ERP systems solve three of the major production or manufacturing efficiency challenges for businesses. That arise due to lack of real-time visibility into raw materials, scheduling and collaboration between their often disconnected legacy systems. Where one business system like sales software is not synced with the inventory management system in real-time. It often requires considerable data or report reconciliation effort to make the reports meaningful and ready for decision making.
This negatively impacts the production or manufacturing efficiency, increases operational costs, causes delays in delivery, and hurts customer experience.
ERP systems like Dynamics 365 Business Central improves manufacturing process efficiency, where a single system seamlessly connects all of your business units such as sales, manufacturing operations etc. and provides real-time visibility and connectivity, leading to operational efficiency and business growth.
To achieve production efficiency, businesses today need real-time insights to stay competitive, which requires that all business units work in coordination and everyone involved in managing these systems has real-time visibility, for efficient and reliable decision making supported by your business data rather than gut feeling.
Trustfort provides comprehensive manufacturing efficiency consultation, send us your inquiry and our manufacturing efficiency consultant will get back to you.
Key Takeaways
- What is production efficiency?
- How do we calculate it?
- How can we increase it?
What is production efficiency?
Production efficiency is the ability of a business to maximize its unit production using the available resources. A business is production efficient if it uses less resources such as raw materials and labor to produce same number of units as its competitors.
How do we calculate production efficiency?
A very popular saying goes by “What you can not measure, you can not improve”. The same is true for measuring production efficiency.
Production Efficiency, a key KPI has a formula: ( Actual Output / Standard Output ) x 100.
How we calculate these two values i-e actual output and standard output varies with business KPIs, However a common approach is to use number of units produced per month as the actual output and number from best production month or industry standard as standard output.
For example, a business has a standard value(their best production month) of 500 units per month, and this month they produce 400 units, then their production efficiency will be calculated as 400/500 x 100 = 80%
They are operating at 80% of their capacity, which itself calls for an action to self-reflect.
How do we increase production efficiency?
Once we have measured the production efficiency, its time to work towards improving it, these are the 4 major areas contributing significantly to improve production efficiency. They include
1. Standardize Business Processes
Standardizing business processes can significantly improve production or manufacturing efficiency. Standardizing makes your day-to-day activities reliable, compliant, and safe. It can be as simple as storing or retrieving products from your warehouse. If a business does not manage storage efficiently and leaves it to personal choices. It can cause batch of old products to wait on shelves and batch of new products to get shipped.
ERP systems come pre-packaged with efficient manufacturing processes based on industry best practices.
2. Identify & remove bottlenecks
Equipment failures and supply chain issues are other areas that businesses struggle, mostly these issues arise from poor maintenance and planning. These bottlenecks not only cause delays in product delivery but also result in increased cost of production, ultimately affecting production efficiency.
ERP systems provide your real-time visibility and collaboration. That helps you track and identify bottlenecks before they get worse.
3. Minimize Waste
Defective units not only waste production capacity and time, but also result in energy and raw material waste. Approaches like Six Sigma and Kaizen are promising approaches to reduce product defects.
4. Use ERP Sofware
Using ERP system like Microsoft Dynamics 365 business central, helps you achieve manufacturing efficiency. It comes pre-packaged with processes based on best industry practices for effective efficient and productive operations, real-time visibility, best of best-of-kind security. As It is a cloud-based erp software. It uses a unified source to connect all your business units, so rather than spending time generating reports for inventory visibility and spending time reconciling reports by different business units, It provides realtime visibility to enable you make smarter decisions.
Copilot integration helps you learn from mistakes, its your organization’s brain that never forgets and improves as you go, and by using conversational AI helps you quickly retrieve what you need.
In order to truly achieve manufacturing process efficiency, you need an ERP system, you can read our article on what is an erp system and why we need one.
Trustfort is an experienced ERP consulting service provider in munich, Germany with a decade of experience in Microsoft Business Central ERP implementation. We help you make most from your ERP implementation in areas such as manufacturing, supply chain management, retail, warehouse management, e-commerce platforms like shopify and integrating AI tools like CoPilot.
Even if you are not based in Germany, we have got you covered. See how we are building trust across time zones and making remote work really work.
ERP Systems are promising but complex, We’d love to help simplify your existing or new ERP journey with expert Business Central consulting tailored to your business needs. Contact Us Now!