In a nutshell, efficiency is the amount of output your process delivers as a function of the input you use. We can explore this a little further and understand how to measure efficiency and identify the elements of it, as well as how you might go about increasing the efficiency of your processes.  

Overview: What is efficiency? 

Efficiency can be defined as a simple mathematical ratio of useful output/input. Your output can be a product or service. You can define your process by using a SIPOC diagram, where the I are your process inputs and the O your process outputs. Outputs can be either good or bad. You can use your inputs to produce a good product or a defective product. One is useful to the customer, while the other isn’t. 

Common process inputs are materials, people, equipment, money, information, methods, and environment. Sometimes these are referred to as the 6Ms, which are manpower, machinery, materials, mother nature, methods, and measurement. These inputs go through a transformation process that results in your output.

Efficiency is a measure of how well you take those inputs and produce useful outputs.

There are three logical possibilities: Produce more with the same input, produce more with less input, or produce the same with less input. One of the keys to reducing your input is to reduce or eliminate your waste. Waste is a consumer of inputs without any appreciable or positive impact on output. Evaluate the 8 wastes of lean to see where you can reduce the cost of your inputs.

An industry example of efficiency 

Process efficiency was a key goal for the vice president of manufacturing. Thanks to his Six Sigma training, he decided to calculate the Process Cycle Efficiency (PCE) of his production line. PCE is the ratio of the amount of value-added work in a process divided by the total time of the process. This is a common measure of process efficiency.  

He was able to improve his efficiency by 15% by analyzing the process and eliminating non- value-added work and waste associated with excess transportation, overproduction, and overprocessing. This allowed for more output and less input.

Frequently Asked Questions (FAQ) about efficiency

What is the definition of efficiency? 

Mathematically, it can be expressed as a ratio of total useful output divided by total input. 

What is the difference between efficiency and effectiveness? 

Efficiency can be thought of as the amount of output you can produce for some level of input. Effectiveness is how well the output achieves its desired objectives. You can be very efficient but not effective, and likewise, be very effective but not efficient. 

Is an efficient process the same as being a fast process? 

No. You can be fast but do it in an inefficient way by expediting wasteful activities and rushing through the process steps. Being efficient requires you to reduce the amount of input relative to your output. By eliminating waste, you may reduce the process lead time, which reduces the time to produce an output. This makes the process faster and more efficient at the same time.