Operational Excellence: A Data-Backed Guide for Manufacturers

Posted by Mike Roberts on Thu, Mar 20, 2014 @ 06:15 AM

people processes and techAt a high level there are two areas that most every business is focused on: (1) optimizing existing human, capital, time, and technological resources to (at the very least) meet performance expectations and (2) finding new and better ways to leverage those resources to continuously improve existing products, services, market share and operating margins.

As any experienced executive knows, executing on these two areas requires a sound approach to continually driving Operational Excellence. An Operational Excellence strategy can be the difference between mediocrity and market leadership. Unfortunately, instituting and sustaining this with effective programs and technology is easier said than done. It takes strategic and bold thinking, rapid adaptations, reactions, and decisions, and fully informed and engaged teams.

If you’re a leader aiming to take your organization to the next level, fear not! Based on analyses from 2013-2014 LNS Research’s Manufacturing Operations Management (MOM) research study, this article details everything you need to know about developing an Operational Excellence strategy.

What is Operational Excellence?

Before we get into the steps for achieving Operational Excellence, it’s important to dive deeper into what we mean when we talk about it. We define Operational Excellence as a continuous improvement journey that essentially never concludes, but positions an organization to endlessly progress forward in the areas most critical for achieving and sustaining market leadership.

As we’ve discussed in the past, an effective Operational Excellence strategy aligns and then optimizes strategic objectives with available people, processes, and technology resources. The optimization phase is facilitated by a strong metrics program that aligns to strategic objectives, tracks performance and provides the opportunity to set increasingly higher goals as time goes on. 

Strategic Objectives: The Basis for Operational Excellence Strategy

Strategic objectives drive Operational Excellence strategy, as you need to understand them to know where to allocate resources and make investments. And when developing your strategy, it’s helpful to have a grasp of what your peers are saying (a.k.a look at the benchmark data). Fortunately we’ve got some great data from the MOM survey on this topic.

mfg objectives

For the survey data noted above, manufacturers were asked to choose 3 top objectives. Topping the chart, 66% said ensuring consistent quality was the number 1 strategic objective in 2013. Not far behind, 56% chose responsiveness to customer demands, 49% chose increasing production capacity and capabilities, and 42% chose getting new products to market faster.

Use this data to compare and contrast your own objectives. Take note that these are responses from all industries, which may account for some disparities. For instance, ensuring regulatory compliance and improving EH&S performance rank relatively low at 33% and 32%, but are undoubtedly top-of-mind issues for manufacturers in risk-prone industries.

Next Steps: Aligning Strategic Objectives with Resources

Now that we’ve addressed the different types of strategic objectives, it’s time to talk about resources. Again, these can be thought of in three separate (but closely interrelated and interdependent) buckets: people, processes, and technology. Below, we’ll address strategies for aligning them with your objectives. 

People and Leadership: What are manufacturers doing?

People can be one of the hardest resources to leverage, but they can also provide incredible returns when managed effectively and given the process and technology resources to execute on goals.

Our research has shown that 26% of manufacturers state a top challenge with a lack of collaboration across different departments. What we can infer from this is people—manufacturers, suppliers, engineers, etc.—face informational and cultural silos that are often doing more harm than good.

From our experience, companies that create an environment and culture of shared vision and collaboration can more easily excel in performance. The survey data sheds some light on what’s being done in this area. Consider the following data points:

  • 61% said they have or plan to establish a continuous improvement/lean group within a year
  • 53% said they have or plan to establish better ways for line of business, IT, engineering, and manufacturing operations to collaborate within a year
  • 46% said they have or plan to establish a strategic Operational group within a year

Company culture comes out of the examples set by management and the actions of ALL employees. Problems and issues continuously arise, but are always best resolved with a team effort, with all relevant stakeholders educated on available information and facts on hand. It's clear from the data points above: Operational Excellence is on everyone’s mind, and the role of people and leadership is not being discounted.

Business Processes: Making Continuous Improvement an Everyday Occurrence

Having the organizational capabilities discussed above is only part of the equation. You also need a set of robust business processes to act as the tools your employees continuously improve and refine.

The manufacturing operations space is replete with not only critical production processes, but also with linkages to related business processes like order management, design/engineering, environment, health and safety compliance, etc. In order to make sure employees are keeping up pace with Operational Excellence initiatives many organizations are investing in different process improvement programs. Our survey highlights the most widely adopted process improvement programs:

  • 29% of companies have implemented or plan to implement a lean manufacturing program
  • 25% of companies have implemented or plan to implement ISO:9000/9001
  • 23% of companies have implemented or plan to implement an Operational Excellence program
  • 22% of companies have implemented or plan to implement a Six Sigma program

We strongly suggest that you take a similar approach of utilizing the right set of proven program methodologies to accelerate your journey. A great place to start in an Operational Excellence journey is to begin using these methodologies in conjunction with a small subset of processes that are most in need of improvement. It is impossible to tackle every major process improvement area simultaneously.

Manufacturing Software and IT: Accelerating Success

Most companies are accelerating Operational Excellence initiatives by institutionalizing best practice processes into software. Over 60% have already implemented or are planning to implement processes supported by a combination of Enterprise, MOM, and Automation software/systems.

We continue to see that leading companies are harmonizing business and manufacturing processes to ensure consistency and efficiency, while also ensuring that every plant can be agile and responsive to customer demands.

When we look at the process and software capabilities that are either in place or planned across a broad set of industries, we can see a clear journey that companies are on. However, we can also see that there are more companies that have the ability to manage single plants with both processes and software (45%) than at the line of business (38%) or enterprise level (31%).

Which MOM software applications are companies deploying today?

In our survey, we looked at manufacturers that noted having the capabilities to effectively manage manufacturing operations at either the plant, line of business, or enterprise levels. Next, we explored which MOM software applications those companies had deployed.

mfg software applications

The results line up well to other data we saw earlier on top strategic objectives and challenges. We can see that Quality Management applications (58%) are most deployed in support of the top strategic objective of ensuring consistent quality.

Planning, Scheduling & Dispatching (53%) and MES (50%) software were the next most popular, and these have been proven to assist companies with being more responsive to customer demands and helping companies increase production capacity and capabilities – which are the next highest top strategic objectives in our survey.

Next-Generation Manufacturing Technology and Operational Excellence

As the MOM space evolves, there a number of technological macro-trends already present in other enterprise software categories like Business Intelligence (BI) and Enterprise Resource Planing (ERP) that LNS Research sees as integral to the next generation of MOM solution offerings.

Big Data, Software as a Service (SaaS)/Cloud capabilities, and Mobility are three rapidly advancing technologies that are poised to advance the MOM market by allowing greater operational agility, universal data access, and previously unknown data correlations and actionable information to drive business value.

MOM applications leveraging these technology trends are already present in the marketplace to some degree, but are poised to become a standard in vendor offerings in the future.

Optimizing People, Processes, and Technology Resources with an Effective Metrics Program

Aligning your people, process, and technology resources will only get you so far on your Operational Excellence journey, and an effective metrics program is vital for making sure you don’t stall out. It’s in the metrics program that you are able to track, analyze, and then prioritize which areas require the most attention as well as which resource investments will deliver the greatest returns.

Continuing on this path over time of tracking, analyzing, improving, and then setting higher goals is the foundation of the continuous improvement mindset found in today’s leading organizations.

Which Metrics Should be Included in Your Metrics Program?

Depending on the products you deliver and the industry in which you compete, the mix of plant floor to enterprise-level metrics you use will likely vary. There are, however, a number of metrics that are most commonly across organizations, which tend to span the following categories: financials, inventory, innovation, responsiveness, efficiency, compliance, quality, maintenance, (a full list here).

Supporting Metrics Programs with Manufacturing IT

real time manufacturingLooking at our survey data, we can see that 18% of companies are already integrating metrics processes and software (typically role-based, performance dashboard software) to deliver KPIs to all of team members in real-time. Another 15% of companies are looking to add this capability within a year in support of Operational Excellence journeys.

Other key technologies being leveraged include manufacturing business performance analytics/intelligence, and manufacturing big data analytics.

Operational Excellence Doesn’t Just Come To You

Today’s increasingly globalizing economy has every executive on his or her toes, provoking an eagerness to drive continuous improvements and sustain competitiveness. The Operational Excellence journey is neither something you can put off, nor take lightly. We strongly advise getting your organization on the right path to ‘year-over-year’ success.

The ideas in this article are part of a larger Operational Excellence research study, of which the results have been compiled in the eBook below. The eBook dives deeper into each of these areas and provides a roadmap for global and regional manufacturers aiming to get on or to accelerate their Operational Excellence Journey.

operational excellence research

Tags: Operational Excellence, Manufacturing Operations Management, Manufacturing Software, Manufacturing Culture