Criteria for evaluating the efficiency of production

Evaluation of the efficiency of production is made on the basis of several criteria. Often used in the analysis of quantitative performance indicators. Tracking their dynamics allows to reveal the decrease in the efficiency of production and take measures to resolve this problem.

One of the key criteria is analyzed profitability, which reflects the efficiency of use of resources of the enterprise. In General, the profitability is the ratio between the revenue (gross income) and total costs. It can be expressed through indicators of net income (the ratio of sales to cost of sales), productivity (the ratio of sales to labor costs), and innovativeness (factor determining the competitiveness of production and the role of innovation in the production process).

The priority and the weight of each criterion depends on the type of enterprise, its market position, staffing, etc. the Task of management is to identify the key factors in the growth of production efficiency.

Most often, the solution to the problem of inefficient production boils down to three areas - optimization of production costs, innovation in manufacturing, and change management system.

Cost optimization

If the result of the analysis it was revealed that the company has a low competitive position in terms of profitability and the profitability of production, the first priority should be the development of measures to reduce costs. Their number may be, for example, steps of optimization of expenses for raw materials by finding more profitable commercial proposals from suppliers or changes of the ingredients and components of the production process.

Another option is the reduction of fixed costs (e.g., rents, logistics expenses) in the cost structure due to increased production volume. However, it can be done only in the presence of guaranteed markets.

Finally, the third option - the optimization of personnel. For example, by removing part of the services outsourced. This method is often used by companies in the financial and economic crisis, passing accounting and legal functions to outside contractors.

Modernization of production

In modern conditions the innovation is one of the key factors of competitiveness of the company. Because they allow to reduce production costs and offer a more quality product.

Modernization can be achieved through implementing modern software or a new, more productive equipment. So, the software can automate part of the business processes, either to improve internal communication between employees. In the conditions of constant increasing cost of energy is one of the most important factors of growth of efficiency of production may be the introduction of energy-efficient conservation technologies.

The change management system

Another popular method is to use developed and proven management systems. Among them the greatest distribution was gained model of the quality management System (QMS) based on ISO 9001 requirements. It is designed to improve the performance and competitiveness of the organization.