An Operational Excellence Definition Quality Executives Must Know

Posted by Matthew Littlefield on Tue, Nov 20, 2012 @ 06:00 AM

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Market leading companies and top executives are talking about operational excellence, but there seems to be a bit of a gray area in defining it. At LNS Research, we’ve developed a model of operational excellence for industrial and manufacturing organizations to manage quality that aligns strategic objectives with people, processes, and technology. Once this has been established, we advise companies to identify a set of metrics, creating an environment for measurable improvements over time.

operational excellence definitionAlthough the actual components of this model will vary drastically depending on the maturity of your organization, the industry it’s in, and what it’s producing, adapting the basic ideology to your needs can be transformative.

Below, we’ll dissect our model of operational excellence, showing how organizations can use it to improve business performance and deliver higher quality products. We’ll also discuss some of the key metrics companies can use to realize quality management goals.

Identifying Strategic Objectives

Strategic objectives, often set at the corporate or divisional level, should be established in a way that ensures buy-in across the organization. Traditionally, companies have split strategic objectives into two sections: operational and financial. Operational objectives include ensuring compliance, improving efficiency, and improving customer experience, while financial objectives include growing revenue, reducing risk, cutting costs, and so on.

Organizations that view quality as a way of life and believe that it can improve many different parts of operations are developing competitive advantages in the marketplace. Consequently, we advise companies to establish a set of quality management objectives, in addition to the operational and financial objectives. These may include, reducing the cost of quality, reducing non-conformances in manufacturing, preserving brand equity, and improving design for quality.

Finding the Right Resources

Once the operational, financial, and quality objectives have been established, it’s important to evaluate current resources relative to these goals. Typically, companies will find areas for improvement in terms of people, processes, and technology when building a model of operational excellence to manage quality.

People: Executive buy-in is imperative for a quality management initiative to take hold. In some cases, it may be necessary to appoint a Chief Quality Officer. Organization’s should also develop or strengthen internal education programs, SOPs, and leverage quality management certifications such as Six Sigma. Finding ways to incentivize good performance in quality can go a long way.

Processes: Since quality touches so many different areas of business, it’s not unusual for there to be numerous manual processes and disparate management systems spread throughout the value chain. As there’s a trend in the consolidation of intelligence across organizations today, market leading companies are moving toward the global use of automated, standardized, and centralized processes.

Technology: For many organizations, homegrown or legacy systems are no longer effective applications for quality management. The emergence of Enterprise Quality Management Software (EQMS) has changed the game for the level of quality in finished products. It infuses a quality management perspective into every process across the value chain, acting as a platform for cross-functional communication and collaboration on issues. Quality Management Software provides executives with a holistic view of quality for making data-backed decisions.

Companies should be looking into an EQMS system or, where appropriate, applications such as ERP that offer EQMS functionalities. A select list of EQMS functionalities is as follows:

  • Non-Conformance/Corrective and Preventive Action Processes
  • Compliance/Audit Management
  • Supplier Quality Management
  • Risk Management
  • Statistical Process Control

Making Measurable Improvements over Time

After aligning strategic objectives with the right mix of people processes and technology, organizations should develop a set of metrics to monitor, analyze, and use to improve performance in functional areas affecting quality. This is a key aspect for any operational excellence model, as it provides measurable visibility into the value of quality management initiatives. These metrics may include:

  • Cost of Quality
  • On Time and Complete Shipments
  • Production Efficiency
  • Successful New Product Introductions
  • Overall Equipment Effectiveness

The functionalities offered in EQMS are proving incomparable when it comes to collecting the right data and having strong processes to evaluate and improve upon quality management metrics. At LNS Research, we help companies to take these metrics to the next level, benchmarking them in comparison to close competitors as well as the industry as a whole. Doing this over time creates an environment for continuous improvement.

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Tags: Operational Excellence, EQMS, Quality Management