Operational Excellence: The New Frontier for Lean

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By Kevin J. Duggan

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One of the keys to Operational Excellence is the visual factory, which involves much more than a clean, organized, lean factory.

For years, companies were taught that the purpose of Lean Manufacturing was to eliminate waste. To this end, organizations looked for problem areas in their operations that could be fixed by running kaizens, or rapid improvement events. These kaizens were then repeated over time as new problems were recognized, with the ultimate goal being to create a culture of continuous improvement in which employees see waste and eliminate it.

With the advent of value streams, companies progressed to designing end-to-end flow using guidelines and principles for creating a flow at the rate of customer demand first described in the book “Learning to See[1].” Since then, companies have learned how to design flow for mixed model pacemakers[2], shared resources[3], and even the office[4] by applying specific guidelines that are unique to each environment. Taken together, these guidelines create a robust value stream flow throughout the entire operation and represent a significant organizational achievement in the world of Lean.

The New Frontier

In recent years, companies have applied new concepts to move beyond the traditional Lean goals of eliminating waste and value stream flow, and to leverage operations not for just efficiency, but for top-line business growth. These concepts, which include “self-healing” value stream flow, or flow without management intervention, are embraced in the pursuit of Operational Excellence.

While Operational Excellence has previously had a very ambiguous definition, it now has a very practical one, and that is, “when each and every employee can see the flow of value to the customer, and fix that flow before it breaks down.” [5] This means that not only do we have a robust lean flow based on design guidelines, each employee can tell if that flow is normal or abnormal and knows how to fix abnormal flow on his or her own without management intervention.

One of the keys to Operational Excellence is the visual factory, which involves much more than a clean, organized, lean factory. Instead, visuals are for seeing end-to-end flow and for indicating normal flow from abnormal flow throughout the entire operation, including the office and supply chain. In fact, our visuals should be so good that a visitor should be able to walk into the operation and tell us if it is on time to customer demand, without asking any questions.

Since an organization that runs on the principles of Operational Excellence requires very little management involvement, company leadership can spend its time working on offense, or activities that grow the business. Therefore, the goal of Operational Excellence is not waste elimination or efficiency, but top-line business growth.


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OpEx in Action

One company that has harnessed the power of Operational Excellence is the Hanover, New Hampshire-based Hypertherm, which employs more than 1,300 associates. Hypertherm has virtually no production control department for its staff of over 600 production associates that build highly technical plasma cutters. And, while the products are built with locally-sourced labor and a supply chain mostly (>97%) located within 150 miles of Hanover, the company sells over 64 percent of its products globally, including 24 percent into low-cost countries – the opposite of most companies in the United States today.

By achieving Operational Excellence and pushing lean concepts to a new level, Hypertherm and other companies are learning to leap-frog their competition and grow their businesses year after year, leading the way in this new frontier for Lean.

 


[1] Rother, Mike and John Shook. Learning to See. The Lean Enterprise Institute. Cambridge, Massachusetts. 2003.

[2] Duggan, Kevin J. Creating Mixed Model Value Streams: Practical Lean Techniques for Building to Demand, Second Edition. Productivity Press. New York, New York. 2012.

[3] Ibid.

[4] The Faculty and Staff of the Institute for Operational Excellence. The Office that Grows Your Business: Achieving Operational Excellence in your Business Processes. The Institute for Operational Excellence. North Kingstown, RI. 2009.

[5] Duggan, Kevin J. Design for Operational Excellence: A Breakthrough Strategy for Business Growth. McGraw-Hill. New York, New York. 2011.

 

Additional Reading

Operational Excellence for the Future of Manufacturing

What Do Johnny Nash and Lean Manufacturing Have in Common?

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