Why Is it Important to Combine Functions in Business?

Efficiency

• You can think of efficiency as a function where the least amount of energy or resources is expended to produce a desired outcome. Something is efficient if it is an efficient function. For example, you have a manufacturing process with four steps; if you can eliminate one of the steps and still produce the same result, you have improved its efficiency.
  
  

Classic Example

• Henry Ford was an efficiency pioneer. The concept of interchangeable parts combined with the assembly line displayed efficiency by reducing steps in production. Henry Ford was said to have specified the wood shipping crates for one of his suppliers. He specified the dimensions of the wood so the crates could be reused as floorboard material in his cars, thus eliminating a step of independently milling floorboards.
  
  

Economies of Scale

• Economies of scale is a business-specific term that refers to certain kinds of efficiencies only achieved by increasing the scale of an activity. For example, if you build a factory and only manufacture and sell one car, it's an inefficient use of your capital. If, however, you use the factory to build a million cars, it's a much more efficient use of the capital that was invested in the factory.
  
  

Productivity and Profit

• The simple reason to combine functions is profit -- but it's not the only reason. Eliminating pollution, recycling materials and providing jobs are all important purposes of business efficiency. The way that resource allocation is organized in the business world, companies must make a profit to continue to function. Productivity usually achieves profit, which is another way to express efficiency or the streamlining of functions.