Any industrial company that wants to be competitive must adopt a strategy of continuous improvement of its methods. If we were to sum up what operational excellence is, we could say that it's a set of approaches aimed at being better than the competition, particularly in the organization of processes and tasks, but also in the allocation of human resources. Let's take a look at the benefits for a company of aiming for operational excellence, and how to measure it.
What is operational excellence?
Definition
Operational excellence refers to a company's ability to provide the best possible products or services with the minimum use of resources. Thus, a company that can maintain a good level of operational excellence is in a position to generate an optimal level of profit.
However, it would be a mistake to reduce operational excellence to a cost management technique. The concept goes far beyond this, and includes employee skills and versatility, as well as customer satisfaction. Indeed, some equate operational excellence with a state of mind rather than a method. Indeed, getting as close as possible to operational excellence requires constant effort on the part of all employees, a commitment to continuous learning and a well-oiled process.
A response to Lean management
The concept of operational excellence has its origins in that of the Lean management. As a reminder, this is a production method whose origins are attributed to Toyota, who wanted to produce vehicles while saving on production costs. The method then became widely popular, adopted by industrial companies around the world as a means of boosting competitiveness.
It wasn't until the early 2000s that Lean was first criticized. These techniques are criticized for focus exclusively on cost-cuttingto the detriment of employee well-being. In the wake of these attacks, industry players have gradually shifted towards a less rigid vision, and one which considers human capital as a strategic resource in its own right.
So, is operational excellence about cutting costs while taking human capital into account? That's a good start, but let's take a closer look at why it's worth putting this philosophy into practice in your company.
Why put operational excellence into practice?
Companies that can produce better, faster and cheaper are generally those that stand out from the crowd. The global health crisis has widened the gap between those who have embraced digital technology and those who are slow to modernize.
But be careful, it's not just a question of putting the right tools in place. Much more than a set of processes, operational excellence is a philosophy that needs to be understood by everyone, from operational staff to managers.
So what are the benefits of this approach? We can distinguish three categories:
Optimizing resources and costs
In many industries, a great deal of time is spent on repetitive, administrative and/or low value-added tasks. Some studies even estimate that only 15 to 20% of time is devoted to purely productive activities. Operational excellence aims in particular to limit the time spent on time-consuming tasks that can be automated.
On the other hand, it is important to identify the key metrics (e.g. scrap rate, number of monthly breakdowns, etc.) to be monitored in order to identify possible areas for improvement in the production cycle.
Employee involvement
The operational excellence mindset also implies empowering all employees. Automating all or part of uninteresting tasks enables operators to focus on more rewarding missions. As mentioned earlier, it's all about corporate culture. And a healthy corporate culture means committed employees. In this way, operational excellence encourages continuous training, knowledge sharing and skills enhancement when relevant. In the same vein, involving employees in the choice of KPIs to monitor for each job gives them the keys to make decisions in line with corporate objectives.
Brand image enhancement
By putting the customer at the heart of its processes, the company aims to reduce delivery times, while optimizing production time, waste and errors. The result is improved customer satisfaction which leads to a gradual improvement in brand image.
Last but not least, operational excellence raises the level ofadaptability to new business challengessuch as those following the 2020 pandemic.
The 5 metrics of operational excellence
Operational excellence is traditionally measured through five main themes. For each of these, it is necessary to identify the relevant KPIs.
Quality
Quality is often measured by the percentage of waste. This indicator is often supplemented by customer-related metrics, such as the percentage of returns or the number of complaints.
The human
All company employees need to be made aware of the operational excellence mindset. To achieve this, it is important to offer a good level of flexibility Managers also have a key role to play in planning and assigning their teams. Digital scheduling tools enable them toorganize production workstations optimally.
Delivery times
Often considered one of the most important indicators, lead time measures the time taken between receipt of an order and final delivery. The idea, of course, is to reduce this time without negatively impacting quality levels expected.
Employee health and safety
Indicators relating to employee health speak volumes about the company's focus on well-being of the latter. For example, an abnormal number of work stoppages may be indicative of a poor distribution of tasks, or a lack of communication or involvement.
In a nutshell:
Operational excellence is much more than just a methodology for reducing production costs. This philosophy implies a global strategy, which requires :
1. Identify areas for improvement on production lines.
2. Enhance the value of employees' work by reducing low-value-added tasks and providing ongoing training.
3. Put the customer at the center of our corporate vision, and strive for optimum flexibility and versatility.
