4 Reasons Why Operational Excellence Is Important To Your Company’s Survival
November 12, 2021
In today's increasingly changing and competitive marketplace, it is essential that companies continually improve their processes to achieve long-term growth. By adopting the operational excellence initiative, companies can realize increased revenues, quality improvements, a more empowered workforce, and enhanced customer relationships.
Maintaining operational excellence increases the chances of success since it positively impacts the organization on several levels. In many ways, it is a necessity that companies adopt the practice to survive and stay ahead of the competition, especially in today's volatile economic conditions. In this post, we’ll dive into why, exactly, operational excellence is important.
The Role of Operational Excellence in Company Survival
Operational excellence ensures that improvements are made for continued growth to gain a competitive advantage. The Harvard Business Review's research demonstrated that companies with peak operational excellence have 25% higher growth and 75% higher productivity. Without operational excellence, it is difficult to not only increase profitability, but continue to operate efficiently.
The following important reasons are why operational excellence is essential for your company's survival.
Optimize processes for improved efficiency: Companies that maintain operational excellence use streamlined, well-defined processes, or value streams, with rules and metrics. The improved efficiency eliminates waste while saving costs for all involved stakeholders. Inefficient processes can result in unsatisfied customers, increased expenses, and overworked staff, all of which will result in decreased productivity and profitability. Organizational drag, where processes waste time, can result in more than a 25% decrease in productivity.
Promotes agility in businesses: Operational excellence requires companies to be agile in the face of market changes, changes in customer tastes, and new technology. Without the ability to adapt to change, companies will find it difficult to survive. A study by McKinsey and Company found that 70% of agile companies rated highly in an Organizational Health Index (OHI). These companies demonstrated higher total returns to shareholders.
Improves the decision-making process through big data: The Internet of Things (IoT) technology enables manufacturers to access a wealth of data from sensors, pumps, motors, compressors, and conveyors. This data includes machine utilization and health, production rates, and other valuable metrics. Manufacturers who practice operational excellence harness this data and use it for greater insights into current processes. The data enables leaders to make better-informed decisions that ultimately have a positive impact on productivity. Companies that have not yet caught up with this technology will quickly fall behind the competition.
Empowers the workforce: Attracting and retaining experienced, talented staff is key to every company's success. Those that practice operational excellence empower their employees to assist in problem-solving. Team members are motivated to make suggestions for improvements that can lead to new opportunities, decreased costs, and increased demand. These actions also improve morale and reduce staff turnover and prevent labor shortages. Studies have shown that employees who are motivated and engaged are 44% more productive.
The Drive to Continually Improve and Grow
While companies were forced to take a reactionary approach in light of the global pandemic, those that followed the tenets of operational excellence and were agile, embraced technology, and streamlined decisions and processes, had fewer disruptions.
Operational excellence focuses on creating and continually improving value streams to produce quality products that customers demand. The operational benefits to manufacturing includes enhanced on-time delivery, and improvements in inventory turns, lead time, performance, budget, and quality.
Contributing to the overall growth of the business rather than simply producing the product is the premise behind the operational excellence concept. Operational excellence reduces costs by doing more for less, resulting in increased profitability. Companies that do not focus on improvement and growth will fall short in customer satisfaction, realize financial loss, and ultimately fall to the competition, especially during these turbulent times. MetaExperts is global network of Operational Excellence (OpEx) deployment experts and resources for flexible, on-demand short-term contract or contract-to-hire needs. MetaExperts align with your industry and OpEx initiatives and are thoroughly vetted through our unique 300+ Screening and Evaluation Process and aligned to your organization using a 47+ alignment process to ensure you get the right talent to solve your specific situation. To learn more, visit https://MetaExperts.com
Ron Crabtree, President of MetaOps, Inc., is an organizational transformation coach/trainer, operational excellence (OpEx) adjunct facilitator at Villanova University, Lean and Six Sigma (LSS) speaker, author and thought leader in business process improvement/re-engineering (BPI/BPR). He is a consultant to private industry and government agencies in supply chain management, design of experiments (DOE), statistical process control (SPC), advanced quality systems (AQS), program evaluation review technique (PERT), enterprise resource planning (ERP), demand flow, theory of constraints, organizational change management, and value stream/process mapping and management. Ron has a BA in Management and Organizational Development, is a Master LSS Black Belt, and is Certified in Production and Inventory Management (CPIM), Integrated Resource Management (CIRM), and Supply Chain Professional (CSCP) by American Production and Inventory Control Society (APICS). If you are an executive and would like to chat with Ron about anything related to business process improvement and operational excellence, please get on his calendar here: http://bit.ly/ExecutiveChat
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