Op­er­a­tion: Ex­cel­lence

Op­er­a­tional ex­cel­lence is business ne­ces­sity. With­out it, or­gan­i­sa­tions en­ter into medi­ocrity or fail. Business First looks at the im­por­tance of op­er­a­tional ex­cel­lence.

Business First - - CONTENTS -

Ac­cord­ing to Price­Wa­ter­house­Coop­ers (PWC), as mar­kets shift, busi­nesses must adopt new strate­gies to sur­vive. PWC states: “As mar­ket con­di­tions shift and com­pet­i­tive pres­sures in­ten­sify, so com­pa­nies have to adopt new strate­gies. That, in turn, means they need new op­er­a­tional mod­els to ac­com­mo­date th­ese new plans.

But ris­ing vo­latil­ity and business com­plex­ity have re­cently made op­er­a­tional trans­for­ma­tion much more dif­fi­cult. And, as another three bil­lion con­sumers join the global mid­dle class in the next few decades – strain­ing far-flung sup­ply chains – con­ven­tional op­er­a­tional mod­els will come un­der in­creas­ing strain.” Take for ex­am­ple, the min­ing sec­tor. Ac­cord­ing to Deloitte, Aus­tralia’s in­creas­ing pro­duc­tion costs for op­er­a­tors are im­pact­ing their com­pet­i­tive ad­van­tage.

Deloitte’s re­port Ex­tract­ing business value through op­er­a­tional in­tel­li­gence states that dur­ing the re­cent min­ing boom, high de­mand and high com­mod­ity prices cre­ated favourable con­di­tions for in­vest­ment and ex­pan­sion of min­ing op­er­a­tions whilst mask­ing some in­ef­fi­cient work prac­tices.

Now that the eco­nomics of the in­dus­try have shifted, Aus­tralian min­ing op­er­a­tors are re­spond­ing by cut­ting costs and pur­su­ing op­er­a­tional ef­fi­cien­cies.

“Our ex­pe­ri­ence re­veals that a del­i­cate bal­ance has to be main­tained be­tween ‘cut­ting too close to the bone’ and main­tain­ing a sus­tain­able op­er­a­tion that can re­spond quickly when the next op­por­tu­nity presents it­self,” said Deloitte Part­ner Links Chithi­ray.

Ac­cord­ing to the re­port op­er­a­tional ef­fi­cien­cies may be gained by au­tomat­ing and in­te­grat­ing in­for­ma­tion across the value chain, which can also in­form the more rad­i­cal step of re­design­ing the op­er­a­tions.

Op­er­a­tional in­tel­li­gence is one of the key levers for im­prov­ing ef­fi­ciency.

“It is the com­pa­nies that en­able their op­er­a­tors and man­age­ment to re­spond in a timely way to op­er­a­tional vari­ances and mar­ket vo­latil­ity, that will be bet­ter placed to min­imise any ad­verse im-

pacts and take ad­van­tage of pro­duc­tiv­ity op­por­tu­ni­ties,” said Mr Chithi­ray.

“Ul­ti­mately, the goal of any min­ing op­er­a­tion in sim­ple terms, is to op­ti­mise pro­duc­tion at the low­est cost with zero harm to the work­ers and the en­vi­ron­ment,” said Mr Chithi­ray. “It is no co­in­ci­dence that de­spite the tougher mar­ket con­di­tions, global min­ing lead­ers are mak­ing big data in­vest­ments in op­er­a­tional in­tel­li­gence, re­mote op­er­a­tions cen­tres, au­to­ma­tion, an­a­lyt­ics and mo­bil­ity.”

Deloitte’s re­port noted that as con­nec­tiv­ity to re­mote sites im­proves, a land­scape of re­port­ing and an­a­lytic so­lu­tions is emerg­ing that can en­able greater trans­parency of op­er­a­tional per­for­mance in real time for op­er­a­tional staff, site man­age­ment and ex­ec­u­tives of the or­gan­i­sa­tion. Such align­ment en­ables all par­ties to make more re­spon­sive and fact-based de­ci­sions.

“Op­er­a­tional in­tel­li­gence is driv­ing fun­da­men­tal changes in the way in­for­ma­tion is ex­ploited in min­ing. Th­ese so­lu­tions are de­liv­er­ing new in­sights to mine site ex­ec­u­tives, man­age­ment teams and op­er­a­tions staff that re­flects their en­vi­ron­ment and em­pow­ers them to make data-driven de­ci­sions on per­for­mance and costs,” added Mr Chithi­ray.

Those in the min­ing sec­tor that are keep­ing the company’s op­er­a­tional in­fra­struc­ture aligned with its cur­rent strat­egy are the ones who are thriv­ing. This is a key point for all com­pa­nies.

As PWC states, “In a per­fect world, a company’s day-to-day op­er­a­tions are man­aged for peak per­for­mance, so that it max­imises its prof­its while min­imis­ing its risks, costs and losses. But in the real world man­age­ment must make con­stant trade-offs in the risk-cost-loss equa­tion, if it’s to keep the company’s op­er­a­tional in­fra­struc­ture aligned with its cur­rent strat­egy. To strike the right bal­ance, man­age­ment must be crys­tal clear about its op­er­a­tional goals and de­velop key per­for­mance met­rics that will en­able it to man­age those op­er­a­tions within well-de­fined tol­er­ances.”

It means busi­nesses must take a more flex­i­ble ap­proach to their op­er­a­tions. Agility and re­spon­sive­ness to chang­ing mar­ket con­di­tions are cru­cial to growth and fu­ture sur­vival.

Op­er­a­tional change is eas­ier said than done, but it is im­por­tant. Busi­nesses need to look beyond ‘cut­ting the fat’ as an op­er­a­tional re­sponse, be­cause in­vari­ably the costs saved don’t equate to a fix in man­age­rial or company per­for­mance.

Says PWC, “many com­pa­nies have been un­able to build on th­ese gains be­cause they haven’t de­vel­oped team lead­ers who can do three things: con­tin­u­ously iden­tify and make ef­fi­ciency im­prove­ments; align the cor­po­rate vi­sion with ac­tiv­ity on the shop floor; and demon­strate the tech­ni­cal and in­ter­per­sonal skills that will help es­tab­lish a last­ing cul­ture of op­er­a­tional ex­cel­lence.

“Cre­at­ing an ag­ile op­er­a­tion in the ser­vices sec­tor is an even big­ger chal­lenge. In fac­to­ries, idle work­ers and stacks of inventory pro­vide clear sig­nals that an op­er­a­tion is poorly de­signed. In ser­vice op­er­a­tions, by con­trast, it’s of­ten dif­fi­cult to iden­tify waste and in­ef­fi­ciency. Man­age­ment may be aware of op­er­a­tional prob­lems with­out be­ing able to de­fine them in de­tail, let alone de­sign ways to cor­rect them. Yet fail­ure to un­der­stand how well its op­er­a­tions are func­tion­ing can be fa­tal to a ser­vice provider.”

So how are th­ese prob­lems solved? The Shingo In­sti­tute has an in­ter­est­ing take. It of­fers Three In­sights of En­ter­prise Ex­cel­lence™.

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