Why Operational Excellence in Manufacturing Must Expand in 2015

The business world in general has become increasingly global and distributed, which has both benefitted and challenged manufacturers in multiple ways. At the same time, it’s also enabled different manufacturing facilities around the globe as well as multiple areas of business to develop unique approaches to Operational Excellence. And unfortunately, today, many large organizations lack a common vision of what Operational Excellence in manufacturing means and how to achieve it in a coordinated and holistic fashion.

When we talk about Operational Excellence here at LNS Research, we’re referring to the alignment and then optimization of key resources (people, processes and technology) with strategic objectives. This approach can lay the foundation for an effective manufacturing strategy. However, it’s incomparably more effective when it’s adopted as the strategy not just within the four walls of a manufacturing facility but across the enterprise.

Delineating the enterprise vision of Operational Excellence is very much so an executive task. In this post, we’ll provide information on important factors senior leadership should consider when starting this journey, as well as tips for instituting an enterprise-wide Operational Excellence initiative and, particularly, the role of process standardization.

Choosing the Right Operational Excellence Path to Go Down

Because every organization faces a unique set of strategic objectives and challenges, and resources available for meeting those objectives and overcoming those challenges, there’s no one specific formula for Operational Excellence. By definition, the formula will vary organization by organization. There are, though, a number of different guiding variables which influence the overarching goals of an Operational Excellence initiative, and those are the strategic objectives.

As mentioned, Operational Excellence is about the alignment and then optimization of key resources with strategic objectives. To gain a better understanding of the types of strategic objectives today’s organizations are focused on, we can refer to data from LNS Research’s recent Manufacturing Operations Management (MOM) survey, which has been taken by over 550 senior leaders and manufacturing executives.

From the data, it’s clear a majority of manufacturers were focused on ensuring product quality as well as responsiveness to customer demands. In many cases, organizations choose one of these strategic objectives as an initial major driver behind their Operational Excellence journey. For instance, with a focus on quality, a company may formulate a strategy around developing a culture of quality, building quality into end-to-end processes, and so on. The same could be said for a customer service/responsiveness focus, which would require looking at all of the enterprise process touch points that impact capabilities in this area.

We think it’s also crucial to create a pillar or set of program pillars that act as the foundation for Operational Excellence. These are the things most important to your company and, in many cases, will be dictated by the industry in which the company operates. In Life Sciences, for example, companies will need to develop a strategy around regulatory compliance. Selecting these pillars doesn’t mean other areas are less important, it’s just a way of highlighting those areas which—if managed and improved effectively—could help ensure success of the overall objectives, while carving out new opportunities for a competitive advantage.

Operational Excellence as an Enterprise Initiative 

Clearly defining strategic objectives is simply the first step toward Operational Excellence. Making progress toward those objectives requires a long-term commitment to doing so, and the investments in resources to make that happen. In many cases, senior leadership (a cross-functional team of leaders) will develop a roadmap by inspecting their current versus ideal state of operating, and then use the gap in between as the basis for developing a plan to get there.

In our previous post in this series, we discussed the importance of leadership and culture, and in this post we’ll continue that conversation by focusing on processes. People can undoubtedly be manufacturers’ greatest asset, but processes and the technology supporting them has come a long way and really compounds the effectiveness of people. After delineating a common vision of excellence, many manufacturers start looking at the processes that are in place for achieving that vision.

Because of the traditionally disparate nature of individual manufacturing plants, and the lack of a unified enterprise vision, it’s not at all that uncommon for a manufacturer with numerous facilities to have different versions of the same processes. For example, something as straightforward as the process for incoming materials inspection may greatly differ from facility to facility, making it difficult to monitor the performance of those materials as they make their way through production as well as interactions with suppliers of those materials from an enterprise perspective.

While developing your roadmap toward Operational Excellence, one of the staples in this exercise is process standardization. In conjunction with developing a culture the aligns with the common vision of excellence, process standardization enables an even playing field between facilities, such that all personnel are working with the same set of resources and performance improvement opportunities that can more easily be seen and compared. In the case of incoming materials inspection, this may mean building out a robust and standardized track and trace process that’s used by all facilities.

Market-leading companies are taking process standardization well beyond the four walls of manufacturing, though, considering the roadmap toward Operational Excellence from a value chain perspective. This incorporates the roles of design, suppliers, production, distribution, service, and more into their visions. Organizations are building a roadmap that includes end-to-end processes, so there’s more visibility into performance, as well as identifying gaps and where additional resources may be required.

In the next post, we’ll discuss the role of technology in Operational Excellence. Technology should always be used in support of people and processes, and when done effectively, can greatly accelerate processes toward manufacturer’s strategic operational excellence goals and objectives.