Managed Services

What exactly is Operational Excellence?

Dave Kravitt, CPIM

Many business professionals talk about “operational excellence”, but few understand that it actually consists of several elements that must be successfully implemented and integrated to be successful. If you ask a dozen business professionals to define Operational Excellence, you’ll get a dozen different answers, such as “it’s about process quality and making perfect parts every time,“ or “it’s applying lean tools everywhere to eliminate waste.” Perhaps one of the best definitions I’ve seen is also one of the simplest, from business consulting firm Duggan Associates: “It is when each and every employee can see the flow of value to the customer and fix that flow when it breaks down.” 

However you define it, Operational Excellence — when pursued with a solid strategy, discipline and rigor, across all business units and departments — enables a company to deliver a combination of price, quality, and ease of purchase and service that will be unmatched in its industry and marketplace. To achieve Operational Excellence requires implementing an integrated business execution system consisting of four fundamental building blocks:

Strategy Deployment A company’s strategic plan and strategy maps help establish an effective Performance Management system. It starts with a strategic planning process that enables an organization to define long-range key entity objectives while keeping sight of the day-to-day business fundamentals required to keep the company operating successfully. A well-defined strategy is crucial for ensuring collaboration and alignment among different parts of the enterprise and effectively links core elements including strategic and operational objectives, initiatives, and execution.

Performance Management A well-crafted strategy helps companies translate strategic or operational objectives into measurable success indicators while ensuring alignment of all the different levels and parts of the organization. 

Process Excellence Well-designed, efficient, and effective processes are key to Operational Excellence success. The right management, value chain, and support processes enable companies to consistently deliver best-in-class products and services. 

High-Performance Work Teams Educated, engaged, and empowered employees are absolutely crucial for Operational Excellence. Companies that have successfully implemented Operational Excellence constantly strive to train and nurture their employees to build strong values, competence, teamwork, and leadership that encourages workers to embrace and own company success because it’s directly linked to their individual success.

Operational Excellence at work.

Going back to our simple definition of Operational Excellence as every employee seeing the flow of value to the customer, let’s take a look at it in a manufacturing setting. At its most fundamental, it means employees know that the product moves in a linear fashion from Process A to Process B and so on, in a specific quantity, at a specific time, to a specific location. If this does not happen, something’s wrong. They’re able to visual the entire process as a pipeline, with a workflow that starts with order entry and moves through manufacturing to delivery or distribution. Ideally, a worker walking the manufacturing floor could visually depict how many processes each station is away from the customer. Every worker would know exactly where he or she is in the value stream and pipeline and where the flow goes. 

If Operational Excellence has been successfully implemented, workers at any point along the pipeline can effectively recommend a fix to a “clog” when they see it to their supervisor or management. This applies to both the business office and the manufacturing floor. By empowering employees as part of an Operational Excellence strategy, companies can streamline wasteful processes, boost productivity, and achieve peak operational efficiency.

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