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DIGITALISATION Operational Excellence: Challenges and opportunities

Mar 8, 2019

The world is more linked and fast-paced than ever before and the manufacturing industry needs to keep up with it. The future of operational excellence does not simply revolve around yield, proficiency, and standardisation alone. But in fact, it is a lot directed towards ideas that include progression, modernisation and customisation. The Viewpoint section finds out the challenges in implementing operational excellence and the opportunities it brings.

Operational excellence brings in huge competitive advantage - Aiyappan Ramamurthi, Technical Director, Siemens PLM Software

Markets are changing rapidly due to technology disruptions and increase in customer requirements towards smarter and efficient products. Manufacturers have to continuously adapt to the changing demands and invest in technology to be competitive. Plus, the trend is increasing towards adapting technology but there are challenges when it comes to the availability of skilled manpower, uncertain business conditions, and regulatory changes among others, which happen to be risks for the SMEs.

Both, operational excellence and continuous improvement are a journey and not a destination. But, operational excellence spans across the entire value chain, from design, engineering, procurement, logistics, manufacturing and service, towards realising customer needs. On the other hand, continuous improvement focuses on each area so as to drive operational excellence. Today, digitalising the entire value chain and the Digital Twin of the product, production and performance helps in the transformation towards operational excellence. It brings in a huge competitive advantage, driving the business goals of quality, cost and delivery. This not only increases the profitability but also boosts the overall business growth and the opportunity to go global. Digitalising the enterprise is one of the key enablers in the journey of operational excellence. When it comes to challenges in executing operational excellence programmes to meet business goals, the fact is that business situations are dynamic as the products, volume and variety keep changing along with the customer requirements. The speed of responding to the changes continuously is a major challenge as it demands a high level of agility and flexibility across the organisation.

Operational excellence is about optimising usage of resources - Regu Ayyaswamy, Vice President & Global Head, Internet of Things & Engineering, Industrial Services, TCS

The primary reasons holding manufacturers, especially SMEs, back from investing in technology are Return on Investment, inability to understand how technology can add value, not being able to connect technology investments to business or competitive enhancement of their position. The role of system integrators and product vendors is to evangelise the technology value and impact in a manner that can be clearly and transparently understood by both, SMEs and large manufacturers.

Operational Excellence is about optimising the usage of resources and enhancing the productivity while continuous improvement or Kaizen aims to constantly seek new ways and methods to improve the value stream. The value stream, typically, is from the demand side to customer delivery. It is not local improvements or individual machine productivity, but end - to - end value stream improvement. Also, processes are not static since the variables continuously change. The primary challenge in executing operational excellence programmes to meet business goals is belief in technology and how it can create an impact and change management within the organisation. It is also important to choose the right technology or vendor, as the solution should deliver the end value desired and should be robust and transparent. With the adoption of IoT and Industry 4.0, the opportunity for industries to enhance operation excellence is tremendous. By addressing this through Industry 4.0, typically, a company can improve its revenue by better delivery and at the same time, reduce cost. While it is difficult to quantify the gains, as each company is different, most companies can enhance their profitability per cent from current levels by an additional 200-500 bps (2%-5%).

Learning and unlearning has become essential - Sameer Kelkar, CEO and R&D Head, Grind Master Machines

The main issue with SMEs in technology, IT, and machinery, is uncertainty in the business. This is due to volatile business situations, especially regarding demand from OEMs, which stops them from investing in technology. The second big issue for SMEs is the lack of awareness and training amongst their manufacturing teams for the latest technology. The speed of adoption of new technology slows down due to the inability to absorb and change. When it comes to operational excellence, continuous improvement is a part of it. An organisation must strive to build a culture of continual improvements. This helps in improving performance parameters related to cost, quality and delivery. Selection of the right technology, process and machinery will also play a crucial role in achieving operational excellence. Another aspect of operational excellence is also linked to the HR function of the company — it is about how we keep our people motivated and maintain the enthusiasm in them to work efficiently. So, operational excellence is a holistic approach and an all-round aspect of the business.

In today’s works, technology and demands are changing very fast. This is itself a big challenge in terms of operational excellence. Quick learning and unlearning new things have become essential. Secondly, it requires a big amount of investment to upgrade the absolute technology to the latest ones. The previous investment must be recovered before making new investments. Profitability depends on the speed of adaption. One must be quick in identifying the opportunity, making fast investments and getting excellent results from them in a short period of time. For this, our operational excellence needs to be in place; one needs to have a strong and flexible structure and system to accommodate the rapid changes happening in the industry, which will help one bring in profitability.

Looking at operational excellence as a business outcome - Dr Arvind Tilak, CEO, Ascent Intellimation

I often get the chance to interact with leaders from manufacturing companies on their take on technology adoption about concepts like, Smart Manufacturing. Most of them are quite guarded about adoption and will not get on the bandwagon easily. They want clearly defined ROI from investments in technology. We propose that returns should be counted in two beans: tangible and non-tangible. Most leaders put a high value on data that is reliable and close to actual events, so that their decision-making can get real-time and realistic. Another major nontangible outcome that they are ready to put value to is operational excellence.

The major driver for looking at operational excellence as a business outcome model is that this will help companies vault over competition, not just for today but for the foreseeable future. We work with them in leveraging data for delivering clear outcomes, including increased revenues and profits, lower operating costs, and lower operational risk. However, in the real world execution or operational excellence, programmes are constrained by many factors, such as, the lack of culture that believes in hard and real-time data and data-driven transparency. Another factor is capability and commitment to make real-time decisions. For example, we enable stake holders to get OEE data every 15 minutes via PlantConnect, thus enabling them to intervene and improve. Compare this to OEE that is calculated manually at the end of each shift and consumed only the next day at best. Besides, proactive practices are not part of the culture in many companies. Thus, with PlantConnect, we enable maintenance teams to manage assets by looking at data and generating alerts and predictions of likely failures and avoiding costly breakdowns of assets.

Continuous improvement is a mindset - Guruprasad Rao, Director & Mentor, Imaginarium India

Operational excellence is a continuous journey. It is all about the best management practices using existing resources. So, its focus is on productivity, loss reductions, cycle time reduction and quality improvements. Attaining a status of Best-in-Class (BIC) with peer recognition can be set as a goal. Continuous improvement is a mindset and a culture that makes it possible. It is that humble thought to stay unsatisfied even after reaching the so-called BIC in their own areas of expertise. Business goals are to be set, communicated, supported and reviewed. They are influenced by both, external and internal factors and operational excellence largely involves internal factors. The primary challenges are to set smart goals and create a culture of continuous improvement. Once the business opportunity is identified, it is the operational excellence that delivers goods and service. For a given investment, one can make and sell nut-bolts or a finished product. The profit one makes by selling nut-bolts is far less than the option of a finished product, such as, a watch. So, this is what I call as the identification of the right business opportunity. Once this is done, then it is only the operational excellence that helps to optimise the costs and hence, the profit.

Coming to SMEs investing in technology, they are conditioned to look at RoI before investments and its immediate returns. Here, they need to look for “value creation”. With the creative use of new tools, they can become not only competitive but also future-ready. Some fear the obsolescence of current technology, while some are busy with their current work and don’t have the time to explore new options. There are a few SMEs, which are not aware of newer technologies that are capable of bringing disruption. So, SMEs and OEMs need to push-pull each other to remain future-ready.

Image Gallery

  • Aiyappan Ramamurthi

    Technical Director

    Siemens PLM Software

  • Regu Ayyaswamy

    Vice President & Global Head - Internet of Things & Engineering Industrial Services


  • Sameer Kelkar

    CEO and R&D Head

    Grind Master Machines

  • Dr Arvind Tilak


    Ascent Intellimation

  • Guruprasad Rao

    Director & Mentor

    Imaginarium India

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