2017 has come to an end and we have set foot in 2018. We believe that Operational Excellence shall be the key to sustainable productivity and continual development even in 2018. It manifests the entire process through integrated performance across revenue, cost and risk. In this note, we want to put across key points that shall bind the beads in a single string in case of Operational Excellence in this new year. Below is the much-talked checklist for Operational Excellence.
- Value Adding Ratio – Measure of Costs
Cost is far most one of the major concerns of the manufacturers. It plays a major role in determining the Operational Excellence of the entire system. Keeping a better track of costs by closing monitoring the VAR is the key. VAR which is the function of non-value adding activities and value-adding activities can be improved by eliminating inefficiencies or wastes in the process.
- Cost of Poor Quality (COPQ) – Quality Measure
In this cut-throat competition, quality is something which is order qualifier and cannot be neglected. However, quality should be built in the process instead of reworking. Keeping a close track of the cost of poor quality will help improve processes and its throughput by drawing more sensitivity towards the same.
Cost of Poor quality is any cost that the company will incur if the quality of the product or service is not perfect. This will further lead to unhappy customers.
CoPQ leads to:
- Identifying and quantifying quality cost
- Effective use of resources
- Robust measurement system
- Breakthrough improvements
- On Time – In Full – Error Free (OTIFEF) Delivery Ratio
A checklist of Operational Excellence cannot be completed without delivery parameters. Timeliness is like an ace in the deck of cards when it comes to operational excellence. It can be achieved through an efficient system and right metrics.
On Time In Full Error Free Delivery ratio is one of the key measurement metrics. This ratio measures how the client gets what they want at the right time, in right quantities and error free. To reach a high level of OTIFEF delivery ratio all the functions in the supply chain must work at their finest levels.
It must be noted that it is a function of three aspects time, quantity and transactional errors. We shall discuss it in details in next articles.
- Value Added Per Employee – Manpower Productivity
Productivity is the ultimate result one wants to achieve through operational excellence. Hence, it has got be on the checklist. Higher productivity is what motivates the workforce as well as encourages the clients to put more trust in you. Moreover, operational excellence along with high productivity leads to continual improvement culture in any organization.
It would be good to translate manpower productivity to value addition ‘cos that is something determines the impact on bottom line, a key for any business.
- Overall Equipment Effectiveness (OEE) – Measure of equipment health
Equipment is the fuel of the manufacturing industry. Hence, a regular and precise tracking of the equipment and measuring Overall Equipment Effectiveness can help in planning the entire production routine and improving performance, thus, gaining operational excellence.
OEE is an effective tool to benchmark, analyze, and improve the equipment health. It is a function of availability, performance and quality.
Structured implementation of OEE improvement practices can lead to remarkably visible results like improved machine availability, reduced maintenance efforts and better awareness of equipment health across all team members.
- Near Misses – Safety Measure
Safety is one of the most underestimated factors. As stated in Heinrich’s Law: that for every accident that causes a major injury, there were 29 accidents that caused minor injuries and 300 near misses that caused no injuries.
Every organization should have a system to measure near misses to further act upon the same and creating safe workplaces.
Team Faber Infinite via its Organizational Transformation Framework has helped organizations across industries and geographies to create sustainable measurement systems leading to improved productivity, quality, costs, delivery, safety and most important employee morale.
We hope that the above-mentioned checkpoints would help you to achieve higher degrees of success in your operational excellence journey in the year 2018 and you craft better growth opportunities.
Written & Compiled By Faber Kishlay Krishna & Faber Mayuri Pandya