The Efficiency Conundrum

Ah yes, efficiency. If there was ever a word more abused I’d like to know about it. I don’t think there is. OK, maybe utilization. But efficiency is really butchered. So let’s dig into the efficiency conundrum a bit this evening.

Efficiency

There are many formal definitions for efficiency. Just Google it if you don’t believe me. Here is how I like to explain it.

We are truly efficient when meeting the exact requirements of our customer while using the minimum amount of resources.

Apparent Efficiency

Next we come to what Taiichi Ohno called apparent efficiency.

Imagine an assembly line with 10 workers is able to produce 100 units per day. After some good old fashioned kaizen the team of 10 lads increases the daily output to 120 units per day. This is great, right? I mean they increased efficiency by 20%.

Mr. Ohno went on to explain that this is only a good thing if the customer is willing to buy this extra 20%. If they are not willing to buy the extra units all we have done is create the waste of overproduction. It’s nothing more than apparent efficiency.

True Efficiency

In this example, assuming the customer wants to keep buying 100 units per day, the only way to increase the true efficiency of the system is to figure out how to produce these 100 units with less than 10 people, or perhaps with less material (e.g. WIP).

Let’s assume the team is able to kaizen 2 people off the line. These folks can then be moved to another area that has to use overtime in order to meet customer demand.

Or perhaps you take the 2 strongest people from the line and form a RIG team (rapid improvement group) allowing them to go to another area to kick start some kaizen there.

Summary

So anytime we speak about efficiency we must be careful to not mistake true efficiency with apparent efficiency. One is naughty and one is nice. Let’s all do our best to not be naughty, OK?

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1 Comment

  1. mike

    April 16, 2008 - 2:26 pm

    You could make apparent efficiency nice by giving the workers 20% less hours for the same pay 🙂 🙂

    Also sometimes its possible to lower the price sell more and make a bit of money on the efficiency gain without moving people.