I find it interesting how phrases get coined and become part of our vocabulary, when in fact, considerable confusion exists around a given term’s definition. These “pie in the sky” phrases sound good, so people are eager to use them to describe how their production processes are performed or their inventory tracking capabilities are achieved. But, in the end, if a common definition doesn’t exist, what is really being said at all?

It is under this scenario that I would like to talk about the phrase “Operational Excellence.” On paper, it not only sounds good, it looks good. Who can argue with a manager explaining that they adhere to a strict set of guidelines to achieve the highest levels of operational excellence? But, if we peel back the onion, what exactly does it mean to perform at a level of operational excellence?

The first question is “Must it be comparative?” In other words, can only the top 20% of manufacturers truly be operating at a level of operational excellence? Or, theoretically, could all operations be performed in an “excellent” manner? I think culture must be considered in order to find an answer. For example, from my experience in working with our German colleagues, they are uncomfortable with using this phrase because the term “excellent” has extraordinary qualities, which are seldom seen in business. In the end, my answer is that some threshold must be identified, which can then be used as a barometer to measure what level of operational excellence has been achieved. Can everyone be operating at this level? Most likely not. True operational excellence is rare because it is difficult to do.

One way to better address this question is to establish a set of criterion as an evaluation metric. A company’s ability to score well on each attribute would suggest a high degree of operational excellence. Here are the criterion I would suggest:

1. How collaborative is your enterprise? How well do you work together within departments as well as across plants? How easy is it to solicit feedback from peers in other regions, or from simply down the hall? Those organizations that have instilled a sense of ‘social’ in how they operate tend to deliver greater results, contributing to a higher achievement of operational excellence.
2. What levels of process governance exist? This is a far-reaching topic, as it impacts not only regulatory and corporate compliance initiatives, but also to your firm’s ability to effectively implement Lean manufacturing, Six Sigma and other continuous improvement programs. If processes are inconsistent and improvement can’t be readily identified, improved and replicated across your organization, it will be difficult to truly achieve “excellence” status.
3. How agile are you? This is another one of those terms that is often used but seldom specifically defined. I am referring to an organization’s ability to change quickly to new market opportunities, demand shifts, supply chain disruptions as well as simply the need to re-tool operations. How tough is this for you to accomplish? Does it take hours, or months? Based on what measure you use to accomplish change, you can then score yourself on how responsive your organization actually is.
4. Do you have a culture of innovation? I know … another one of those vague terms. Here I am referring to not only an ability to consistently deliver new products to market that serve new needs, but also an organization’s ability to think creatively to solve business issues, such as resource constraints, economic down turns or labor shortages. Those that have a good track record of innovative thoughts and processes to address these challenges score well in this criterion.
5. How well do you operate on a global scale? This factor encompasses a company’s ability to design, build, distribute and service anywhere. It is one thing to operate one plant and service one market. It is a completely different animal to do so effectively across locations, geographies, cultures and regulatory environments. Those organizations with a platform for manufacturing operations management that can track and trace materials, processes and resources on a global scale will be more readily capable of achieving a higher degree of operational excellence.

There you have it. My five criterion for operational excellence. For those engineers in the audience, you could apply a score of 1-5 for each of the above criterion. Then, if you score a 20 or higher, I would propose you are operating at a high degree of operational excellence, at least according to me! How well do you operate? What do you think of my criteria? I welcome your suggestions.