Operational excellence: definition and practical application

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?


Operational excellence refers to a company's ability to deliver the best possible products or services with the minimum use of resources. Thus, a company that can maintain a high level of operational excellence is in a position to generate an optimum 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 lean management. As a reminder, this is a production method whose origins are attributed to Toyota, which 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 were criticized for focusing exclusively on cost reduction, to the detriment of employee well-being. In the wake of these attacks, industry players have gradually shifted towards a less rigid vision, one that 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 usually the ones that stand out. The global health crisis has widened the gap between those who have embraced digital technology and those who are slow to modernize.

But it's not just a matter 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:

Optimization of resources and costs

In many industries, a large proportion of time is spent on repetitive, administrative and/or low value-added tasks. Some studies even estimate that only 15-20% of time is spent on purely productive activities. One of the aims of operational excellence is 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 some or all of the less interesting tasks enables operators to concentrate on more rewarding missions. But that's not all: as mentioned above, it's the corporate culture that really gets the ball rolling. And a healthy corporate culture means committed employees. Thus, operational excellence encourages continuous training, knowledge sharing and skills upgrad ing where appropriate. In the same vein, involving employees in the choice of KPIs to be tracked for each position gives them the keys to making decisions in line with the company's objectives.

Brand image enhancement

By placing 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 greater customer satisfaction, which leads to a gradual improvement in brand image.
Finally, operational excellence increasesadaptability to new business challenges, such as those arising from 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.

The quality

Quality is often measured by the percentage of waste. This indicator is often complemented by customer-related metrics, such as the percentage of returns or the number of complaints.

The human

All company employees must be made aware of the operational excellence mindset. Managers also have a key role to play in planning and assigning their teams. Digital scheduling tools enable them toorganize production shifts in the best possible way.

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 the expected level of quality.

Health and safety of employees

Indicators relating to employee health speak volumes about the company's attention to employee well-being. For example, an abnormal number of work stoppages may be indicative of a poor distribution of tasks, a lack of communication or a lack of commitment.

In summary:

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. To enhance the value of employees' work by reducing low-value-added tasks and by providing them with continuous training.

3. Put the customer at the center of our corporate vision, and strive for the highest possible level of flexibility and versatility.

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