The Four P's of Operational Excellence

Lean/Six Sigma/ DMAIC are great for solving operational problems. But when you simply have too many high priority problems to fix, and not enough resources, how do you turn a failing operation into a successful one? How do you stop losing money, retain good people and happy customers?

This journey from losing money and customers to Operational Excellence is achieved by tackling every problem related to Profitability, People, Productivity and Plant. These are the 4 Ps that can be used to group improvement areas around organization, processes and technologies for every business.

For each of these Ps, owners are identified with operational objectives, so that all areas of opportunity can be addressed using Lean.

Profitability

  • Key groups here are Sales and Finance

  • Operational objectives here include increased revenue and customer service.

People 

  • Key group here is Human Resources

  • Operational objectives here are around meeting recruiting and retention targets, as well as those around training talent.

Productivity

  • Key groups here are Operations, Industrial Engineering, and IT.

  • Operational objectives include increased labor productivities, inventory accuracy, and process and systems improvements.

Plant

  • Key groups here are Plant Maintenance, Engineering, Safety, and IT.

  • Operational objectives include improved machine and IT infrastructure availability, as well as safety metrics.

Step one is for the improvement team, that we call “The Tiger Team”, will collectively review each of the 4 Ps to: 

  1. Define the Problem Areas by presenting to the whole group so that all understand the issues that you are working with. For example: we are short shipping products.

  2. Measure what is good! Agree on metrics for each of these Ps that are easy to track and that you agree will impact the Operational Goals. For example: On-Time-in-Full customer service.

  3. Analyze solution options and agree on actions with deadlines.  For example: find the cause of short ships which is causing poor inventory accuracy, so you agree to count a section of your warehouse by a certain date.

Step two is to create an action plan to implement and sustain identified improvements. These types of engagements are metric driven, and not necessarily bound by time. 

In our experience, some of these engagements achieve the turnaround goals in 3 months, others are more complex and can take 6-9 months or even years. It is important however that there is a focus on action and on tracking metrics. If metrics are not going in the right direction, it is okay to re-analyze and change course if necessary. 

The tools for The Tiger Team to be successful are the Action Tracker, Milestone Plan and the Operations Scorecard.


  • The Tiger Team Action Tracker

    • The Action Tracker is a collaborative tool used by the team. In its simplest form, this is an excel file on a shared folder to ensure team collaboration and information transparency. At G1 we use cloud-based collaborative tools for this purpose..

    • Each Action Owner is accountable for their actions and is expected to maintain the Action Tracker items that they own at least weekly.

    • It is the role of the Project Manager to establish the routines that ensure that the Action Tracker is kept up to date. The Action Tracker is used as the basis for status updates.   

  • Milestone Plan

    • The Milestone Plan summarizes the Action Tracker information to show progress against Operational Objectives grouped by “P”.

    • The Milestone plan is used in project updates to understand progress around agreed deliverables and goals by “P”. Milestones shouldn’t change, and so tracking progress against these (instead of detailed actions) keeps the team focused on the finish line. 

  • Operations Scorecard

    • The Operations Scorecard lists the key performance metrics by “P” that are set to by operations team, easily to measure and align directly with the operational goals for the engagement

    • The Scorecard lists 3-5 KPIs per “P” with agreed target values.

    • If these metrics trend in the correct direction, then you know that the actions being taken are effective, if these metrics don’t move, that the team needs to relook at the actions against the agreed milestones. It is okay to try something else to improve performance.

Weekly/Bi-Weekly updates maintain the ‘drumbeat’ of the improvement plan.  At these meetings:

  • Progress against agreed operational goals (Milestone Plan) are reviewed

  • Critical Action items, or those needing Tiger Team input, are reviewed

  • Operational KPIs are reviewed and trends used to adjust plans if necessary

These meetings are typically held onsite to help everyone on the Tiger Team to connect in person, as well as to walk around the operation to better understand issues that they are working to solve..

The heavy lift of these improvement projects is in doing what is necessary to achieve the agreed operational goals. Getting to this takes a lot of resources and cost. However, following the 4 Ps process, the benefits far outweigh these costs and effort.

Sustaining these improvements requires a Culture of Continuous Improvement.  This is important so that the approach and tools used by the Tiger Team become part of how the operations run their business, and not lost after the team has gone.  Operations leaders need to take ownership of the processes and tools to help them address new problems.  

Successfully traveling along this journey from firefighting to operational excellence requires C-Level commitment, a team effort, and a well-managed structured Lean approach. 

  1. C-level commitment and support is essential. Senior leaders need to be onboard with improvement plans to ensure that required resources (capital & people) can be dedicated to fixing the operation. These are your Key Stakeholders. In return, their commitment requires that you meet or beat strategic goals related to Revenue, EBITDA and/or Customer Service that they set.

  2. A cross-functional team is needed to address cross-functional problems. This cross-functional team of process experts will define problem areas, prioritize solution options and then implement and sustain improvements. There can be no organizational silos when fixing operations like this! For the purposes of this article, let’s call this cross-functional group the Tiger Team.

  3. An improvement plan based on Lean principles that can address multiple problem areas at the same time is key. This will deliver measurable operational targets that are aligned with the agreed strategic goals set by the Key Stakeholders.

Learn more about how we implemented Lean 4Ps to turnaround warehousing operations for one of our valued clients. For more on how operational leaders can create a culture of Continuous Improvement, check out our blog on the 4Cs of Successful Continuous Improvement Initiatives.




G1 Consulting Group