Operational Excellence

Journey to Creating Sustainable Value

John S. Mitchell

• Publisher: Wiley
• Year: 2015
• ISBN:
  9781118990148
• Edition: 1
• Topic: Technology & Engineering
• Subtopic: Chemical & Biochemical Engineering
• Index: Technology & Engineering

Provides the foundation and tools that are essential for an enterprise to bring Operational Excellence into their organizational culture; gain maximum results, benefits and value

• Strategies for and implementing details for enterprises at all levels of maturity from those with programs in place to those looking to improve safety, health, environment performance as well as the efficiency and effectiveness of their operations
• Includes topics from concept to sustainability satisfying knowledge requirements of all levels in the organization
• Defines program objectives; develops improvement strategies; identifies and prioritizes improvement opportunities; implements improvement plans; monitors, continuously improves and sustains results
• Applicable to a broad variety of operating enterprises, academic institutions and third party implementing organizations

CHAPTER 1
OPERATIONAL EXCELLENCE—THE IMPERATIVE

The term Operational Excellence describes the ideal state of an operating enterprise. It has great cachet at the highest executive levels and is being incorporated into the working culture by organizations committed to being the very best in all business, mission, and operating activities. Whether yours is among the great performing enterprises dedicated to remaining great, a good performer aspiring to become great, or one of the large number who know improvements are essential for continuing success, Operational Excellence and an effective Operational Excellence program are musts. This chapter and the following ones will define Operational Excellence concepts, principles, values, and requirements. Why Operational Excellence is a business and operating imperative, how the program and supporting elements must be mastered, and how Operational Excellence is implemented to achieve greatest results are all described in detail.

DEFINITION OF OPERATIONAL EXCELLENCE

Operational Excellence is an ideal descriptive term; in two words it clearly defines applicability and objective:

Operational refers to an operating enterprise, one that uses some physical means to produce and/or deliver a product and comply with a mission. Thus, Operational Excellence applies to a broad spectrum of industries and operating entities: process, production, power generation and distribution, continuous and discrete manufacturing, mining, food and beverage, life sciences, pharma, transportation, including pipeline, rail, and marine, and many more. Operational Excellence is especially well suited for industries/missions where process flow is fixed and predictability, minimal variation, and reliability are key to effectiveness. In addition to industrial organizations, the process and programmatic implementation described in this book are equally applicable to service industries: municipalities (e.g., fresh and waste water treatment), the military, and other types of operating enterprises where mission effectiveness rather than profit may be the governing factor. Principles expressed to achieve mission and organizational effectiveness apply equally to hospitality (hotel), hospital, financial, insurance, and similar firms that may manage physical and/or financial assets to maximize return.

Excellence is a broad objective that must be achieved and sustained to remain successful.

Definitions from Leading Global Enterprises

Chevron, a leading global enterprise defines Operational Excellence this way:

“Operational Excellence is the systematic management of safety, health, environment, reliability, and efficiency to achieve world class performance.”

Chevron Operational Excellence Management System

DuPont, another global leader states the following:

“Operational Excellence (OE)” is an integrated management system that drives business productivity by applying proven practices and procedures in three “foundation blocks:”

1. Asset Productivity
2. Capital Effectiveness
3. Operations Risk Management

DuPont: Delivering Operational Excellence to the Global Market, 2005

Under the heading of Operational Excellence, ExxonMobil stated their commitment in the 2008 annual report to shareholders:

“Ensuring the safety and reliability of our operations is fundamental to our business success and a critical challenge that ExxonMobil takes on every day.”

ExxonMobil 2008 Annual Report

The commitment to Operational Excellence continued in ExxonMobil's 2011 Annual Report:

“…we seek to maximize value and improve efficiency.”

ExxonMobil 2011 Annual Report

Emphasis the author

Operational Excellence was featured in ExxonMobil's 2012 Annual Report as one of five competitive advantages. Four full pages were devoted to Operational Excellence describing ExxonMobil's commitment to Operational Excellence culture, systems, and results in 10 specific areas:

• Management leadership, commitment, and accountability
• Risk assessment and management
• Facilities design and construction
• Information/documentation
• Personnel and training
• Operations and maintenance
• Management of change
• Third-party services
• Incident investigation and analysis
• Community awareness and preparedness.

Under the heading “Delivering Profitable Growth” ExxonMobil's 2013 Annual Report repeats their commitment to Operational Excellence in the 10 areas listed previously. In four pages (two of text), ExxonMobil expresses pride in their “culture of excellence” and states “…a steadfast commitment to improve the reliability and efficiency of our assets continuously, which leads to improved profitability.” Furthermore: … “our commitment to operational excellence … provides a solid framework to achieve safe and reliable operations.”

With leading global enterprises advocating a continuing commitment to Operational Excellence, there can be no doubt of its great importance to operating and financial success.

A Simpler Definition for Operational Excellence

Safely create greatest sustainable value

In this definition, safely goes without question and includes health and environmentally sound operation (SHE/EHS). Value must be defined for the specific enterprise. For some, it is profitability and shareholder value, for others, such as a municipality or public transport system, it could be cost-effective customer satisfaction.

This simple definition is all important. All subsequent processes, tasks, and activities within Operational Excellence detailed in this book will flow from and be prioritized by contribution to “Safely creating sustainable value.”

OPERATIONAL EXCELLENCE EMBRACES EVERYONE IN AN ENTERPRISE

Operational Excellence requires committed leadership, a positive working culture, and collective and individual ownership for excellence and success. All are necessary for real achievement in any endeavor to improve, gain, and continuously sustain greatness. From visionary, engaged executives, success-oriented leadership, and management to ownership, commitment, and responsibility at the working level, Operational Excellence embraces everyone in the enterprise.

Ambitious, clearly stated organizational objectives, importance, necessity and benefits, as well as organizational and individual responsibilities, must be clearly enumerated and totally understood by all.

Operational Excellence requires robust, reliable control, management and administrative systems, fully coordinated efforts, and ownership at all levels in the organization. This must be reinforced with complete and accurate practices and procedures, continuing learning and a total commitment to continuous, sustainable improvement.

Operational Excellence broadens horizons, consolidates, builds on, and enhances most existing programs while providing linkages and a laser focus on risk reduction and safely increasing business value/mission compliance. It requires thinking well beyond increasing efficiency to improving effectiveness and achieving results that contribute real value to the enterprise.

OPERATIONAL EXCELLENCE IMPROVES EFFICIENCY

For decades, the primary objective of an operating enterprise has been to improve efficiency. Operating efficiency, the ability to deliver a product or service with minimum waste, operating, and energy costs, has been considered essential since Henry Ford's first assembly line. Improvements in efficiency, the optimum combination of variables within an operating/manufacturing/service process, have historically translated directly into corresponding improvements in business/mission effectiveness, quality, delivery, and profitability. Total Quality Management, Lean Six Sigma, and the huge resources expended to optimize production control automation, increase efficiency, and provide more detailed business and financial reporting. All are well-known examples that testify to the importance of this area at the highest levels of executive management. Today, functional improvements in manufacturing, back office, supply chain, etc. are no longer sufficient. Real success requires totally coordinated enterprise-wide improvements in effectiveness.

EFFICIENCY AND EFFECTIVENESS

At this point, the all-important distinction between efficiency and effectiveness must be defined, Figure 1.1:

1. Efficiency: performing a given task well
2. Effectiveness: performing the correct task efficiently

Figure 1.1 Efficiency and effectiveness.

Efficiency is task oriented; it does not question whether the task was appropriate or even necessary. Effectiveness is results oriented; it addresses both the capacity of the task to achieve desired results and how well it was performed. Operational Excellence is focused on results, safe contribution to value—effectiveness.

By going beyond efficiency to concentrate on effectiveness, Operational Excellence elevates performance from simply performing activities safely and well, to safely performing the right activities exceptionally well at the right time. This is central to creating strategic advantage and the driver for continuous improvement. High performance organizations apply operational excellence to:

• Create a strategic, enterprise-wide imperative that coordinates and fully integrates business, technology, process, and practice for maximum effectiveness, leverage, and economy of scale to gain business/mission success.
• Direct the working culture of the entire enterprise to excellence ...

Table of contents

• Cover
• Title Page
• Copyright
• Table of Contents
• BIOGRAPHY OF JOHN S. MITCHELL
• PREFACE JOURNEY TO OPERATIONAL EXCELLENCE
• ACKNOWLEDGMENTS
• INTRODUCTION
• CHAPTER 1: OPERATIONAL EXCELLENCE—THE IMPERATIVE
• CHAPTER 2: APPLICATION OF OPERATIONAL EXCELLENCE
• CHAPTER 3: FOUNDATION PRINCIPLES
• CHAPTER 4: THE OPERATIONAL EXCELLENCE PROGRAM—OVERVIEW
• CHAPTER 5: BUSINESS AND FINANCIAL ELEMENTS
• CHAPTER 6: THE ESSENTIAL EVOLUTION TO REAL-TIME BUSINESS OPERATIONAL EXCELLENCE
• CHAPTER 7: LEADERSHIP, VISION, STRATEGY
• CHAPTER 8: SAFETY AND HUMAN PERFORMANCE EXCELLENCE
• CHAPTER 9: DEFINE THE PROGRAM AND PROGRAM OBJECTIVES
• CHAPTER 10: OPTIMIZE THE ORGANIZATION
• CHAPTER 11: CONDUCT INITIAL TRAINING WORKSHOPS
• CHAPTER 12: IDENTIFY AND VALUE PRIORITIZE OPPORTUNITIES FOR IMPROVEMENT
• CHAPTER 13: PROCESS RELIABILITY TECHNIQUES HELP MAKE MORE MONEY
• CHAPTER 14: PLAN OPPORTUNITIES FOR IMPROVEMENT
• CHAPTER 15: MEASURES OF PERFORMANCE—METRICS AND KPI
• CHAPTER 16: IMPLEMENT—IMPROVEMENT ACTION PLANS
• CHAPTER 17: PERFORMANCE ASSESSMENTS
• CHAPTER 18: CHECK—MEASURE AND MANAGE RESULTS
• CHAPTER 19: IMPROVE—INSTITUTIONALIZE AND SUSTAIN GAINS
• CHAPTER 20: CONCLUSION—NOW IT IS UP TO YOU!
• INDEX
• End User License Agreement