a new perspective on operational excellence
DESCRIPTION
The world has changed dramatically since LEAN and Six Sigma were popularized in the early 1990′s. Globalization, product proliferation, information technology, intense competition, and an activist regulatory environment have contributed to a rapid rise in complexity. As a result, many companies are finding that LEAN and Six Sigma aren’t delivering the results they expected. In this presentation, delivered by Chris Seifert at APICS 2013, we discuss a new approach that a select few companies are utilizing to achieve Operational Excellence in the face of complexity.TRANSCRIPT
A New Approach for a Complex World
A New Perspective on Operational Excellence
Chris Seifert, Consultant Wilson Perumal & Company
• Expertise in manufacturing, operational excellence, and management system design and implementation
• Former Operations Leader, Owens Corning (increased plant productivity by 25% in just 9 months)
• Former Plant Manager and Manager of Business Strategy & Analysis, Georgia Pacific (Koch Industries)
• Top-ranked submarine officer, US Navy (ranked #1 of 9 submarine junior officers)
• MBA, Summa Cum Laude, University of Georgia; BS Business Administration, St. Louis University
Agenda/Objectives• Discuss reasons a new approach is necessary
• Defining operational excellence (OE)
• Explain the foundations of the operational excellence management system (OEMS) and state its implications
• Describe the steps in implementing an OEMS
A new approach is necessary• Operational excellence is more
important than ever – customers demand it!
• Traditional approaches are not achieving expected results
• Leadership engagement is often blamed
• A different culprit is to blame
The world has changed!
Volume
Cost
Pre-Industrial Age
“Individual productivity”
Dominated by variable costs
Volume
Industrial Age
“Economies of Scale”
Dominated by fixed costs
Complexity
Post-Industrial Age
“Complexity”
Dominated by complexity
costs
The Vicious Complexity Cycle
Complexity increases
Poor execution
Loss of process control
Poor business results
More people & processes Vicious
Complexity Cycle
Traditional approaches aren’t effective in the face of complexity
• Address individual processes – not interactions between product, process, and organization
Traditional approaches aren’t effective in the face of complexity
Bottom-up approach: Improving one process at a time
Top-down approach: Start with a framework
Traditional approaches aren’t effective in the face of complexity• Attempt to improve before establishing
control
Agenda/Objectives• Discuss reasons a new approach is necessary
• Defining operational excellence (OE)
Defining Operational Excellence
• The often overlooked first step
• Many definitions exist
• To be effective, it must be measurable
Leadership Alignment
Consistent Messaging
Employees Understand
Clear Roles and Responsibilities
Increased Commitment
• Leaders must be united and share a common vision
• If leaders aren’t aligned, messages won’t be clear and consistent
• Unclear and inconsistent messages impede employee’s understanding
• If employees don’t understand vision, they will spend time trying to define their roles
• In the face of ambiguity, many employees take a “wait and see” stance
Example - Definition of Operational Excellence
Operational excellence is a philosophy of leadership, teamwork and problem solving
resulting in continuous improvement throughout the organization by focusing on the needs of the
customer, empowering employees, and optimizing existing activities in the process. -
Wikipedia
Operational Excellence delivers industry leading performanceSound
StrategyOperational Excellence
Leading Performance
7 Value Drivers
1. Safety2. Environment3. Compliance4. Quality5. Productivity6. Yield 7. Cost
Strategy
1. Product portfolio2. Markets served3. Distribution
channels4. Price point5. Level of service6. Partnerships7. Operating model
Operational excellence is the execution of the business strategy
more consistently and reliably than the competition.
Operational Excellence is a function of the management system & cultureSound
StrategyOperational Excellence
Leading Performance
Effective processes
and procedures
Culture of OperationalDiscipline
Operational
Excellence
Understanding this relationship helps cut through complexity to quickly identify the real problem from the “top—down”
Agenda/Objectives• Discuss reasons a new approach is necessary
• Defining operational excellence (OE)
• Explain the foundations of the operational excellence management system (OEMS) and state its implications
The foundation of an Operational Excellence Management System
Performance Indicators
Four Sources of Risk
Finite Causes of Failure
Specific Key Controls
OEMS Elements
Safety
Environment
Compliance
Quality
Productivity
Yield
Cost
The 4 Sources of Risk
EquipmentProcessesPeopleInputs Acted on by
To produce
Finished Goods/Services
The Operation
• Any failure of the operation to produce a good or service that meets the customers requirements is a result of 1 of 4 sources:
1. A person failed to do what they were expected to do.2. A process failed to perform as expected3. A piece of equipment failed to perform as expected4. Un-managed change
The foundation of an Operational Excellence Management System
Performance Indicators
Four Sources of Risk
Finite Causes of Failure
Specific Key Controls
OEMS Elements
Safety
Environment
Compliance
Quality
Productivity
Yield
Cost
People
Processes
Equipment
Change
Each source of risk can be analyzed for the key causes of failure
People
Unaware of expectation
Unable to perform as expected
Chooses not to perform as expected
Expectations don’t exist
Expectations not communicated
Expectations not enforced
Lack of knowledge
Lack of talent
Lack of virtue
Wrong incentive
The foundation of an Operational Excellence Management System
Performance Indicators
Four Sources of Risk
Common Causes of
Failure
Specific Key Controls
OEMS Elements
Examples
Expectations don’t exist
Lack of knowledge
Wrong incentives
Equipment not capable
Personnel not allocated
Process not capable
MOC inadequate
Safety
Environment
Compliance
Quality
Productivity
Yield
Cost
People
Processes
Equipment
Change
For each key cause, there is a Key Control to prevent the failure
People
Unaware of expectation
Unable to perform as expected
Chooses not to perform as expected
Expectations don’t exist
Expectations not communicated
Expectations not enforced
Lack of knowledge
Lack of talent
Lack of virtue
Wrong incentive
Ops/maintenance procedures/policies/standard work
Core communication strategy
Audits/assessments, org structure, performance management
Training/certification
Selection process
Culture, selection process
Compensation strategy, performance management
The foundation of an Operational Excellence Management System
Performance Indicators
Four Sources of Risk
Finite Causes of Failure
Specific Key Controls
OEMS Elements
Examples
Vision/procedures
Training/certification
Performance mgmt
Engineering disciplines
Maintenance planning/scheduling
Design for Six Sigma
MOC process
Culture
Process control plan
FMEA
Examples
Expectations don’t exist
Lack of knowledge
Wrong incentives
Equipment not capable
Personnel not allocated
Process not capable
MOC inadequate
Safety
Environment
Compliance
Quality
Productivity
Yield
Cost
People
Processes
Equipment
Change
The Key Controls can be grouped into Elements to facilitate application
Value of the Elements
• Easier to remember
• Creates common language that facilitates learning
• Encourages systems thinking
Risk Identification
Process Hazard
Analysis
Failure Modes Effects
Analysis
Risk Registers
The Key Controls can be grouped into Elements to facilitate application
Value of the Elements
• Easier to remember
• Creates common language that facilitates learning
• Encourages systems thinking
Risk Identification
Process Hazard
Analysis
Failure Modes Effects
Analysis
Risk Registers
The foundation of an Operational Excellence Management System
Performance Indicators
Four Sources of Risk
Finite Causes of Failure
Specific Key Controls
OEMS Elements
Examples
Vision/procedures
Training/certification
Performance mgmt
Engineering disciplines
Maintenance planning/scheduling
Design for Six Sigma
MOC process
Culture
Process control plan
FMEA
Examples
Expectations don’t exist
Lack of knowledge
Wrong incentives
Equipment not capable
Personnel not allocated
Process not capable
MOC inadequate
Leadership
Employee accountability
Risk identification
Risk mitigation
Knowledge sharing
Management of change
Continuous improvement
Safety
Environment
Compliance
Quality
Productivity
Yield
Cost
People
Processes
Equipment
Change
Implications of the 7 Element OEMS • Benchmarking is essential• Manage the sources of risk, not the outcomes• The OEMS is applicable across all types of
operations• All incidents are the result of a failure of at
least one Element• You must break the vicious complexity cycle
Agenda/Objectives• Discuss reasons a new approach is necessary
• Defining operational excellence (OE)
• Explain the foundations of the operational excellence management system (OEMS) and state its implications
• Describe the steps in implementing an OEMS
OE is achieved by applying plan-do-check-adjust to each element
Audits, assessments, and
metrics
Management review
Goal translation and task execution
Goal planning and budgeting processesPlan
Do
Adjust
Excellence in each element will result in OE.
Excellence in each of the 7
Elements
Check
Developing the OE planOutputProcess Steps
Determine the “size of the
prize”
Benchmark excellence in
each key value driver
Measure current performance in each key value
driver
Identify gaps in OEMS elements
Benchmark excellence in each element
Assess current state of each
element
Develop OE planPrioritize
element gaps to close based on potential value
Schedule, and resource
strategies for closing gaps
Metrics and targets that will be used to measure progress.
List of the systemic breakdowns that
are causing failures.
Prioritized action plan.
There is an “order” to implementation
Leadership
Employee accountability
Risk identification
Risk control
Knowledge sharing
Management of change
Continuous improvement
Committed leadership is the foundation
Employees must know their accountabilities
Once leaders and employees are committed to preventing risks, identifying them creates value
Risks must be identified and assessed before they can be controlled
Controls must be in place before employees can be trained on them
Processes must be clearly defined and controlled before change can be managed
Assessing a process that is known to be out of control often creates little value
Summary• A new approach is required due to complexity• First Step: Define and quantify OE• The 7 Element OEMS breaks the vicious
complexity cycle• Apply plan-do-check-adjust to each element• Remember that there is an “order” to things
Questions
Email: [email protected]
On the Web: www.wilsonperumal.com
Blog: www.wilsonperumal.com/blog
Twitter: @cpseifer
@Wilson_Perumal
LinkedIn: http://www.linkedin.com/in/christopherseifert
http://linkd.in/10BnH1i
Phone:
(972) 800-3618
(972) 716-3930
Contact Information