The Benefits of Operational Excellence

Since thoughts about our manufacturing activities and how they relate to the growth of the business depends on how we define Operational Excellence, describing the benefits of Operational Excellence may not be such a simple process.

Once Operational excellence is achieved, the operational benefits that normally stem from continuous improvement are automatically enhanced in the processed.

Here are some of the benefits we are talking about:

• quality
• budget
• performance
• lead time
• inventory turns
• delivery

However, Operational Excellence has a more pronounced effect on an organization that runs much deeper:

Specifically, it provides exceptional business results in the shortest time possible.

The beauty about it is that managerial intervention is kept at a minimum (or not needed at all) once Operational Excellence is achieved in a business operation. On top being completely capable of making sure the customer receives the product, everyone working in the flow will also be able to identify issues before or after they occur. And then, they will be able to take pre-emptive action (before) or fix them (after) using standard work that was previously established.

Management Should Not Be Focused on Damage Control but the Growth of the Business

How will the leaders and managers in the organization utilize their time in this environment when they aren’t too busy attending meetings, doing damage control and going after people and parts? Their energy will be geared towards business growth.

Particularly, in these areas:

• finding new clients
• sustaining relationships with current customers
• new product development
• entering new markets

By achieving Operational Excellence, organizations can move in the direction of growth and profitability using their operations; instead of just using them merely to produce more and more products. If there is no time to grow the business, the business will remain stagnant. And Operational Excellence’s biggest benefit is in giving businesses more time to build forward momentum – moving away from stagnation.

With Operational Excellence, the other benefits that usually accompany a commitment to continuous improvement are realized as well. However, the true benefits lie in the way Operational Excellence enhances operations for the betterment of the entire organization; not just in the way it enhances operations in and of themselves.

Case Studies

Many companies have experienced the benefits of Operational Excellence. Below are examples of real-life scenarios:

The Instrumentation Products Division of Parker in Europe

The Instrumentation Products Division of Parker in Europe is known for making manifolds, valves and fittings for the petrochemical, gas and oil industries. They managed to get their business’ operational side to run through a “self-healing flow” after achieving Operational Excellence. Now employees are able to fix any breaks in the flow. This has allowed the organization to reallocate resources, such as capital and time, to other areas other than production, allowing them to foster growth and innovation.

Parker saw the following results:

• In under a year, three products were launched by Parker IPDE – it took ten years for their competitors to do the same
• The organization’s manifold was expanded, making it encompass 18-percent of its business operations from 2003 to 2008 – previously, its business model did not even consider it a factor
• Employees that previously worked in production are now making significant contributions to the growth of the business
• Processing of daily quotes by Parker IPDE has been improved by 30-percent, on top of increasing the value of quoted items by 23-percent

IDEX Health & Science

After IDEX Health & Sciences (IH&S), an IDEX-owned business that makes fluid handling equipment for diagnostics and analytic systems, managed to achieve Operational Excellence, it grew significantly.

• The business unit saw a threefold growth above the market average in 2010
• New systems and products made up 35-percent of their revenue in the same year
• 60- to 70-percent of the general manager’s time is now spent growing the business by entering emerging markets, finding new customers and developing new products

MicroPump

Micropump is another business owned by IDEX that managed to achieve Operational Excellence. In the process, they managed to spur innovation with the resources and time they freed up.

• The business unit saw a fourfold growth above the market average in 2010
• Between 2009 and 2010, new products brought in 162-percent more revenue
• They spent 125-percent more of their time innovating in 2010 compared to 2009, which made the company experienced a 240-percent increase in their dollars from their innovation efforts

Hypertherm

Hypertherm is an SME from Hanover, New Hampshire that is owned privately and has Operational Excellence ingrained in its business operations. They have over 600 associate production employees and none of them need to be managed since they utilize visual indicators to know when its time for production and time to restock materials. This enabled the company to do away with a production control department. Almost all the efforts of Hypertherm have been channeled towards the growth of the business thanks to Operational Excellence.

• They managed to regain their normal sales levels in 2009, which was after the recession, putting themselves a year ahead of their recovery schedule
• Hypertherm manages to import almost 30% of its products to Europe and about 25% to Asia from its headquarters in Hanover, New Hampshire
• The manufacturing department’s vice president has said business operations are no longer a problem for them

In conclusion, gains experienced by these companies stem from making sure the “customer’s flow of value is recognized by all employees and each of them works towards making sure the flow is never interrupted,” which is the destination of their continuous improvement journey. It wasn’t because the companies reduced wastage through improvement efforts. Since the operations have little-to-no need from managerial intervention and a self-healing flow was established, leadership found themselves with free time, which they redirected towards the growth of their respective companies.