All businesses and organizations aim to have the most preferred and successful product or service. Their primary focus is also on-time project completion or delivery and attaining top quality standards. But in practical scenarios, this benchmark remains difficult to achieve unless the business strives to improve its operational efficiency. Organizations need to gain operational efficiency so that they can optimize their performance and productivity and avoid waste of time, effort, and costs. Operational efficiency is important to save time, and resources, and improve your systems.
But the main question is how do you find the causes of extra or wasted effort or the reasons for projects to fail? In this article, let’s first understand what operational efficiency is, its related terms, and how you can improve your organization’s operational efficiency and capacity planning and capacity management process by using resource management software.
Defining Operational Efficiency
Operational efficiency is a business’s ability to deliver good products and services consistently with minimum resources. In simpler words, operational efficiency refers to the connection between a company’s input and output. Attaining improved operational efficiency can be done only when you streamline your processes and projects and reduce or eliminate waste. The aim here is to enhance your processes and systems so that you can get an optimal output without going down on the quality of your offerings.
Calculating Operational Efficiency for your business
Operational efficiency is the ratio between the inputs and outputs of your business. The input here means employees, time, effort, other resources, and finances. Whereas output refers to the revenue, innovations, addition of customers, business expansion, new market opportunities, and profits.
The formula to estimate operational efficiency is: Operating expenses / Total revenue
For example, if your company had revenue of $100,000 in the past year. You incurred an operating expense of about $ 20,000 to earn this revenue. So, your operational efficiency would be 0.2. Your operational efficiency, sustainability, productivity, and cost-effectiveness go up as the rate goes down.
Resource Utilization to Gauge Operational Efficiency
If your organization delivers professional services and projects, then the chance is that your COGS will be leaning towards resource costs such as salaries of the employees aligned on those projects. Hence, it will always be beneficial to maximize or optimize how you utilize these resources. This will also enable your team members to complete more work in the same time or effort. Calculating and tracking resource utilization enables you to monitor the time your resources spend in completing their tasks. You can calculate resource utilization for all the work delivered, for your entire team, an individual, or only for billable work. However, overall resource utilization includes both billable and non-billable work such as internal projects, meetings, training, workshops, or conferences. This metric is also important to gauge operational efficiency and is expressed in percentage, which depicts the total time for which the resources are being productive.
Overall resource utilization = (Total registered hours / Total hours available) x 100
Profitability to Gauge Operational Efficiency
Calculating and tracking profitability is also a good measure of operational efficiency. In a project-based setup, usually, your processes will be standardized and the projection methods that are being used are precise. Therefore, if projects are performed as per the plan, then your organization should earn a fair level of profitability across various projects. However, in case there is a significant level of variation in the profitability of projects, then there could be some underlying issues with operational efficiency. To draw a comparison between the profitability of various projects, calculate the profit margin for all the projects. The formula is a simple sum:
(Total project cost – total expenses) / Total project cost x 100
Benefits of Improving your Operational Efficiency
Doing some simple amendments to the way your organization or business functions can bring many advantages. For example:
- Higher profits and revenue
- Reduced costs
- Lower lead-times
- Elimination of redundant or non-value-added tasks and errors
- Motivated employees
- Satisfied and happy clients
- Better clarity of key goals of the business
- Market adaptability
- A better understanding of business processes
- Capability for risk mitigation and meet any challenges
How can you Enhance your Operational Efficiency?
Improving operational efficiency and realizing an organization-wide change requires united efforts from the company’s management, employees, and all teams. The following are some ways that can help you achieve higher operational efficiency and streamline your business functions.
- Automation of processes and tasks
One of the best and sure-shot solutions to enhance your business’ operational efficiency and capacity management is automation. Automating your manual processes can help you to eliminate errors, do away with manual and administrative tasks, and increase your processing speed. This way your team members free up some of their bandwidth and will have more time at hand for strategic tasks and innovation. A resource management tool such as eResource Scheduler helps streamline a lot of manual, repetitive, and process-intensive tasks. Such a tool not only helps with capacity planning and management but also helps to improve your resource utilization, which further leads to better profitability and operational efficiency.
- Better time management
Better managed time will always translate to more productivity, better revenues, and higher operational efficiency. In a multi-project environment, employees are usually multi-tasking and hard-pressed for time. This also makes it difficult for project managers to track what the team members are working on and monitor the utilization. However, a resource management tool such as eResource Scheduler not only helps the employees in time-tracking and management but also helps project managers to track resource utilization and availability. This helps them in efficient capacity planning and finally, enhances operational efficiency.
- Eliminating waste
Waste elimination is yet another approach that helps in improving a business’ operational efficiency. Automation is the first step in doing this. You can do so by mapping your workflow first. Then, identify each step, procedure or process, and stakeholders. After you have finalized the checklist, find out what all actions or steps can add value to the outcome. With all this information in front of you, you can have better clarity of the end-to-end process, any challenges that can be a probability, and tasks that may not add any value to the result. Thus, you can easily eliminate those activities and save your money, effort, and time.
- Collaborating with other verticals or cross-functionally
Inter-departmental collaboration is another important step to improving operational efficiency. Working in silos can be very detrimental to the organization and collaboration between various teams and verticals is very important for distributed teams and multinational organizations spread across geographies. Seamless collaboration between departments and teams helps in keeping all the stakeholders on the same page. You can maintain a shared vision or goal and sharing of information, experience, and knowledge becomes easier. It also improves inter-team bonding and provides an opportunity to get honest feedback.
- Improve your data flows
Importance of data in achieving operational efficiency cannot be undermined. Imagine working with unclear or incomplete data. Wouldn’t it be a challenge to design any operational strategies with such data? Using spreadsheets to maintain important data is outdated and poses a lot of challenges. In contrast, if you improve your data flows and implement a project or resource management tool to maintain all your data about resources, projects, etc, then the quality and accessibility of your data will really go up. A tool such as eResource Scheduler provides you with real-time information that any team member can access at any time and from anywhere. Thus, a centralized, AI-enabled, and automated solution like this makes sharing, reviewing, and approving data much faster and simpler.
- Efficient resource utilization
Working to improve and optimize your resource utilization always results in better operational efficiency of a business. Organizations rely on people, time, money, effort, and material inputs. Efficiently using your human and material resources helps to enhance operational efficiency and also eliminate waste. A resource management tool such as eResource Scheduler helps in finding the best-fit person for a job as per his or her skill set, expertise, and interest. It also helps to find the availability of resources throughout your organization in a few clicks and check if a person has bandwidth for a task or not. This way, you can ensure that only a few employees are not over-burdened or over-utilized, while others are under-utilized. Such a tool helps in balanced workload distribution and improving productivity and resource utilization of employees, which directly leads to higher operational efficiency.
- Using tools powered by analytics and reporting capabilities
You may have the best approaches and plans in place, but if you do not analyze the performance of your resources, then you cannot go far. To enhance your operational efficiency, you should track how your new strategies are working. Monitoring the changes in results helps to break it down into some key actionable tasks. Customizable and AI-enabled reporting and an analytical tool such as eResource Scheduler provides detailed reports, visual dashboards, and analytics that offer deep insights into the likely bottlenecks and tell you where you can do some risk mitigation on time. These kinds of data and analytics become a backbone in enhancing your productivity, utilization, and operational efficiency.
Enhancing your Operational Efficiency with eResource Scheduler – A Leading Resource Management Tool
If you are seeking a solution to find the right methodology and strategy to enhance your operational efficiency, Enbraun’s flagship product, eResource Scheduler is your best bet. Not only does it consolidate all the important and useful data in one online, central platform, but it also offers clear visibility to everyone involved and flags any challenges or conflicting priorities. Visual dashboards and comprehensive reports provide you with in-depth insights and precise data needed to measure your success. It also provides clarity on resource scheduling, allocation, resource planning and management, utilization, time management, and a lot more. Implementing this top-rated cloud-based capacity management tool will help track the team’s capacity, workload, and profitability.
So, discover the simplest way to optimize your team’s capacity and enhance your operational efficiency by implementing eResource Scheduler. Sign up to get a free trial of this capacity planning tool today to know more about it.