Whatever industry you operate in, maximizing your efficiency is critical. But nowhere is this more the case than in the world of manufacturing. Cutting-edge manufacturing firms are always on the lookout for new ways to improve their efficiency and gain a competitive edge that can boost their bottom line.  

But what is manufacturing efficiency and how can you improve it in your business? 

What is manufacturing efficiency? 

Very simply, you achieve manufacturing efficiency when you create products with the lowest possible total cost. It’s all about creating as much as you can with the resources you have, while reducing the time, materials, and energy you spend.  

Productivity and efficiency are often used interchangeably in many industries, but they are not the same thing. While manufacturing productivity is focused on increasing the quantity of the products you deliver, manufacturing efficiency is all about increasing the effectiveness and quality of the work you do.   

Manufacturing efficiency, which some people call manufacturing operational efficiency, is usually expressed as a percentage, with 100% representing maximum efficiency, where you produce quality goods at the lowest possible cost. In practice, however, most manufacturing firms typically operate at around 60-80%, with issues such as defective goods and poor-quality raw materials pulling the numbers down. 

Why is efficiency important in manufacturing? 

Unlike productivity, manufacturing efficiency considers much more than just input and output by numbers. Instead, it focuses on the bigger picture and considers every aspect of your manufacturing process, including everything from ensuring quality and effectiveness of work to minimizing risk and reducing total losses. 

You can only be as efficient as your machinery, equipment, and resources allow you to be, but as long as your manufacturing operational efficiency is better than your rivals’, you have an edge.

However, achieving manufacturing efficiency is a process of continuous improvement. You must also capitalize on new technology as it emerges to allow you to make faster and better decisions to keep ahead of what is accepted as the “standard” within your industry.    

Focusing on efficiency is important for manufacturing companies, but it shouldn’t come at the cost of productivity. You could be the most efficient firm in your industry, but if you can’t meet customer demand, you lose both business and revenue. Instead, you want to find a steady balance between efficiency and productivity to optimize your output while minimizing your losses. 

How do you calculate manufacturing efficiency? 

At its most basic level, you can calculate your manufacturing efficiency by dividing the standard output by your actual output and expressing that as a percentage. 

Actual output

You can calculate your actual output by dividing your total output by your total input. As an example: 

  • You create 100 products for $500 
  • The input is $500 worth of costs 
  • The output is 100 products 
  • The actual output is $500 of costs / 100 products = $5 per product  



Standard output

You can get a figure for standard output by looking at your own historical data, using an industry benchmark, or using a competitor’s efficiency figure that you might find in a report. 

If you find that a competitor can produce 120 products for $500, then your competitor’s actual output is $500 of costs / 120 products = $4.17 per product. Therefore, your standard output is $5 per product / $4.17 per product = 1.1999 

That figure suggests that it costs you roughly 20% (19.9%) more to produce a single product than your competitor. That makes you nearly 20% less efficient.   

What are examples of manufacturing efficiency KPIs? 

There are several different KPIs that can help you better understand where you are in your manufacturing efficiency journey and the steps you can take to make improvements. 

Overall equipment effectiveness

This commonly used efficiency measure helps you determine how much of an end product you make versus how much you could make. To do that, it measures how available your equipment is (availability), how it performs (performance), and the kind of quality it produces (quality). It is an excellent metric for identifying losses, benchmarking progress, and eliminating waste.  

You can calculate it very simply by multiplying the three OEE factors: 

Availability X performance rate X quality rate = OEE 

Material yield

Your material yield is the ratio of how many raw materials you should use compared to the amount of material you do use. It shows you how efficient you are at converting your raw materials into finished products.  

Materials you should use / materials you do use = material yield 

This simple KPI can be more complicated if you use multiple raw materials to make a product, although having a “bill of materials” or “ingredients list” close at hand can make the calculation a lot easier.  

Labor Efficiency 

Labor efficiency is a measure of the optimum output versus the actual output to produce a certain number of finished products. It can be useful if you have an under-resourced production process and want to know how your efficiency has been affected by the reduction in your workforce. 

Actual output / optimum output = labor efficiency  

This KPI only applies where your resource level is the primary factor in your output. If your resource level is not the primary factor in your output, then use OEE instead.   

How can you improve your manufacturing efficiency? 

Improving the efficiency of your manufacturing process is essential to keep you competitive. Even if your manufacturing processes are more efficient than the competition now, you should still be on the lookout for new technology, software, and machinery to take your production lines to the next level. You also hire resources who can help you look at things differently. 

Here are some of the steps that you can take to improve your manufacturing efficiency.  

Identify and eliminate waste 

Waste is inevitable in some manufacturing processes, but you should still do everything you can to reduce it to its lowest level. Waste, in this context, is a broad term that can refer to raw materials, man-hours, energy, and time. However, the biggest form of waste for most manufacturers is their materials. 

There are several steps that you can take to reduce material wastage over the short and longer term. First, you should look at the processes which create waste in your business and optimize them to bring waste levels down to a more acceptable level. You can also explore ways to recycle more of the waste you create by converting it into new materials or selling it to other businesses.  

Over the longer term, you should consider the process changes you can make and operations you can improve to produce less waste in the first instance. This could be by investing in new assets and equipment or designing new parts that improve your material yield.  

Improve production line efficiency  

Your production line is your bread and butter, so when it comes to improving your manufacturing operational efficiency, it makes sense to start here. Measuring the throughput of your production lines, which tells you how many units you produce over a specific period, is one of the easiest ways to identify areas where you can improve your efficiency. 

If your throughput is low on specific assets and equipment, you need to ask yourself why. It could be that your operators need more training or that it’s time to upgrade.  

Standardize work 

Everyone has their own way of doing things, but when it comes to manufacturing, there’s no room for individuality. Standardizing even the simplest of tasks can help you maximize efficiency by reducing unscheduled downtime and increasing overall product quality. 

A good place to start is by creating a checklist for each workspace and making sure that everyone in that workspace follows it. If they don’t, you can make them accountable and provide further training where necessary.   

Engage and train your employees 

Your employees should be the first people you go to if your process is plagued by downtime. They do the job on a day-to-day basis, so they should have plenty of ideas about how to make the process more efficient. These small opportunities for improvement can add up to big efficiency gains, so make sure they know how to make any suggestions or complaints.  

Feedback from your employees may identify the need for additional training. Providing practical, hands-on training in the manufacturing process and the latest technology can help you make sure every employee has the skills to complete their tasks in the most efficient way and stand in for each other to reduce unscheduled downtime.    

Maintain equipment before it breaks 

Regular inspections and maintenance of your assets and equipment help you identify issues and repair them before they fail. By implementing a program of preventive maintenance, you give your assets the care they need while they’re still running to actively reduce the likelihood of failures, costly repairs, and unscheduled downtime.  

How can maintenance software for manufacturing plants help? 

To achieve manufacturing efficiency, you need to have complete visibility of every aspect of your maintenance operations, including assets, people, and parts. That’s exactly what computerized maintenance management software (CMMS) can do.  


Hippo CMMS® lets you see the whole manufacturing operational efficiency picture. You can capture real-time data on the go, centralize that data so it’s safe and searchable, and manage your assets, resources, and materials all from one place.  

When you rely on old-fashioned paper-based approaches or spreadsheets, your efficiency suffers before your manufacturing process has even begun. But paper and spreadsheets do more than just slow you down; they also trip you up with unreliable and out-of-date data.  

Hippo takes all of your critical efficiency data and keeps it safe in a cloud-based database that your team can access from any internet-connected device. It also puts you in control with streamlined work order management, PM scheduling, and real-time inventory control. Those are all of the tools you need to build reliable manufacturing lines that maximize efficiency without compromising safety.  

What’s next?  

Hippo’s here to help you get the solution that works best for you, including answering your questions about maintenance management software, helping you book a live software demo, or even setting you up with a free trial.

Executive summary 

Manufacturing efficiency is achieved when you create products with the lowest possible total cost. It’s all about creating as much as you can with the resources that you have while reducing the time, materials, and energy you waste. Efficiency is important in manufacturing because it takes into account much more than just input and output by numbers, as is the case with productivity. Instead, it focuses on the bigger picture and considers every aspect of your manufacturing process.  

At its most basic level, you can calculate manufacturing efficiency by dividing the standard output by your actual output and expressing that as a percentage. However, there are also other KPIs, including OEE, material yield, and labor efficiency, that can give you more insight into your manufacturing efficiency.  

Improving the efficiency of your manufacturing processes is essential to keep you competitive and in business. You can improve your efficiency by eliminating waste, improving product line efficiency, standardizing work, engaging and training your employees, and maintaining equipment before it breaks. Hippo is a simple, powerful CMMS solution that lets you see the whole manufacturing operational efficiency picture and provides you with all of the tools you need to build reliable manufacturing lines that maximize efficiency without compromising safety. 

About The Author

Jonathan Davis

Jonathan has been covering asset management, maintenance software, and SaaS solutions since joining Hippo CMMS. Prior to that, he wrote for textbooks and video games.
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