Operational Excellence

Methodology

Operational Excellence is a concept that has developed from earlier methodologies, such as Lean and Six Sigma, which are focused primarily on how a business can realize continuous productivity improvements through the removal of waste.  The resulting streamlined process flows, often referred to as value streams, can be extraordinarily useful for a variety of business processes as long as everything flows in a standard and expected way.  

A very simplistic example of this would be a basic invoicing process.  Since it is expected that 80% - 85% of incoming invoices will contain standard payment terms, it is reasonable that a streamlined handling process could be developed that requires minimal internal resource consumption.  But what about the exceptions?  How are the 15% - 20% of irregular invoices to be handled?  In the majority of cases, this is where management is brought in and the savings realized by the lean value stream has just been eaten up by their involvement in problem solving vs. staying focused on growth opportunities.

Enter Operational Excellence, which goes a step further to include standard handling processes for the exceptions and irregularities.  This is called a “self-healing” value stream because workers know what to do in such cases without having to rely on management, therefore freeing up leadership to focus on growth areas of the business.

The principal of Operational Excellence is most commonly associated with a manufacturing related scenario, but as outlined in the above accounting example, it can actually be applied to any industry or business process flow.  

 

Technology

When considering how to apply Operational Excellence within a business, it is important to analyze more than just the business process flows and related information.  The next step is to factor in business process automation, including how it is currently used and how it could be leveraged even further.

Returning to the simple invoicing example, assuming that “lean and self-healing” value streams are in place from a process standpoint,  a typical finding is still that an accounting department has only partially automated the invoicing process via a standalone software package, or as a module within the company’s ERP system.  There is still a great deal of manual data entry that occurs, as well as manual sorting, routing and reporting that pertains to exception handling.   In a company processing high volumes of monthly invoices, a glaring inefficiency still exists.

Although the process oriented elements of Operational Excellence may have been addressed, it will take the introduction of new technology components to enable the additional process automation necessary to complete the picture.

In this particular case, a vendor invoice management solution would address the final inefficiencies of manual data entry by automating the invoice data entry process with the use of scanning and optical character recognition (OCR) software, and would also utilize powerful workflow and reporting tools to eliminate manual sorting, routing & reporting.  

Business process automation will in most cases offer some efficiency in its own right, but it is important to remember that it is always most powerful when implemented within optimal business process flows in order to reach Operational Excellence.

 

Results

By understanding Operational Excellence as a methodology and applying the concept to develop streamlined process flows for both regular and irregular business processes, and by understanding how to leverage business process automation tools, the results of the effort will be quantifiable in terms of both operational cost savings and top line growth.

Operational cost savings will be seen by the eliminating the use of any unnecessary resources.  And top line growth will be seen by releasing leadership from the daily management of the workforce, allowing them to instead direct attention to the customer base and potential ways to grow the business.

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