Operational Efficiency: Strategies, Challenges, and Real-World Examples

Running a business is a lot like running a household. You have to make sure you're not wasting time, money, or energy. Whether it’s a factory, a retail store, or a tech startup, every organization wants to do more with less. That’s where operational efficiency comes in.

When a business is operationally efficient, it uses fewer resources like time, money, and staff effort to get the same or better results. This isn’t just about cutting costs. It’s about working smarter, not harder.

In this blog, we will explain what operational efficiency is, why it matters, and how businesses can take simple steps toward improving it. We’ll also look at how efficiency in operations management plays a key role in everyday business decisions.

What is Operational Efficiency?

Operational efficiency means getting the most work done with the least amount of waste. This includes saving time, reducing costs, and using resources wisely.

In simple terms, it’s doing things in a better way so a business runs smoothly and profitably.

Think of it like this:

• A pizza shop that takes 10 minutes instead of 20 to prepare an order without sacrificing quality is more operationally efficient.
• An online clothing store that automates its inventory system so it doesn’t oversell or run out of stock is improving its efficiency.

What it’s not:

• It’s not just about speed
• It’s not about cutting corners
• It’s not only about saving money

Efficiency means getting better at how things are done without lowering quality.

Why operational efficiency matters in business

Operational efficiency affects nearly every part of a business. When a company runs efficiently, it avoids waste, saves money, and delivers better service to customers. It also helps employees work without unnecessary stress, making the workplace more productive and less tiring. In simple terms, improving operational efficiency means doing things in a smarter way that benefits both the business and the people involved. 

For example, in 2023, Domino’s Pizza used AI to improve how it scheduled deliveries. This reduced delivery times, cut down on fuel use, and made the process more reliable without sacrificing service. This shows how even one change can lead to better results across the board. Customers are more likely to return when they get fast, consistent service. 

How Third Parties Impact Operational Efficiency

Many businesses rely on third parties like suppliers, delivery services, software vendors, or outsourced support teams to get their work done. While these outside partners can help a company grow, they can also affect how efficient its operations are.

When a third party works well, everything runs smoothly. But when they make mistakes, are slow to respond, or use outdated systems, it can cause delays, errors, and extra costs. This directly impacts operational efficiency.

Here’s how third parties can influence efficiency in business operations:

• Delays in supply chains can slow down production or lead to missed deadlines
• Poor communication can create confusion or repeated work
• Inconsistent quality can lead to product returns or customer complaints
• Unreliable tech support can cause downtime if systems crash

Read: Fourth-Party Risk Management: Key Strategies That Work

Key Metrics to Measure Operational Efficiency

Measuring operational efficiency helps businesses understand how well they use their resources and where they can improve. Here are some common metrics companies track:

• Cost per unit: This shows how much it costs to produce one item or deliver one service. Lower costs usually mean better efficiency.
• Cycle time: The total time it takes to complete a task or process from start to finish. Shorter cycle times mean faster work.
• Resource utilization: This measures how well a company uses its resources, like staff, machines, or materials. Higher utilization means less waste.
• Error rate: The number of mistakes or defects in products or services. Fewer errors mean smoother operations and less rework.
• Employee productivity: How much work each employee completes in a given time. Higher productivity often points to better efficiency.
• Downtime: The amount of time machines or systems are not working. Less downtime means better use of equipment and fewer delays.

Tracking these metrics regularly helps businesses spot problems early and make changes that improve efficiency over time.

Examples of Operational Efficiency 

Just as we discussed so far, operational efficiency is about making work faster, cheaper, and better. Many companies have found new ways to improve how they operate by using technology, changing processes, or managing resources smarter.

The following examples show how different businesses in healthcare, banking, manufacturing, and insurance have boosted their efficiency to save time and cut costs:

1. Healthcare: AI-Driven Directory Management

Atlas Systems partnered with a large U.S. healthcare organization to improve the accuracy of its provider directories, an essential component for patient care and compliance. By applying AI-based solutions, Atlas automated and improved the validation process, significantly reducing errors and manual work. This led to better patient experiences and reduced administrative overhead.

2. Government: Meeting CMS Wait-Time Regulations Efficiently

Atlas Systems helped a government healthcare agency meet CMS provider wait-time requirements by implementing advanced automation and data integration solutions. The improvements helped ensure compliance while reducing operational bottlenecks and enhancing service delivery.

3. Cybersecurity: Enhancing Efficiency with Tenable Scans

To support clients in strengthening their cybersecurity posture, Atlas Systems partnered with Tenable to conduct automated vulnerability scans. These scans provided continuous visibility and reduced the manual effort required for security assessments, helping companies detect and fix issues faster, an essential step in maintaining operational continuity.

Top Strategies to Improve Operational Efficiency

One key strategy is to simplify processes by removing unnecessary steps or tasks that slow things down. Using technology to automate routine work is another effective way to boost efficiency in business operations. Regular training ensures employees understand their roles and can work without errors, which supports better efficiency in operations management. 

It’s also important to track key measures like time, cost, and error rates so problems can be fixed quickly. Clear communication helps teams stay coordinated and avoid mistakes. 

Lastly, managing third-party partners well is part of a good operational efficiency strategy, making sure outside suppliers or services don’t cause delays or add extra costs. By focusing on these steps, businesses can improve their operational efficiency steadily over time.

Read: Vendor Risk Assessment: Best Practices & Challenges

Proven Steps to achieving Operational Excellence? 

Achieving operational excellence means running your business in the best possible way, with smooth processes and happy customers. Here are clear steps to help improve operational efficiency and reach this goal:

1. Understand your current operations: Start by looking at how your business works now. This helps you see where things are slow or costly. Knowing the meaning of operational efficiency helps you focus on the right areas.
2. Set clear goals: Decide what you want to improve. It could be faster delivery, lower costs, or better quality. Setting goals guides your operational efficiency strategy.
3. Simplify processes: Remove unnecessary steps and make workflows easier. This step is key to improving operational efficiency because it cuts down on waste and delays.
4. Use the right technology: Automate tasks and use software to track work. IT operational efficiency can save time and reduce errors.
5. Train your team: Make sure employees understand new tools and processes. Well-trained staff help keep efficiency in business operations high.
6. Measure performance: Track important metrics like cycle time, costs, and errors. This helps you see if your efforts are working.
7. Keep improving: Operational excellence is not a one-time fix. Regularly review your processes and make changes to stay efficient.

Best Practices to Improve Operational Efficiency

To improve operational efficiency, businesses should focus on making their processes smoother and reducing waste. Start by analyzing current workflows to find slow or unnecessary steps. Use technology to automate routine tasks, which helps improve IT operational efficiency. Further, training employees regularly ensures they work effectively with new tools and methods. Tracking key performance indicators like cost, cycle time, and errors helps measure progress. Good communication across teams also supports efficiency in business operations. Finally, regularly updating your operational efficiency strategy keeps your processes aligned with changing business needs.

Challenges in Achieving Operational Efficiency

Achieving operational efficiency is not always easy. One common challenge is resistance to change - for instance, employees may be used to old ways and slow to adopt new processes or technology. Limited budgets can also restrict investments in tools that improve efficiency. Another challenge is managing third-party suppliers, which can cause delays or quality issues. Sometimes, businesses struggle to track the right metrics, making it hard to know where to improve. Lastly, poor communication or unclear roles can lead to mistakes and wasted effort, reducing efficiency in operations management.

To overcome these challenges, businesses need a clear operational efficiency strategy and the right partners. This is where experienced providers like Atlas Systems can help. With deep expertise in IT operational efficiency, vendor oversight, and digital transformation, Atlas supports companies in simplifying processes, improving visibility, and reducing waste without stretching internal teams or budgets.

How Improving Operational Efficiency Drives Better Business Results

Improving operational efficiency means running your business with fewer delays, lower costs, and better results. When businesses streamline IT infrastructure, reduce vendor-related risks, and automate routine processes, they gain time, save resources and improve performance. This kind of efficiency in operations management is what helps companies stay adaptable in a fast-changing environment.

Atlas Systems helps businesses achieve this by offering a wide range of services that directly support improving operational efficiency. Whether it’s managing your helpdesk, applying AIOps to predict issues, or ensuring 24/7 monitoring across your systems, Atlas acts as a natural extension of your team—delivering smart, scalable solutions for today’s digital demands. One example is ComplyScore®, Atlas Systems’ AI-driven Third-Party Risk Management (TPRM) software. It helps businesses manage vendor relationships with greater accuracy and less manual effort, cutting down delays and protecting your operations. When paired with our IT infrastructure support and automation services, it enables a more reliable and cost-efficient business environment. If your goal is to enhance operational efficiency while reducing risk and downtime, Atlas Systems can help you make that a reality.

FAQ on Operational Efficiency

1. What industries benefit the most from focusing on operational efficiency?

Almost every industry can benefit, but sectors like manufacturing, healthcare, banking, retail, and logistics see big improvements. These industries often have complex processes and rely heavily on timely deliveries and quality service.

2. What technologies or tools help improve operational efficiency?

Automation software, data analytics, cloud tools, and AI-powered platforms all help. For example, Atlas Systems offers ComplyScore®, a third-party risk management tool that uses AI to simplify vendor oversight and reduce risks, improving efficiency in business operations.

3. How can third-party partnerships impact operational efficiency?

Third-party vendors can either support or slow down operations. Good partners help you meet deadlines and maintain quality. Poor management of these relationships can cause delays, errors, and extra costs. Using tools to monitor vendor performance can improve operational efficiency.

4. How can small businesses improve operational efficiency without large budgets?

Small businesses can start by simplifying workflows, training employees well, and using affordable automation tools. Even small changes, like improving communication or tracking key performance indicators, can lead to better efficiency without big expenses.