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The Dark Side Of Operational Efficiency In Times Of Crisis

Too much of a good thing can lower operational flexibility

Few management practices have captured business attention more than the quest for operational efficiency. Indeed, over the years, businesses across a wide spectrum of industries have readily adopted practices such as Just-in-Time (JIT) and lean manufacturing, which drive efficiency across production and distribution processes. But is the zeal for efficiency really worth it? Do firms stand only to gain from efficiency or are there downsides as well? During times as uncertain as these—with the COVID-19 pandemic and threats of economic recession—it is important to carefully weigh the obvious pros and not-so-obvious cons of focusing solely on keeping operations lean.

Heavy reliance on efficient management processes is completely understandable. These practices greatly lower resource requirements and help reduce waste. Further, by streamlining the flow of materials across supply chains, ensuring availability of resources for just-in-time production, and optimizing manufacturing cycles, managers are able to derive greater returns on their investments. Moreover, recent availability of large datasets and advances in computing have made efficiency even more attainable, allowing managers to optimize their value chains.

But what risks do firms take when efficiency overshadows flexibility? How can they safeguard themselves during such unprecedented circumstances such as these?

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