The one Crucial ingredient you need to ensure your OPEX program is successful

By: Mickey Granot

Industrial organizations have a clear understanding – the performance of the factory (factories) and their logistics is critical to their business success. It affects their competitiveness (as it dictates the proposed service levels and price), it affects their customer satisfaction (through actual service levels) and it affects profits, cash flow and profitability and return on investment (through the actual costs and investments). This obvious understanding leads industrial organizations to always try and find ways to improve their operations.


This need to improve manufacturing is further enhanced by the impact of external factors, such as; Globalization, New production technologies, innovative transportation solutions, Industry 4.0, Internet Of Things (IOT), Opex, Lean, 6-Sigma, Kaizen, 5S, ERP, etc. All of these buzzes whistling around attract attention. Some are perceived as risks that mandate action, some as opportunities that must be considered. Especially when there are either exciting stories about how great these trends are, or stories about competitors already engaged with them.


From one hand side management knows something needs to be done to become better, and clearly not a one time effort but rather continuously, from the other hand there are so many options that, judging by the stories, are not only key ingredients for that, but actually are THE way to realize meaningful improvements. But what change, out of all of these options, should management choose to implement? Here we need to look at these initiatives in two groups; the first group is the group of initiatives aimed at decreasing costs, and the second group is the group of initiatives aimed at improving the service levels. (already here the readers should ask themselves, is it viable to treat these initiatives separately?)


Many of the initiatives companies adopt first are aimed at cost reduction, such as; outsourcing, replacing equipment with more efficient equipment, product reverse engineering, alternative supply sources, shifting production sites to cheaper regions of the world, outsourcing and similar. Choices here are typically made through the identification of the initiatives that have the greatest anticipated impact on cost.


Then companies look at the initiatives that can help improve the service level, such as; :Lean manufacturing, 5S, Kaizen, the 7 Quality tools, QFD, advanced scheduling systems etc. Choices here are typically made through considering competition choices and personal biases of the decision makers (basically what seems most attractive to them).


One may believe, these choices are sensible and the most appropriate ones to make. Still, if one considers the statistics of implementing many of these approaches within operations, one will find that the following are the most common experiences:

  1. Operational performance as measured by the KPI’s that effect competitiveness, customer satisfaction, profits, cash flow and profitability are very rarely noticeably improving, and
  2. (for the changes this is relevant) After not a very long time (usually within a year) there is almost nothing left (or still being used) out of the implemented changes.


As a result industrial companies find themselves again at the same starting point (or even worse) which intensifies the need to reduce cost (as other aspect of improving competitiveness were not too successful) as well as the disbelief that fashionable trends can really work for us. Companies find themselves trapped and construct the story of “we are different”, “of course it worked for them, they are different”, or even “I do not believe it really worked for them, it is just a story people tell so they don’t have to say that they have failed”. The sad reality is that more often than not, it is true; companies did not get the expected improvement , or even when they did get them, they could not sustain them for long and people do not like to admit to failures. Mostly, meaningful improvement efforts are just a toll companies are paying so that it is acknowledged that they are part of the game, they themselves do not have too high expectations.


But this is not a mandatory reality, a faith that cannot be escaped. The different tools and approaches are excellent. However, like with most (any) other tool, if it is misused it is not likely to do the expected job. There is one key ingredient, without which meaningful and sustainable improvement is highly unlikely.


Try to imagine a multinational firm that operates in many international markets. Now try to imagine a gathering of all leaders of the sales organizations in all local markets. The purpose of this meeting is to create an action plan for increasing sales globally, next year. Lastly, imagine that every leader only speaks his native language, and no one speaks a language that the others understand. How successful do you expect this gathering to be? Without a common language, this gathering is doomed. It does not mean sales will not increase next year, however it does mean that these gathering will not end with an agreed upon, global, feasible action plan for the purpose of this gathering.


Do you think this example is extreme? It does not resemble real life? Well, think again. Even when all people speak the same spoken language they still speak totally different languages. Consider all the stakeholders of the company’s operations; CEO, CFO, CMO, COO, CIO, VP New Product Development, VP HR, VP Sales, Customers, Prospects, Suppliers, Department managers, VP Quality, quality controllers, production planning and control, operators, warehouse people, logistics, transporters etc. All of them looking at operations. All of them with different points of view and different interests and at the same time, all of them with some level of influence on the overall operations performance. They all have a common objective – plan, execute and improve operations activities and performance. But, they speak different “operations” languages. The effort is doomed. It does not mean operations will not improve, however it does mean it is highly unlikely that operations will meaningfully and continuously improve and it does mean that any realized improvement will be short lived.


Without creating a uniform, global, clear and easily understood operational language, meaningful improvement efforts are doomed. But what is this common operations language? What can create this uniformity, so critical for any successful improvement initiative? To answer this question, we need to understand in what way do we speak in different operational languages today? What is the key disagreement between all stakeholders of operations? There may be many such disagreements, but if we group them according to the type of disagreement, and arrange all the types by the cause and effect relationships between them, at the base of this cause and effect lies one type of disagreement. A majority of the disagreements are exactly of that type, and all other disagreements are a causality result of this type. And this disagreement, is the disagreement on operational priorities. Everyone strongly believes that the most important, top priority activity, is the one they think to be top priority. And everyone of the stakeholders, has a different such task.


To stand a chance to embark on a successful continuous improvement journey it is absolutely critical to first install and instill a common, uniform, global, clear, agreed upon and easy to understand system that provides all stakeholders with clear priorities they can follow with the full trust that this priority provides the best response to what they believe, from their point of view, to be top priority while at the same time also being the correct top priority for the system as a whole.


Such a system is basically a control system, that is applied to all operational activities. monitors them against appropriate KPI (not KPI’s), as a result of the monitoring this system assigns clear and simple priority (Too late, Urgent, important, regular, don’t touch) that everyone understands and can follow while fully understanding how adhering to this priority advances both the valid local need as well as the valid global need. The fact that with time, priority of a task may change from one level to another, it is possible to define a point (such as “whenever a task turns Urgent) that indicates that smooth flow is disturbed and to document where was the task delayed when it turned urgent. Analyzing this data will clearly mark the area where the operations should focus attention, so that the overall performance of the operations is improved. And once again, this identification will be clear, understandable and accepted by all.


Now, all stakeholders speak a common language. Now we stand a chance to launch effective improvement initiatives. And now, we can apply the beautiful and exciting operations management tools effectively. Because, if for example, over the last analysis period most of the flow disturbances were “waiting for set-up completion at work center X”, it is clear an effort to reduce set up is required at work center X and it is clear that once this set up is reduced the overall flow of the company will become smoother. Therefore, by knowing where we should focus our attention to improve the system performance, we can open the amazing operations management tool box, choose the appropriate tool at the appropriate time and exploit it’s potential. More than that, the minute we know where to focus our improvement attention, the task of analyzing the cause, choosing the best solution and implementing it can be assigned with the appropriate stakeholders and as a result the commitment to the change itself and to its sustainability is significantly enhanced.

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