Efficiency in production

Course: Operation Management

Lecturer: Dr. Waseem Sultan

:Prepared and presented by

Ameer Alshareef

MBA program – Hebron University

Sep 2023
 ?What is efficiency

.Efficiency is about making the best possible use of resources

Efficient firms maximise outputs from given inputs, and so minimise

.their costs

By improving efficiency a business can reduce its costs and improve

.its competitiveness
 Efficiency, productivity and competitiveness are linked.

Better productivity means increased efficiency which results in a higher level of

competitiveness.

Productivity measures the quantity of output, efficiency measures of

.its quality

Efficient companies are able to produce desired results with little to

.no waste and with minimal resources

A business that strives to produce the same amount of work with

less time and resources is growing more efficient. It’s no wonder
why efficiency is defined as working in a well-organized and
.competent way
What’s the difference between productivity
and efficiency?

Both are important to business

Quantity vs. quality - Productivity
results, and the two terms are
measures quantity, while efficiency
often used interchangeably. So,
.measures quality
?what’s the difference

Cost assessment - creating the

most production is not always the Raw vs. refined - Productivity is a
ultimate goal. If the quality suffers, raw measure, while efficiency is a
the overall costs to the company .refined measure of success
.will be greater
 Factors Affecting Efficiency:

Economies of scale,
Example: A car manufacturing company increases its production
volume, allowing it to purchase raw materials at lower prices due to
large purchase quantities, reducing the cost of production per unit.

The technology used,

Example: A factory invests in new machinery and technologies that
increase its productivity and reduce error rates, thereby improving
efficiency.

specialization,
Example: A company hires professional accountants to manage its
financial affairs instead of leaving this task to the general manager,
improving financial reporting accuracy and resource management.
 Factors Affecting Efficiency:

 Process Improvement and Quality Management:

Example: A company adopts Six Sigma methodology to analyze and improve
its processes, increasing efficiency, reducing error rates, and minimizing waste.

 marketing economics,
Example: A company increases its sales volume and expands its marketing
reach for its products, enabling it to spread marketing costs across more units
sold, thereby reducing marketing costs per unit.

 risk-bearing.
Example: A company operating in a single industry may be exposed to high
risks in the event of market changes, while a diversified company operating in
multiple industries reduces its exposure to risks.
 Strategies for Improving Efficiency:
• Strategies for improving efficiency include :

1. Analyzing and optimizing processes,

2. Using advanced technology,
3. Optimizing inventory management,
4. Developing skills,
5. Applying quality analysis methods such as
Six Sigma.
Challenges and
Obstacles:
Challenges may include :
• the costs of improvement and
changes in company operations,
• employee resistance to change,
• financial pressures,
• market challenges,
• and the availability of suitable
technology.
Role of Production
Operations
Management:
• Production operations
management plays a key
role in achieving efficiency
by planning and executing
operations effectively and
continuously improving
them.