What Is Production Efficiency?
Production efficiency is a metric for assessing how well your organization uses its resources – like equipment, raw materials, labor power, and time. A high level of production efficiency indicates that your plant is achieving its maximum possible throughput without wasting any resources. Low production efficiency means that your organization is wasting resources somewhere in the production process.
Production efficiency is calculated by comparing your operation’s actual production levels to its expected production levels. A low production efficiency score means that the plant is not operating at maximum capacity. This could indicate bottlenecks in the supply chain, inefficient processes in the manufacturing process, faulty maintenance practices, or outdated equipment.
Poor production efficiency wastes labor and materials. It also lowers profitability and may mean your business struggles to meet production demand. Fortunately, there are simple steps you can take to improve your plant’s production efficiency. By using the right tools and methodology, you can investigate – and correct – the root causes of this issue.
Production Efficiency vs. Productive Efficiency
Production efficiency refers to the efficient use of resources, but what is productive efficiency? These terms are often used interchangeably. Both terms refer to maximizing the use of resources so that the highest possible amount of goods are produced with the least possible amount of materials.
However, productive efficiency often describes the process of production itself, while production efficiency describes the broader process of maintaining a plant in optimal condition, so as to maximize its productivity. In general, though, the two terms are used in roughly the same way.
Whether you call it production efficiency or productive efficiency, you can take simple steps to improve your metrics. Typically, that process starts with data and with useful visualizations, like the productive possibility frontier curve.
What Is the Productive Possibility Frontier Curve?
The production possibility frontier (PPF) is a graphic representation of your plant’s maximum possible output levels when producing two different types of goods at the same time. The curve illustrates the opportunity cost of producing one good rather than another. Increasing production on one product lowers the outcome for the second product.
All of the points on the PPF curve represent maximum efficiency. If your production falls below the PPF curve, then you are underutilizing your resources. On the other hand, if your production goal is above the PPF curve, it is unrealistic and should be adjusted.
You can drill down and get a more detailed picture of your production efficiency by leveraging some key performance indicators (KPIs) including the production efficiency formula.
How to Calculate Production Efficiency
Key performance indicators can provide a detailed picture of your effectiveness of production, as assessed from several different angles.
Overall production efficiency (OPE) is calculated as a ratio of actual output to standard output. Here are the steps to calculating production efficiency:
Step One: Calculate Actual Output
Actual output is the number of units produced in a certain period of time. This refers to undamaged, high-quality units of goods.
Your computerized maintenance management system (CMMS) can track production automatically, making it easy to determine actual output.
Step Two: Find Standard (Expected) Output
Standard output is your organization’s production goal. Typically it’s determined by your past production, your overall capacity, and projected customer demand.
Step Three: Calculate Production Efficiency Using the Production Efficiency Formula
The production efficiency formula is:
Production efficiency = (Actual output / Standard output) x 100
For example, if a plant is expected to produce 1,000 bottles of beer in an hour but actually produces 750 bottles, the plant’s production efficiency would be:
(750 bottles / 1000 bottles) x 100 = 75
That means that the plant has a 75% production efficiency rate.
Other Useful Metrics for Assessing Productive Efficiency
The productive efficiency formula isn’t the only way to determine your plant’s overall efficiency. Here are some of the other essential KPIs every manufacturing company should measure:
Overall Equipment Effectiveness (OEE)
This metric measures your equipment availability, performance, and quality to evaluate its effectiveness. To calculate it, you’ll need the following data:
- Availability % = Run Time / Planned Production Time
- Performance % = (Ideal Cycle Time x Total Count) / Run Time
- Quality % = Good Count / Total Count
Once you have these numbers, multiply them to find your overall equipment effectiveness (OEE) score:
Availability % x Performance % x Quality % = OEE
Your OEE score is a standardized way to measure how your equipment and processes are functioning. These scores can give you an easy way to track production efficiency across shifts or longer periods of time and can ultimately indicate if processes need improvement.
OEE industry-standard group scores are:
- 100% – Perfect
- 85% – World Class
- 60% – Typical
- 40% – Low
If your OEE score is below 60%, this can indicate that your production efficiency needs improvement.
Asset Utilization
This KPI measures how effectively your organization is using its equipment. Assets are costly, require maintenance, and take up time and space. If your asset has a low utilization rate, it could indicate that you aren’t getting good value from your investment in that equipment.
To calculate asset utilization, you’ll need to know:
- The total number of hours the equipment was used in the period of time you’re measuring
- The total number of hours in the time period you’re measuring
Once you have these numbers, you can plug them into this formula to calculate your asset utilization percentage:
Number of hours the equipment was used / Total number of hours available = Asset utilization percentage
Low asset utilization rates could be caused by unplanned machine downtime, poor inventory management, inefficient machine maintenance practices, or other reasons.
What Is Efficient Production?
The term efficient production is often used interchangeably with production efficiency. However, there’s a slight difference between the two concepts.
Efficient production refers to the production process itself. It’s used to describe a production line that’s been carefully streamlined for maximum efficiency.
Production efficiency, on the other hand, refers to the metric used to gauge efficiency. It’s a type of key performance indicator that assesses how well your operation is making use of its resources, optimizing workflows, and maintaining critical assets so that your plant can produce more high-quality goods.
How to Improve Production Efficiency
The best ways to improve your production efficiency are to:
- Evaluate your workflows to look for inefficient processes, waste, and excess idling. Replace inefficient processes with streamlined, standardized workflows. You can build step-by-step guidelines into your work orders using a CMMS.
- Optimize spare parts inventory management. Waiting for spare parts or searching for them across multiple locations slows down your workflows and creates expensive downtime. Simplify your inventory management system with a CMMS.
- Conduct an asset criticality assessment so that you know which equipment is most important for your short- and long-term production goals. Asset criticality assessments help set maintenance priorities and improve resource allocation. Over time, they reduce downtime and improve production.
- Implement a proactive maintenance approach. Predictive maintenance is a data-driven strategy that leverages asset health data to stay ahead of serious machine faults. The process dramatically reduces downtime and improves asset management, boosting production efficiency.
- Set clear goals and benchmarks. Actionable, quantifiable targets are easier to reach than vague goals. Choose a few KPIs (like OEE and asset utilization) and track them to see how quickly your team can increase efficiency.
Case Studies: Successful Implementation of Production Efficiency Practices
Implementing a CMMS can have a significant impact on production efficiency.
When Klein Plastics, a plastic manufacturer of automotive parts, appliances, tools, and furniture, implemented eMaint CMMS, the company increased its OEE by 20%. Using eMaint enabled Klein Plastics to improve consistency and productivity across all shifts.
Bemis Company Inc., a global supplier of flexible packaging, had similar results when it implemented eMaint. Bemis reduced their equipment downtime from 20% to just 3% and also increased their technician utilization rate from 50% to 80%. And, perhaps most impressive of all, the company went from completing just 13% of work orders within 30 days to completing 73% within the same time span.
These are just a few examples of manufacturing companies that have seen a measurable impact on their production efficiency scores by implementing CMMS software. Other manufacturing companies have experienced additional benefits like reduced equipment downtime, improved cost savings, and increased performance metrics.
Reporting on Production Efficiency with a CMMS
Tracking and reporting on production efficiency can seem like a challenge, especially at the outset. Fortunately, CMMS software makes the whole process easy.
A CMMS is a powerful tool for making production efficient across your organization. The software acts as a central repository for your organization’s data across sources, enabling your team to see exactly where there are bottlenecks and inefficiencies in your workflows. Remote teams and managers can also access CMMS data from anywhere.
CMMS software allows you to monitor asset performance and address issues before they result in unplanned downtime. It simplifies preventive and scheduled maintenance by streamlining work orders, scheduling maintenance tasks, and ensuring a robust spare parts inventory so your techs have what they need when they need it.
Reports and dashboards allow asset performance monitoring, both on-site and remotely. And detailed maintenance records help you monitor how frequently your assets need repair and maintenance.
A quality CMMS ensures your assets are running optimally and provides you with the reporting and analytics you need to make decisions to enhance production efficiency.
Maintaining high production efficiency is key to your organization’s health. It ensures you’re producing quality products, maximizing resources, increasing productivity, and reducing costs. Leveraging a CMMS helps your organization increase OEE and asset utilization scores through effective data gathering, scheduling tools, reporting, and analytics.
eMaint CMMS impacts entire organizations and provides real-time data which allows companies to quickly find and correct flaws in their processes. Schedule a demo to see what eMaint can do for you.