Productive Efficiency: A Comprehensive Guide

In today’s competitive markets, production facility managers are constantly faced with the challenge of producing maximum output while also reducing waste. Yet, many don’t have a clear answer as to whether or not their available resources are being used as effectively as possible. If you can’t answer this question with a resounding yes, it is time to calculate your productive efficiency. 

Let’s suppose you operate a facility producing hundreds of units daily. Despite your best efforts, you’re dealing with outdated machinery, unexpected downtime and a poorly trained labor force. While things might seem productive on the surface, calculating your productive efficiency highlights that you’re only achieving 75 percent of your potential output, meaning you’re overspending on production and not earning the highest possible ROI.

So, how can you recognize if you’re achieving maximum efficiency? And what adjustments can be made if you are, in fact, underperforming? Follow along for everything you need to know about productive efficiency, the benefits of having a high output and the actions that can be taken to unlock your full production capabilities. 

What Is Productive Efficiency? 

Productive efficiency is a metric that manufacturers use to determine how effectively they’re using their resources compared to standard production rates. The goal is to achieve the highest available output with the available resources and to create goods at the lowest possible cost per unit. 

When calculating this essential manufacturing KPI, a higher rate indicates that your business is using its resources more effectively and operating at a higher level of productivity. For example, let’s say you’re running a textile production facility and recently concluded that resources are being wasted due to inefficiencies in your dyeing process that cause frequent equipment downtime and excessive use of materials. By calculating your productive efficiency, you learn that you’re operating at only 65 percent of your potential output and that, by upgrading to an automated dyeing system, you can improve your efficiency to 90 percent to reduce material waste and increase production quantity. 

Benefits of High Productive Efficiency

Being more efficient in your production process comes with increased profits and lower expenses. Here’s why emphasizing productive efficiency is advantageous for your manufacturing business:

Higher Revenue

Boosting your efficiency lowers the average total cost per unit, giving your business the capability to lower prices without cutting into your profit margins. Lower prices will increase demand, leading to a larger market share and more sales overall, boosting your bottom line significantly. 

Additionally, improved production means you can produce more goods, pairing more demand with the needed supply to fill orders and enhance total revenue.

Better Customer Satisfaction

Offering high-quality products at lower prices will make them accessible to more buyers. And optimized production processes ensure that orders are consistently filled on time, ensuring timely delivery and constant availability of products. 

Who doesn’t love high-quality, affordable and consistently accessible goods? Efficient production enhances the customer experience and will boost brand loyalty. 

Minimized Waste

Ensure you’re using labor, materials and energy in the most effective way possible to maximize efficiency and minimize waste. 

Streamlined processes mitigate unnecessary production, product defects and unexpected downtime, maximizing resource allocation and cutting costs.  

How to Calculate Productive Efficiency

Calculate productive efficiency by comparing your actual output rate (the total amount of goods you’re currently producing within a certain time frame) to the standard output rate (the target production level your operation should achieve with optimal conditions based on industry standards and/or internal goals). 

To get an actual measurement of productive efficiency, divide the actual output rate by the standard output rate and then multiply the result by 100. This percentage emphasizes how close your production is to operating at its full potential, with a higher percentage indicating greater efficiency in using available resources to achieve your production goals.

Example: 

• Actual output rate: 100 units / 15 hours = 6.66 units per hours
• Standard output rate: 100 units / 12 hours = 8.33 units per hour
• Productive efficiency = (6.66 / 8.33) x 100 = 79.95%

Production Possibility Frontier, Explained

The Production Possibility Frontier (PPF) is an economic graph that showcases the amount of production that can occur when you have scarce resources. This economic theory differs from the average cost curve, which shows the relationship between the average cost per unit of output and the level of output. Instead, PPF emphasizes all of the possible combinations of how much output of a product can be produced based on usage and availability of resources and how prioritizing one good can impact the production of another. 

The PPF curve showcases various production scenarios and types of efficiency, including:

• Point A (Inside the Curve): Resources are being underused, indicating inefficient usage of labor and/or machinery.
• Point B (On the Curve): Emphasizes efficient usage of resources, where the available resources are being used to maximize efficiency.
• Point C (On the Curve, Different Mix): Articulates a trade-off; creating more of one product requires less production of another due to limited resources.
• Point D (On the Curve, Extreme): Prioritizes the use of resources entirely on one good, willingly sacrificing the other.
• Point E (Outside the Curve): Production is unattainable with currently available resources but achievable with advancements like production technology upgrades or economic growth.

Productive Efficiency Use-Case Example

Let’s suppose you’re operating a small furniture manufacturing business. You notice that your production line is underperforming due to a bottleneck in the sanding process, so you decide to calculate your productive efficiency. It shows that you’re operating at just 65 percent of your potential output when compared to industry standards. 

Leveraging this data, deeper analysis dictates that the root cause of delays is outdated sanding machines. Now, you’ve upgraded your machinery and your efficiency rate jumps to an impressive 95 percent, meaning that you’re now producing 30 percent more furniture while maintaining the same workforce and materials. 

By performing the productive efficiency calculation, you’ve now lowered the total cost per unit, meaning you can price your products more competitively and increase your market share. 

How to Improve Productive Efficiency 

Making your workflows more efficient is essential for decreasing the cost of production, increasing revenue and mitigating unexpected downtime. Here are key ways to improve your maintenance workflows so that production functions as efficiently as possible:

Create a Maintenance Plan for Critical Equipment

Unplanned breakdowns can bring production to a screeching halt and leave your entire production line inoperable. A preventative maintenance strategy involves regular inspections and routine repairs and upgrades so that your machines are functioning at their full capacity and have longer lifespans.   

Provide Proper Technician Training 

Maintenance technicians need proper, up-to-date training to maintain equipment properly to prevent breakdowns and maximize efficiency. Skilled technicians can catch issues during inspections, perform repairs, replace parts and manage frequent system upgrades. 

Turn to the 5 Ms (Man, Machine, Material, Method, Measurement)

The 5 Ms of manufacturing provide a framework that leads to proper hiring, high-quality equipment, inventory management, detailed processes and maintenance analytics, which are all integral to maximizing efficiency in a production facility. 

Improve Documentation & Review Processes

Craft detailed documentation about all of your maintenance activities and your equipment’s historical maintenance data. Regularly review your processes to discover inefficiencies and make adjustments as needed to make production more efficient. You’ll also want to create relationships with vendors that provide you spare parts. Their impact on the supply chain can make or break your turnaround time — and not just in the short run.

Implement a CMMS

A computerized maintenance management system (CMMS) like Coast centralizes maintenance data into a simplified digital platform, streamlining scheduling, digitizing work orders and automatically pulling equipment data into a maintenance report for smarter decision-making. 

Leveraging digital scheduling and enhanced analytics are some of the most effective ways to maximize efficiency, limit downtime and boost production.

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