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Operations and efficiency

Operational efficiency is one of the great objectives of companies in all sectors to increase their competitiveness and success in the market. Today it is difficult not to have heard of this term, accompanied by numerous technologies and examples. But before we get into the complexity of operational efficiency, it's important to understand what this term means. What objective do we pursue when we seek operational efficiency? What factors influence it, and how can we measure it? What is the role of technologies such as Artificial Intelligence in operational efficiency?

What is operational efficiency?

Operational efficiency is an organization's ability to improve all the processes that support producing its final products or services while maintaining their necessary quality.

At a financial level, it is the ratio between the input required to keep the organization running and the output these inputs provide. In other words, the input refers to everything that is contributed to the business so it can operate, such as material costs or those derived from employees. Meanwhile, the output refers to what is earned or obtained from the operation. For example, we can gain improvements in development times, an increase in the quality of products and services, an increase in profit or even the acquisition and loyalty of customers. The relationship between inputs and outputs will ultimately define the efficiency level.

Typically, operational efficiency answers one of two questions:

  • Can we produce the same level of our product or service while reducing its cost?
  • And if we maintain the cost but improve the processes, can we also increase the quality and, therefore, the price of the product or service?

Once we know the basic definition of operational efficiency, we can analyze what factors are involved and how we can measure them.

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Factors that define process improvement

To improve operational efficiency, companies must reduce the cost of their operations, eliminating redundant or useless processes. This is achieved by focusing on 4 main aspects:

  • More efficient use of resources. It is important to eliminate all kinds of waste in areas related to production and operations. For example, it is necessary to avoid misallocated talent, overproduction, functionalities that do not add value to the product or service, and waiting times due to poor planning.
  • Improved organization of the production environment. Ensuring that teams and employees work efficiently and obtain the maximum value from human capital is necessary.
  • Verify that the product or service distribution is being carried out efficiently. This must be done both at the level of physical deliveries and in the digital world.
  • Proper inventory management: To do this, the organization must ensure enough is produced to meet customer demand while reducing the excess as much as possible. Something that will require a great predictive capacity.

Indicators for measuring operational efficiency

To measure operational efficiency, the indicators related to input and output must be considered, elements that we already anticipated at the beginning of the definition of efficiency. Although these may vary by industry, in general, we can group them into the following:


  • Operating expenses correspond to the general costs for the business to be running.
  • Capital expenditures are the money the business spends to buy, maintain, or improve assets such as buildings, vehicles, or equipment.
  • Human resources, including not only employees but also key partners.


  • Company income.
  • Number of customers in a certain period.
  • Product or service quality.
  • Business growth figures.
  • Customer satisfaction level.

Once we know the main factors influencing operational efficiency, the most important question arises. How to improve it?


How can companies increase it?

The improvement of operational efficiency can be carried out from different angles. Different strategies can be applied to meet the objectives set, but generally, companies focus on changing inputs and outputs. To do this, they can reduce the inputs to get the same outputs, increase the outputs for the same number of inputs, modify the number of inputs, or increase both the inputs and the outputs (increasing the outputs to a greater extent). In other words, improving operational efficiency is based on modifying the input-output relationship in the organization.

But, in addition to these changes in inputs and outputs, it will be very important to control what is happening to achieve this increase or reduction in inputs and outputs and to know what is being done right or wrong. For this, companies must carry out controls such as:

  • Performance monitoring through control panels or dashboards.
  • We have already commented on the identification and minimization of the waste in previous sections.
  • Comparison with the competition through benchmark analysis.

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