March 27, 2015

What is Operational Excellence in Manufacturing and Supply Chain?


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Performance Excellence
An integrated approach to organizational performance management that results in (1) delivery of ever-improving value to customers and stakeholders, contributing to ongoing organizational success; (2) improvement of your organization’s overall effectiveness and capabilities; and (3) learning for the organization and for people in the workforce.

Product quality, productivity and customer retention are the pillars of operational excellence. They  are critical to profitable manufacturing concerns. Operational excellence has emerged as the key management initiative to sustainable revenue and business growth.

What is operational excellence?

As defined by Michael Treacy and Fred Wiersema in a seminal Harvard Business Review article, “Companies pursuing operational excellence are indefatigable in seeking ways to minimize overhead costs, to eliminate intermediate production steps, to reduce transaction and other ‘friction’ costs and to optimize business processes across functional and organizational boundaries.”

Operational excellence is ultimately about delighting your customers, setting a new standard of performance in your industry and becoming the preferred supplier in your industry.  As a preferred supplier, you grow revenue with existing customers and  attract business away from your competition.

Operations is the delivery mechanism of the manufacturing enterprise, providing what the business sells and how that product gets to market. It is an engine driving the work in purchasing, production, distribution, logistics and inventory management. That engine depends on input from the front line of the business—sales, marketing and is supported by finance.

To connect processes with performance goals, companies need business intelligence (BI) capabilities, including metrics, key performance indicators (KPIs), dashboards and advanced reporting. With the right BI solution, manufacturers can gain crucial visibility into performance and ensure Operations is functioning at peak levels.

You can get a continuous view into key areas, can gain the ability to see problems as they happen,
can see trends developing, which allows you to take proactive action to prevent problems in real time or  before they happen. This means you can solve problems quickly and guarantee they have a minimal effect on your business. It helps to prevent losses and to improve revenues by identification of new, potentially profitable business opportunities.

Reference - IBM White Paper on Operational Excellence

The 12 Principles of Manufacturing Excellence: A Leader's Guide to Achieving and Sustaining Excellence
Larry E. Fast
CRC Press, Oct 11, 2011 - 266 pages
Explaining how to implement and sustain a top-down strategy for manufacturing excellence, The 12 Principles of Manufacturing Excellence: A Leader’s Guide to Achieving and Sustaining Excellence provides a comprehensive, proven approach for delivering world-class performance while also cultivating the right culture through leadership and mentoring.

Tapping into four decades of leadership experience, 35 years of it in the manufacturing industry, Larry Fast explains how to achieve vertical and horizontal alignment across your organization. He details a clear pathway to excellence via the 12 Principles of Manufacturing Excellence and provides a method for tracking progress—plant by plant and function by function. Emphasizing the importance of using Lean and Six Sigma tools to improve your business, the book:

Integrates strategy and leadership development
Paves a path for culture change–Operator-Led Process Control (OLPC)—that prepares hourly employees to take control of their processes and prepares management to enable them to do it
Details an audit process for tracking progress and ensuring sustainability
Includes a CD with color versions of the images in the book as well as a sample Manufacturing Excellence Audit, a sample Communications Plan, and a sample Training Plan that can all be easily customized for the reader’s use
This resource-rich book will allow you to spell out leadership expectations and provide your employees and associates with a clear understanding of their individual roles. Helping you keep everyone in your organization focused during the quest towards sustainable manufacturing excellence, the accompanying CD supplies the tools you and your team will need to pursue it with passion, confidence, and urgency.

Harvard Business Review on Manufacturing Excellence at Toyota
Harvard Business Press, 2008 - 246 pages
Few companies have so consistently inspired management best practices as Toyota. In everything from strategic operational design and quality improvement to integrated product development and management training, the company has achieved success through constant innovation. This collection shows just how Toyota does it and how you can apply these same lessons to fuel success in your company.

Leading Manufacturing Excellence: A Guide to State of Art Manufacturing
Patricia E. Moody

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