process by eliminating the human time that goes in making reports and spreadsheets.

These ERP solutions can also help the manufacturing houses avoid the product shortage and stay on top of their inventory counts, ensuring that the stock is at optimal levels.  

[Also Read: How is IoT Helping Manufacturers Better Their Operational Efficiencies]

Frequently asked questions about Production Efficiency

Q. How do I check if my production line is inefficient?

A.  If you are producing less goods with high resources or raw material, if the majority of your employees are not able to deliver the quality, if customers are returning the products – all of these are signs that your production efficiency needs an overhaul.

Q. How is production efficiency measured?

A.  You can measure the production efficiency count by measuring the actual output of a process or a worker with the standard output set in the industry. The formula for estimating the production efficiency is:

Actual output rate / Standard output rate X 100% = Production efficiency

Q. The production efficiency of my business came out very low. How do I improve it?

A.  There are a number of ways to improve the efficiency as highlighted in the article above. Let me give you a quick recap of the ways. 

  • Evaluate where the production line stands today
  • Improve employee training
  • Eliminate the bottlenecks
  • Update the technology, etc.

How can Appinventiv help?

Improving the production efficiency is an ongoing task. The importance of making tweaks to lower waste, better employee training, and streamline the bottlenecked production line, can be a costly ignorance. To prevent manufacturing houses from making the mistake, Appinventiv provides them production efficiency software. These software helps manufacturing managers build online libraries of the SOPs, allocate the work orders, and manage the assets – all from a centralized dashboard that works on both desktops and smartphones. 

We have also worked with manufacturing plants to build mobile apps that enable workers to seamlessly access the quality control checklists, safety audits, and the project scope – all from their smartphones. 

Irrespective of what use case we work on, the outcome that we aim for is almost always the same – building a digitalized trail which combines compliance and quality checkpoints. In addition to this, the software also acts as a data powerhouse which improves production efficiency.  

Struggling with attaining your ideal level of production efficiency? We can help.

Saurabh Singh
CEO & Director
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