In Pursuit of Operational Excellence
Manufacturers should consider the value of a “back to basics” approach to production
When I began my career in the chemical industry, my company’s initiatives impressed and intrigued me. The leadership would lay out our direction and focus, as well as the metrics by which we would measure success in the coming year. Eventually, I came to understand that, even with the push to improve profitability through various company initiatives, it makes good business sense to not lose sight of the measurable basics. While that concept seems simple enough on the surface, it is often forgotten in the drive to meet all the demands in today’s manufacturing operations. Moreover, these metrics are intertwined when delivering continuous improvement.
The foundation of continuous improvement is predicated on four basic interlocking pieces and their corresponding metrics: safety, planning, efficiency, and reproducibility. To achieve these milestones, operations staff cannot work in a silo, but rather need to be engaged with other internal teams (e.g., R&D, technical, marketing and sales) and, most importantly, with customers. These types of interactions within a company’s various disciplines are critical for a successful product and a profitable company by every measure.
Safety can never be overstated. While safety is typically viewed as a plant concern, that notion is incorrect―and can lead to unnecessary risks. It is imperative to engage every department and employee in safety—from the cleaning crew all the way up the organizational chart, including executive management. Garnering the commitment of all employees and groups through direct involvement and accountability demonstrates and reinforces that safety is truly a core value. Employee commitment is a critical component of the drive toward continuous improvement performance in safety, as well as all other aspects of the business. Primary safety metrics are TRIR, DART (shown in Figure 1), Near Miss, etc.
Planning your approach based on the parameters that your research and technical departments designed into the product and according to your marketing and sales strategy—while keeping the customer’s needs front and center—is a tall order. Yet it is imperative for supporting delivery of the right product at the right time. This type of engagement and process builds competence in timing and ensures reproducibility for the customer. Primary metrics used for planning include return on invested capital, cost of returned goods, inventory level (days’ sales
in inventory, inventory turns, etc.), and on-time delivery.
Efficiency is focused in three areas; exchanging information with research and technical departments to optimize the process and maximize yields (while reducing waste), engaging sales and marketing staff to support inventory planning and developing appropriate site and resource needs, both short- and long-term. Adapting at all levels to the customer’s requirements is achieved by providing the best product for the money, including end-of-line needs such as packaging and delivery. This commitment to efficiency builds quality and value for the customer and throughout operations. Primary metrics used to measure efficiency include percent yield, cycle time, volume/dollars sales per direct labor hour worked, return on invested capital, waste disposal costs, inventory levels, and on-time delivery.
Reproducibility is defined as consistently adhering to the processing and raw material requirements that were defined by research and technical departments, with repeatable results in the manufacture of a uniform product built to the customer’s exact specification. Done right, reproducibility will create goodwill with your customers, who will rank you as a qualified supplier, which in turn improves customer relations and ensures repeat business for your sales and marketing department. Primary metrics used to measure reproducibility are first-time right, rework costs, non-prime inventory levels, and on-time delivery.
It is important to use metrics that are industry benchmarks for performance and not subjective “feel good” values. For example, I recently heard from a client who was receiving multiple, ongoing complaints about the long lead times for exported goods to its customers. My client was baffled because their on-time shipment metric measured at over 96.5% (as depicted in Table 1).
After investigating the claim, we learned that their internal standard for on-time deliveries was getting the material on a ship within 14 days of dispatch from the plant. While this metric was useful in uncovering delays with ship bookings, it missed the customer’s requirement of receiving their delivery on time. The appropriate metric would measure the lead time from order placement to shipment against the customer’s preferred delivery date. While their performance was indeed reasonable, as reported by their metric, it missed the fundamental requirement and caused customer dissatisfaction. The use of a new metric, performance vs. customer requested ship/delivery date, has helped the company understand and identify the root cause of its customer’s dissatisfaction.
When your company unveils a new initiative, embrace and support it. But remember that best practice means keeping your customer’s requirements front and center using the appropriate basic operations metrics and industry benchmarks to ensure operational excellence. ASI
W. Pete Smith is a director at The ChemQuest Group Inc. and ChemQuest Technology Institute. For more information, visit www.chemquest.com.