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.
1. A New Approach for a Complex
World
A New Perspective on
Operational Excellence
2. 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
3. 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
4. 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
5. 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
6. The Vicious Complexity Cycle
Complexity
increases
Poor
execution
Loss of
process
control
Poor
business
results
More
people &
processes
Vicious
Complexity Cycle
7. Traditional approaches aren’t effective
in the face of complexity
• Address individual
processes – not
interactions between
product, process, and
organization
8. 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
11. 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
12. 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
13. Operational Excellence delivers
industry leading performance
Sound
Strategy
Operational
Excellence
Leading
Performance
7 Value Drivers
1. Safety
2. Environment
3. Compliance
4. Quality
5. Productivity
6. Yield
7. Cost
Strategy
1. Product portfolio
2. Markets served
3. Distribution
channels
4. Price point
5. Level of service
6. Partnerships
7. Operating model
Operational
excellence is the
execution of the
business strategy
more consistently
and reliably than
the competition.
14. Operational Excellence is a function
of the management system & culture
Sound
Strategy
Operational
Excellence
Leading
Performance
Effective
processes
and
procedures
Culture of
Operational
Discipline
Operational
Excellence
Understanding this relationship helps cut through complexity to
quickly identify the real problem from the “top—down”
15. 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
16. The foundation of an Operational
Excellence Management System
Performance
Indicators
Safety
Environment
Compliance
Quality
Productivity
Yield
Cost
17. 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 expected
3. A piece of equipment failed to perform as expected
4. Un-managed change
18. The foundation of an Operational
Excellence Management System
Performance
Indicators
Four Sources
of Risk
Safety
Environment
Compliance
Quality
Productivity
Yield
Cost
People
Processes
Equipment
Change
19. 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
20. The foundation of an Operational
Excellence Management System
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
21. 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
22. The foundation of an Operational
Excellence Management System
Performance
Indicators
Four Sources
of Risk
Finite Causes
of Failure
Specific Key
Controls
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
23. 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
24. 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
25. 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
26. 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
27. 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
28. 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
29. 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.
30. 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
31. 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
33. Email: cseifert@wilsonperumal.com
cpseifer@gmail.com
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
Notes de l'éditeur
Achieving Operational Excellence is more important than ever Competition is greater – margins are tighter Expectations are higher – customers, shareholders, community/government News of poor performance travels fast – social media Traditional approaches are not achieving expected results 58% of executives report their continuous improvement programs produced minimal financial impact1 *2010 Accenture Survey Chevron CEO Quote about LEAN/Six SigmaOther data points Leadership Engagement is often blamed Is this really the case? They invested the money – why didn’t they get the results
Given two companies with similar strategies, the one that executes better will have greater performance across ALL 7 Value Drivers.
Given two companies with similar strategies, the one that executes better will have greater performance across ALL 7 Value Drivers.