Business efficiency is how much output a business produces for a unit of input. It is the opposite of waste. Efficiency measures how well a business converts inputs such as capital, labor and materials into outputs like revenue, products and services. The following are common types of business efficiency.
Financial Efficiency The financial efficiency of a business can be measured as expenses as a percentage of revenue. Labor productivity is typically measured as the output of employees in an hour of work. This is greatly influenced by technology tools, automation and equipment that is available to workers.
The energy required to produce products, services and operate the business. Relevant to cost and sustainability goals. In the latter case, the energy consumption of products across their entire lifecycle may be calculated.
Eco-efficiencyCalculating the total impact of the business on the environment. For example, environmental cost as a percentage of revenue.
The efficiency of the core business processes of an organization such as manufacturing or service delivery processes. Efficiency efforts are often focused on operations as this is where most costs occur.
Process EfficiencyMeasuring the efficiency of a particular process. For example, the cost and speed of delivering a package.
Return on InvestmentThe efficiency of business investments can be modeled as return on investment or net present value. An investment is often a current business cost that results in future revenue. As such, investments may reduce current efficiency and improve future efficiency.
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