Maximum Efficiency In the engineering world, there are two ways to come up with a solution to solve a problem. There’s the ‘effective’ method, which is a solution that simply solves the problem at hand. However, simply solving a problem is never enough. Therefore, this is why we usually revert to finding an ‘efficient’ method of problem solving. Efficiency is the ultimate goal for all manufacturers and businesses as this is where the big bucks come from. It is very important that these big companies find these efficient solutions in order to minimize their losses whilst maximizing their profits. Benjamin Disraeli, a British writer from the 19th century once said that, “there can be economy only where there is efficiency”. Efficiency is the basis of all large production companies. They’re main goal is to be able to produce their product at a fast enough rate, whilst keeping the production costs at a minimum. Companies must take a lot of small factors in mind when it comes to production. Assessment of labour costs, material costs and time is key when it comes to figuring out how to minimize the cost of production. An oversimplified equation to represent efficiency is, Output ÷ Input = Efficiency. In the eyes of a manufacturer, the output would represent their product sale cost and the input would represent the production cost. Every successful production company must realize the importance of efficiency. For example, if you look at a car company and look behind the scenes
Production – Having a good production team can help your business stay up to the task of handling all of your demand needs. Knowing your production costs and the speed your employees can complete a task will help you to figure out how much profit can be made of an item. This can be done by taking in the time factor when working on a particular job and the parts required. The speed and quality of production plays a big factor in the company and keeping it running. Our employees in the business who are in the production department will be the engine room of the business. We would strive to keep them comfortable and provide them with enough down to make sure they are not over worked and stressed, which will give us better quality in
Representing costs as a percentage of sales is not the best way to judge efficiency since it can ignore variables such as bottle deposits and discounted rates, which would show problems in production when in fact there are not any. Therefore, JJ’s statement on production remains truthful when he said that CBI has been operating as efficiently, if not more, in the past. Here’s an example:
It is stressed in the Goal that there is a massive difference between throughput and efficiency. The novel makes the case that having an efficient operation does not equate to profitability. What does equate to profitability is to increase the throughput of any given operations system. Jonah tells Alex, “Throughput, is the rate in which the system generates money through sales.” (Goldratt, E.M. (2014), The Goal, pg. 60). Jonah goes on to explain to Alex that inventory is all the money that was invested in purchasing things that the system intends to sell. (Id). Furthermore, operational expenses are those costs that are required to turn inventory into throughput. (Id, at pg. 61). The definitions of these three measurements are not standard definitions for an MBA student. It is an interesting perspective on how to view operations.
B. Efficiency: A process characteristic indicating the degree to which the process produces the required output at minimum resource cost and ask “are we doing things right?
Efficiency Ratios tells us how well the company uses their assets to generate income. These ratios look at how long it takes to collect cash from customer and to convert inventory to cash. Efficiency ratios are connected with profitability ratios because if they are efficient, then they become profitable. The type of efficiency ratios include accounts receivable turnover and inventory turnover.
Throughout the entirety of the book, The Goal: A Process of Ongoing Improvement, author Eliyahu M. Goldratt focuses on demonstrating the importance of the Theory of Constraints and what corporations should do in order to increase profits. A major term used throughout the novel is “throughput,” which according to the text, is “the rate at which the system generates money through sales” (Goldratt 60). Once a bottleneck machine in a production process is identified, there are multiple ways to increase throughput without expanding the physical capacity of the machine.
These four elements all work together to create the success of an organization. These elements can easily related to many of the shifts that we have seen in many areas of our day-to-day lives. Healthcare is one area of our lives that I feel continues to change to become more efficient. New practices are being implemented daily to improve ways patients are cared for. The implementation of technology has become an important part of healthcare and will continue to grow in use. Our patient population over the past several years has evolved and become more educated on the hospitals they choose and their illness. When they come into the hospitals they are expecting a high level of care. According to Wikipedia (ND), efficiency is used as an ideal practice to achieve a goal. Relating this to healthcare we see new systems in place such as urgent cares, or even clinics so a greater number of patients can be seen increasing revenue. Not only that since many of these
Performance metrics are tools that businesses can use to determine the efficiency of production. There are various types of performance metrics that a company can use; however in evaluating the performance of Riordan’s electric fan supply chains the two most relevant metrics would be the productivity metric and the efficiency metric. “Productivity is the ratio of output to input” (Jacobs & Chase, 2011 pg. 117). This metric is useful to Riordan because the company can determine the ratio of the dollar value of the output and dividing it by the cost of the inputs. This ratio helps the company to determine if the they are spending more in labor and parts then they are generating in sales. For an organization in which generating sales is the primary goal, this is an important ratio to know. The productivity ratio determines whether or not the company is generating as much of a profit as it should or if too much money is being spent in order to make money.
Eliyahu M Goldratt purpose of writing this book is to introduce individuals to how to manage and measure effectively. Goldratt illustrates how the accounting cost figures and productivity per machine can actually be problematic for it misleads individuals into thinking they’re achieving the goal. Rather all attention should be focused on strategy planning and managing the bottlenecks because they are the true driving metric of production. One major takeaway message from this novel is that there is always room for improvement. This philosophy of ongoing improvement originated in a Toyotas production system and is better know as the Kaizen theory. The Novel, stresses the Kaizen theory, which starts with an indication, then an in-depth analysis, followed by a diagnosis, eventually arrive ate a hypothesis and ending with
Besides, decreasing the production cost is also important as the firm can then lower the price. So the decisions related to change in plant size, process improvement and the training are also important.
Although financial information is not available for all competitors, the top 3 competitors show a discrepancy in production efficiency. This would lead the analysis to support the existence of other significant factors influencing the value chain outside of production. These could be the cost of supplies, distribution and marketing.
For any management team or executive, the pursuit to merge a good amount of these two qualities together requires some amount of sacrifice. To become highly effective, efficiency has to be first sacrificed after which it can be slowly increased without a considerable drop in effectiveness. This is the most accepted method used by managers because results matter to clients and customers instead of the cost of acquiring it.
Production is valued exceedingly within businesses, raw materials need to be created and assembled so that the company can then sell the product to the customer. Production will have its
* The company has to suffer economical loss due to its cyclic nature of production. The production does not run at full efficiency every time. This leads to the waste of energy, money and resources.