Improvements through efficiency

by Gordon on Tuesday 21st February, 2012

Council tax and parking charges will be frozen by Bath and North East Somerset Council as part of its 2012/13 budget. The freeze means the council will receive a £1.93m government grant.  The Lib Dem-run authority says that due to efficiency savings, frontline services will be cut by £1.2m, just 0.5% of its £240m budget.

Leader of the Council, Paul Crossley said: ‘Whilst other councils have made deep cuts to frontline services, we have taken steps to become more efficient in the way in which our services are provided and protected frontline priority public services.’ (BBC, 15th February 2012)

Efficiency is not just about cutting costs.  Seeking out the most efficient practices can help a business to achieve competitive advantage.  The food retailer, Aldi, distinguishes its business from competitors by offering high quality products at prices up to 30% cheaper than its rivals.  It can do this by passing on the savings made from its highly efficient operation.

Aldi’s approach to efficiency is based on the principles of lean production.  This involves managing its supply chain efficiently: it sources products locally wherever possible; it takes advantage of economies of scale, selling large volumes of fewer varieties of products; and it reduces waste across all parts of the business.

Reducing waste might include using staff more flexibly, shorter daily opening hours, thus reducing energy costs, or using a Just-in-Time approach to stock.  By buying in stocks only when needed, the company retains cash flow and saves on the costs of storage.

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