Entrepreneurship

3 Strategies for Improving Business Productivity

Technological advances, customer expectations and especially globalization have increased the need for higher productivity.

In a formal sense, productivity refers to how well an organization converts input (such as labour, materials, machines and capital) into goods and services or output. But today it is no longer limited to measuring ratios of inputs and outputs. Basically, increasing productivity just means working smarter. You can look for opportunities to improve efficiency just about anywhere in your company. Here are some key areas to consider.

Choosing the right equipment can help you reduce the risk of costly errors and improve the way you do business. Before you buy any equipment, be sure you are thoroughly familiar with the current and future needs of your business. Ask yourself:

    Is the current equipment giving you good results?

    Do you need to replace several pieces of equipment with more efficient machinery?

    Can the equipment you are replacing be used elsewhere in your company?

    Will its acquisition be a long-term investment?

    Would it be better to rent equipment?

    Will you use all the features, or are they simply gadgets?

    Have you considered the costs of training employees on new equipment?

  1. Use technology to improve your operations

Web-based technologies enable you to dramatically improve how you run your business. You’re a good candidate if you’re looking to increase market share, aggressively pursue cost reduction or greater efficiency, or prevent customer-service problems. Production management tools range from spreadsheets to off-the-shelf software solutions or business-specific, custom-developed applications. Here are some examples:

    E-purchasing (online buying) is an alternative vehicle you can use to get your materials from suppliers. This technology enables you to get more competitive pricing as you are no longer limited to local merchants. Generally, the cost of transaction processing is reduced and there is less paperwork.

    Smart inventory control systems can help you reduce inventory levels, improve profitability and speed up customer response time. Online and order management systems integrate inventory information with your organization’s purchasing, accounting and e-business systems, so you can easily track order status and the movement of inventory within your company. You will also be able to identify peak and low periods, allowing you to adjust supply purchases and better manage working capital.

It also helps to keep abreast of technological developments and ensure that your business is taking advantage of the latest innovations to improve productivity. You can use the web or attend trade shows to stay on top of new technology. Trade shows are a great resource as software vendors often make their information available to attendees. You can also network with other organizations in your industry that may have already tried and tested new innovations. Finding out what your competitors are doing can narrow your search down for solutions that are specific to your industry.

  1. Review your existing setup

Look at your processes from the point of view of a potential investor. Keep in mind the overall objective and vision of the business, and ensure the processes meet those goals and add value. Draw an accurate map of each process in your material and information flow. By doing this, you can better understand the links between various elements of your production, and you will be better equipped to identify and eliminate waste throughout your company.

  1. Implement a continuous improvement approach

Improving productivity is an ongoing activity. Here are some suggestions for setting up a continuous improvement plan:

    Start by assessing the competition and the best practices in your industry, also known as benchmarking. But don’t copy plans of other businesses—develop one that works for your company.

    Get external help to assess your business weaknesses and strengths. This gives you an objective viewpoint from which you can improve productivity and redesign processes.

        Take a step-by-step approach rather than tackling everything at once. Focusing on a few priorities will enable you to see results faster.

        Assign specific teams to specific problems or processes for redesign.

        Put a formal suggestion system in place for employees.

        Look for breakthrough accomplishments. Small improvements can transform into major increases in productivity.

        Measure your results. Ideally, this should be done by an objective outside party.

Outsourcing can be a cost-effective way to focus your efforts on what you do best as a business and make productivity gains. But whether you choose to outsource logistics, accounting, payroll, public relations or IT, it’s vital to first grasp what drives costs and profits in your company. Before you get started, it’s important to assess your current production and costs such as location, shipment and client proximity. You need to know exactly which core functions increase revenues and which noncore functions increase your expenses and affect your productivity.

Many entrepreneurs don’t tap into outsourcing opportunities because they fear they might lose control of their business or are concerned about expenses. And although these may be valid concerns, outsourcing works if you take the right steps.

Strategic alliances allow you to grow your organization without necessarily expanding its size and incurring more costs. For example, the right alliance could improve your production processes by increasing your economies of scale and broadening your distribution market. An alliance could help your company negotiate better supply deals, share costs such as advertising or take advantage of costly technology. Increasing your productivity could also mean getting into new markets with new products and services, extending your market reach or accelerating research and development by sharing costs and resources.

Source: Business Development Bank of Canada

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