Operational Excellence: Defined

April 18, 2007
It is when each and every employee can see the flow of value to the customer, and fix that flow when it breaks down.

Many companies drive operational excellence into their operations. Yet when asked exactly what it is, there is always hesitation. Answers such as "It's about process quality (making perfect parts every time)," or "Applying lean tools everywhere to eliminate waste" are common. It is not an easy concept to quantify, and very difficult to explain in simple practical terms to an operator on the production floor, so they know what to do to create and sustain it.

Where Will Your Lean Journey Take You?

Lean is a big component of Operational Excellence. Lean is based on elimination of waste, and the best way to eliminate waste is to create flow. Therefore the lean journey is one of creating flow. Flow is created at a cell level by using one piece flow techniques. Flow is continued at the value stream level by connecting processes or cells with FIFO (First In First Out) or supermarket (Kanban or Pull) systems.

Flow is created in the office through work flow cycles, integration events, virtual office cells, and pitch and recently more progressive companies have created flow in the supply chain by setting up formal connections such as Sequenced FIFO and kanban with suppliers. The intent of lean is to flow value at the rate of customer demand which is the first step towards Operational Excellence. The answer to the question, "Where will your lean journey take you?" -- Operational Excellence.

Defining Operational Excellence

Operational Excellence is when each and every employee can see the flow of value to the customer, and fix that flow when it breaks down. It's that simple. What this means is that each employee knows that the product moves from process A to process B in a specific quantity, at a specific time, to a specific location; otherwise, something is wrong.

Additionally, when something does goes wrong (and it will), they know what to do to fix it, without seeing their supervisor, reporting to management, or having a meeting. This happens in the office as well, where employees can see the flow of a customer order through several business processes and fix that flow when it breaks down in the same manner.

Think of it as orders flowing (from order entry through manufacturing to delivery) through a pipe. Someplace (in the office or on the manufacturing floor) the pipe gets clogged and the flow stops. The operators would know what to do to unclog the pipe and allow flow to resume without any management involvement. Employees create and maintain a lean flow, while management focuses on growing the business.

Seeing The Flow Of Value

What if anyone could walk to any area on a production floor and visually depict exactly how many processes each station is away from the customer? From any process, they would know how long it takes to get to shipping from that point. If it is simple enough so a visitor could see the flow, then each operator can see exactly where they are in the value stream, and how the flows works. All that is left is to create it in a way that each employee can see it.

Enter visual systems. The myth is that visual systems organize a factory and make it look nice and neat. Everything is labeled and everyone knows where everything is. It's time to break that myth. Visual systems should be designed to allow everyone to see the flow, even visitors. They should allow everyone to have the capability to answer the questions, "Are we on time to customer demand?" and "Is everything flowing the way it should be?" Simple ways to accomplish this can be color coded FIFO lanes, colored zones in supermarkets and identified areas of overproduction indicating a problem.

Fixing Flow

It is inevitable that value stream flow will fail; therefore, what matters is how the problem is addressed when it does happen. Standard work is the solution that drives Operational Excellence. So the question then becomes, "What is the standard work when flow breaks down?" In the lean environment, the answer cannot be to call the supervisor.

The key is to keep the decision making to a minimum, and that can be illustrated in a simple example. Two processes are connected by a FIFO lane that is divided into three zones green, yellow, and red. If parts are backed up into the green, everything is normal. If parts are backed up into the yellow (caution), something is going wrong. The consuming process may have standard work that tells them to rotate breaks to catch up (without asking a supervisor). If parts are backed up to the red section, the operator would go to the phone and call in second shift early, again, without asking a supervisor. Other methods include an escalation method to let management know that flow broke down and a fix is in process.

Operational Excellence is when each and every employee can see the flow of value to the customer, and fix that flow when it breaks down. Lean provides the road map to get there.

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