In the wake of COVID-19, organizations in every industry are accelerating their digital transformation initiatives to increase operational flexibility and boost their bottom lines. But achieving these objectives involves more than having a well-designed business process or implementing innovative automation technologies. Organizations must have a plan for improving process efficiency.
What is Process Efficiency?
Process efficiency is the amount of effort required to achieve a business objective. For example, producing a product or providing a service. In this sense, process efficiency is a measure of performance that accounts for the time and costs of executing a business process. To measure process efficiency, organizations typically use some variation of the following formula: (Value of Outputs/Value of Inputs) x 100Any result over 100% is considered to add value to the organization. For example, suppose an auto manufacturer employs 20 workers that are capable of producing a total of 1 car each day. The value of the car is $30,000 and the cost of production is $50,000. The manufacturer’s production process is operating at 60% efficiency ($30,000/$50,000 x 100). This process is not efficient.But what if the 20 workers could produce 20 cars per day with costs of production at $150,000? In this case the production process is operating at 400% efficiency ($600,000/$150,000 x 100) and it is an efficient business process.This is obviously a very simplified example of a complicated process. Depending on the complexity of a business process there may be many other metrics that are relevant to measuring process efficiency. For instance, it may be necessary to account for quality, resource efficiency, production time, or throughput.
The Benefits of Efficient Processes
Efficient processes are a common characteristic of successful organizations. Organizations that achieve process efficiency experience the following benefits:
