a new perspective on operational excellence -...

10/21/2013

1

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

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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

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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

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Traditional approaches aren’t effective

in the face of complexity

• Address individual

processes – not

interactions between

product, process, and

organization



Bottom-up approach: Improving one process at a time

Top-down approach: Start with a framework

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• Attempt to improve before establishing

control

Agenda/Objectives



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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

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Operational Excellence delivers

industry leading performance

Sound

Strategy

Operational

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.

Agenda/Objectives






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The foundation of an Operational

Excellence Management System

Performance

Indicators

Safety

Environment

Compliance

Quality

Productivity

Yield

Cost

The 4 Sources of Risk

EquipmentProcessesPeopleInputsActed on

byTo

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

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Performance

Indicators

Four Sources

of Risk

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 Unaware of expectation

Unable to perform as Unable to perform as expected

Chooses not to performChooses not to performas expected

Expectations don’t exist

Expectations not Expectations not communicated

Expectations not Expectations not enforced

Lack of knowledge

Lack of talent

Lack of virtue

Wrong incentive

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Performance

Indicators

Four Sources

of Risk

Common

Causes of

Failure

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 Unaware of expectation

Unable to perform as Unable to perform as expected

Chooses not to performChooses not to performas expected

Expectations don’t exist

Expectations not Expectations not communicated

Expectations not 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

, performance Compensation strategy, performance management

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Performance

Indicators

Four Sources

of Risk

Finite Causes

of Failure

Specific Key

Controls

Examples

Vision/procedures


Performance mgmt

Engineering

disciplines

Maintenance

planning/scheduling

Design for Six Sigma

MOC process

Culture

Process control plan

FMEA

Examples


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

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Performance

Indicators

Four Sources

of Risk

Finite Causes

of Failure

Specific Key

Controls

OEMS

Elements

Examples

Vision/procedures


Performance mgmt

Engineering

disciplines

Maintenance

planning/scheduling

Design for Six Sigma

MOC process

Culture

Process control plan

FMEA

Examples


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

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Agenda/Objectives






• 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

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Developing the OE plan

OutputProcess 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 plan

Prioritize 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

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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

10/21/2013

16

Email: [email protected]

[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

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