The best companies in the world all use the best methods available to them to increase their top line and bottom line. These methods are described here.
The three elements of a business that define profitability are how much is sold, the features that the product possesses, and the efficiency with which it is produced. An easily remembered hook is “How Fast, How Good and How Cheap”. For each of these three elements there is a Business Excellence tool. “How Fast” is maximized using a Lean Manufacturing method, “How Good” is enhanced using a Quality Program, and “How Cheap” is optimized using Rational Management Processes.
The three aspects of Business Excellence are not independent. There are overlaps between each of them, not least because the exponents of each have tried to widen the scope of their methods.
Business Excellence: Lean Manufacturing
There are several tools available to increase output and reduce cycle times. They all rely on reducing inventory levels in the work area. Although the phrase “Lean Manufacturing” has a specific meaning in some quarters, it is used here to mean any method that reduces cycle time by keeping inventory levels low. Examples of lean manufacturing methods include Kanban, Theory of Constraints, and Just in Time (JIT).
Business Excellence: Quality Tools
The best companies strive continuously for quality improvements, and have a focused program to this effect. There are many of these programs available, such as TQM, Kaizen, and Six Sigma.
TQM – Total Quality Management – educates the entire workforce (hence “Total”) on the benefits of quality (reduced waste, lower cycle time, lower costs, etc.), where quality is defined by the customers, both internal to the company as well as external to it.
Kaizen means “Improvement” and tries to improve every aspect of the business, from management to tool set-up, to production practices. It tries to introduce a human element to improvement, and often focuses on removing difficult work, since human error is the most difficult to eliminate.
Six Sigma aims to reduce defect levels down to around 3 parts per million. The focus is to recruit the best people and get them to work on the hardest problems. It attempts to characterise a process output by finding out, using sound statistics, what inputs affect the output. It was first used by Motorola, but is now in widespread use.
Business Excellence: Rational Processes
There is another aspect to Business Excellence that is better suited to deal with management issues. For example, how to decide which engineer should be assigned as project leader on a new machine installation. The rational thought process can be formalized to a large extent, and one of the methods in common use is the Kepner-Tregoe Rational Thinking management program.
It has five main components:
- Situation Appraisal: This is what every good manager does regularly, set out in standard form
- Problem Analysis: Formal method to solve any problem, product, personnel, etc
- Decision Analysis: Standard method to remove emotion and inconsistency from decisions
- Potential Problem / Opportunity Analysis: Indentify possible problems, and take action accordingly
- Incident Mapping: Summarise a complex incident and identify the true root cause
Summary of Business Excellence Tools
There are many methods to make a product or a service faster, better and cheaper. Tools such as Theory of Constraints, Six Sigma, and Kepner-Tregoe, are used together and are closely linked. Proficiency at using these Business Excellence tools leads to more product being made, and made with higher quality, more cheaply.