Overview Of The Features And Effectiveness Of Excellence Cone Manufacturing Model

The ability to provide high quality, competitively priced products and services in a global marketplace is the main hurdle that manufacturers have to face. In order to reach productive excellence, some fundamentals elements have been identified as characteristics of manufacturers; they are generic, not specific to company, country, or industry, and they are universal since they can be applied to a wide variety of circumstances.

These fundamentals elements offer a starting point from which develop models of excellence, a basis upon which is possible to formalize the principles that define how companies should organize and manage their human, financial, managerial, and technological resources. For example, Six Sigma, Lean manufacturing, Total Quality Management, quality control, and quality function deployment are collectors of tools that enhance productivity in organizations.

Improvement methodologies could be integrated into a manufacturing execution model that leads to perfection, through the integration of customer satisfaction and manufacturing excellence.

There is some research that outlines the benefit of each tool into a particular context of firm´s productivity; in this paper instead, the focus will be on grouping some of these tools (as well as others, from different fields), in order to create a model able to help organizations in reaching Manufacturing Excellence, a branch of Operational Excellence. Operational Excellence can be defined as a philosophy of the workplace where problem-solving, teamwork, and leadership results in the ongoing improvement in an organization. The main intent is concentrating on customers' needs, preserving the employees’ empowerment, encouraging continually the improvement of the various activities in the workplace. Entering in a higher level of detail, organizations that aim at Operational Excellence must first of all consider Manufacturing Excellence, a broader concept that leads to seeking perfection in manufacturing execution, merging different approaches to reduce process variability and waste while increasing throughput flow. Manufacturing Excellence in combination with voice of the customer is the foundation of business performance.

Model introduction

The "ExCone" (Excellence Cone) Manufacturing model is a framework that collects heterogeneous tools, deriving from different worlds like Lean Production or Industry 4.0, whose application in an operative context aims at achieving Manufacturing Excellence, i.e. a branch of Operational Excellence that excludes (or considers only partially) the links with the whole supply chain, focusing mostly on the productive context.

The model has a conical/pyramidal structure, hence the name Excellence Cone, at the top of which the Mission is positioned, that is the set of long-term objectives that this model aims at. In this particular case, the Mission is to deliver Value to customers. Going down the structure, the performance block is reached. This sector connects the Mission to the underlying Building Blocks, ensuring control of these and verifying alignment with the Mission. There are 4 main Building Blocks, representing the 4 key areas to be considered in the achievement of the Operational Excellence:

1. Strategy: it represents the set of elements necessary for defining the direction and objectives of a long-term organization which allows a certain type of advantage for the organization.
2. Organization: represents the group of aspects that allow an organization to manage its human resources.
3. Methods: collects the methodologies and concepts necessary to guarantee the satisfaction of the strategy.
4. Technology: collects the technological concepts supporting the previous Building Blocks, helping and sustaining the process of achieving Operational Excellence.

Each Building Block is made up of a series of key elements, the structuring aspects of each cornerstone. At the base of the structure are collected, divided by membership of the respective Building Blocks, the tools that support the key elements.

Mission and objectives

As already mentioned above, the model aims to achieve the Operational Excellence, placing itself as Mission to deliver value to the customer, in terms of cost, service and quality.

Customer value can be conceptualized as a comparison of weighted “get” attributes to “give” attributes. Customer value can be represented as a ratio or trade-off between total benefit received to total sacrifices, taking into consideration the available suppliers’ offerings and prices. Valarie Zeithaml, marketing professor at Kenan-Flagler Business School, University of North Carolina at Chapel Hill, defined customer value as ‘‘the customer’s overall assessment of the utility of a product based on perceptions of what is received and what is given’’. According to this model, in satisfying customers' needs the three main aspects to consider are:

Cost: in a production context, it is essential to reduce to a minimum all costs necessary for the production of finished products, in order to be competitive in terms of price offered to the market, increasing profit margins.

Service: the general mission of a company is to guarantee a high level of customer service. In the case of this model, operating in an operational context, in order to support other business functions, it is necessary to aim at reducing production lead times to increase the probability of on-time delivery and produce the correct quantity of products in order to fulfill customers’ need.

Quality: it can be defined as the degree to which a set of inherent characteristics fulfills requirements. Customers pay high attention to quality of the product or service. In order to be competitive, it is important to guarantee and maintain high quality level of products. Customers will expect and demand quality and leave if not satisfied in this aspect.

Starting point: assessment

The "ExCone" Manufacturing model is a general model to be applied in the field of manufacturing in any company. For this reason, a fundamental phase in the application of the model is an initial assessment phase.

The assessment stage is an evaluation, made through an audit, necessary to evaluate all key systems and processes of the company, gathering more complete information about the departments and processes which they manage. Assessment is useful to help organizations in: Identify the critical areas where to intervene. Choose the tools to apply within the collected in the "ExCone" Manufacturing model.

The assessment period is a phase that must be repeated over time, with a certain frequency, in order to evaluate the effectiveness of the implemented tools, verify how are changed the areas where interventions have been made and identify new areas of intervention.

Management commitment

Without strong support from above, projects tend to lose importance over time or, in the worst case, encounter difficulties even in the early stages. The support of management in the processes of change is a fundamental stimulus for everyone in engaging and making itself available for transformation.

ISO 9001 says in subclause 5.1 that “Executive management shall provide evidence of its commitment to the development and implementation of the quality management system and continually improving its effectiveness”.

Management should express its commitment following the subsequent basic principles: Listen to attitude: good listener makes the difference. Accept the recommendation given from people and understand the potential benefits for the organizational growth. Be willing to invest time and money as requested by people. Be prepared to wait for the success of the employees and do not pressure them to achieve results immediately. Spend more time at the initial stages and listen to the problems of the employees. During execution there may be some problems and should be heard instead of finding fault. Reward the good teams and motivate them. It is important that the responsibility for leadership and for creating the environment of continuous improvement belongs to all levels of management and members, but particularly to the highest.

Tracking and monitoring: the “Performance” pillar

Performance are parameters that allow the quantitative or qualitative detection of the status of a process, good or employee.

According to H. J. Harrington, "Measuring is the key: if it is not measured, it cannot be controlled, if it cannot be controlled, it cannot be managed. If it cannot be managed it cannot be improved". Measurements are the basis for any attempt to progress because they offer a clear idea of the current situation. It is precisely the measurements, therefore, that can guide gradually towards the achievement of the prefixed objectives.

Both in the preliminary analysis phase of the processes and steady management phase it is extremely important to build a measurement system that allows to control the company: without the measurement and without a formalized database there would be the risk of proceeding in the wrong direction, not knowing how to intervene to improve. As a consequence of the reports, it is possible to intervene in the most appropriate way: if there are discrepancies, by providing objective data, it is possible to bring the processes back in the desired direction, as well as take initiatives aimed at improving.

To take a real advantage from the measurement process, however, it is important to understand well what are the right characteristics to measure and the motivations behind this data collection. The measurement system, in fact, could work well and detect data correctly but, for example, it could focus attention on details of little or no importance, leading to take the attention of management away from those factors that should, instead, be kept, effectively, under control.

The collection of data through the measurement will, however, have a different meaning and detail depending on the organizational level to which it will be applied. The measurements made at the base of the organization, in fact, will be completely different from those applied at the top where they prepare strategic plans and where they decide the paths that the organization will have to follow.

High-level measurements can derive both from a consolidation of the low-level ones and from their aggregation. Or they can even be completely different. In fact, sometimes, applying to management the measurements that are used for the base can be very frustrating for the people who must decide the mission of the company and can distract them from the real strategic objectives to be achieved.

The basic aims of the need to measure corporate performance are mainly three: Support decisions. Coordinate and focus managerial attention. Monitoring and diagnosis of the activities carried out by transformations.

Performance measurement can be viewed as a feedback, which highlights how performance should be a guide in defining and adjusting targets and objectives, being at the same time influenced by them.

There are two aspects with which company performance can be analyzed from a strategic point of view: As result profiles (not exclusively of an economic-financial nature): this first aspect leads to identify a system of measures of effectiveness, efficiency and affordability that, based on strategic guidelines and pre-established objectives, is able to detect the company's ability to manage the critical variables that underlie the competitive advantage. As a trend: the temporal aspect leads to a perspective view that starts from the results achieved and focuses on the management conditions that are projected into the future and which are the prerequisites for maintaining and improving performance.

A performance measurement and control system must have the requisites that give it the ability to guide the company towards the achievement of short, medium and long-term objectives, in terms of static and dynamic efficiency. There are 4 main characteristics that these systems must have:

1. Completeness: for the system to be complete, it must measure all the components in which the concept of value created by the company can be subdivided.
2. Relevance: the system must be closely linked to the decision-making processes of the company. The indicators are relevant if they support decisions in critical areas of management, in which the most significant effects on performance are placed. They must provide information on identifying alternatives of choice and understanding the links between the decisions taken and the achievement of the objectives
3. Flexibility: the possibility of modification is necessary according to the needs of the measurement. In today's productive contexts, dominated by conditions of strong dynamism and complexity of the external environment and of the business strategies, the critical factors of success and the measurement parameters can change even in a short time.
4. Understanding: the system must be able to spread within the organization with a language and a level of detail appropriate to the needs of users, to expand to the whole organization the awareness of the performance objectives, the critical variables that determine it and the results produced by all the activities and processes carried out in the company.

Traditionally, companies have focused their efforts to measure performance measures related to financial transformation. However, the orientation at measuring purely financial performance has led to some negative effects, including:

• Short-term orientation.
• Lack of strategic thinking, with a consequent lack of information on quality, reactivity and flexibility.
• Search for "local optimum".
• Encouraging managers to minimize variation from standards, instead of encouraging continuous improvement.
• Lack of information about consumer preferences and the competitive dynamics of competing companies.

The model presented here aims at measuring the so-called operational performances, i.e. the combination of a set of processes and an improvement methodology that together help organizations optimize their business performance. After defining its corporate strategy, a company will identify the relevant operational performance objectives to measure and configure the environment, to enable the targets to be accomplished. Operational performance indicators come close to what other authors label “critical success factors” (defined as those few crucial areas where the company must work perfectly to succeed in business). There is, however, a conceptual difference: operational performance variables are conceived as indicators of the performance construct itself, whereas critical-success-factors are regarded as predictors of performance.

The three fundamental measures that absolutely must be monitored to control and improve operational performance are:

Cost measures: a first and fundamental indication on the efficiency of the processes can be obtained by measuring the costs necessary for the performance of individual activities and processes. A satisfactory control system (although not without criticism) to guarantee management a medium-term vision of company’s performance is the Activity-Based Costing (ABC). Other indicators that fall within this category are productivity, efficiency, resources used and working capital (stocks, Work In Progress).

Time measurements: time factor has assumed an extraordinary importance as competition factor. Being a measurable and direct measure (differently than costs, that may have arbitrary attributions), there is a widespread diffusion of time measures in company management. The main measures of time performance are the "lead times", i.e. the actual execution times of the process.

Other time measures can be: time to market, introduction rate of new products, time to order, inventory turnover rate. Quality measures: these measures are the most varied and complex to analyze. For a correct interpretation of the measurement system it is useful to distinguish the quality produced (or quality of the processes) from the perceived quality. The quality produced consists in the effective validity and effectiveness of the processes and its output, while the perceived quality is usually defined as the conformity of the offer with respect to the client's expectations.

In addition to these indicators, it is also important to measure the satisfaction of employees within the company, in order to ensure a healthy work environment. There are two main indicators that measure the attention to employees in a company:

Safety: it is important to measure the safety level within the organization and validate the effectiveness of safety risk controls. The safety performance shall be verified in accordance with safety policies and approved safety targets, using dedicated safety performance indicators. Trends must be evaluated and, consequently, corrective or improving actions should be identified after recognizing any worsening of specified safety levels.

Morale: a company relies upon its employees for everything, from production of goods to the accounting. When employees are satisfied with their company, they perform more efficiently, which increases the success of company’s business as well as profits. Instead, poor employee morale can have the opposite effect on business, toppling productivity and increasing turnover rates. When running a business, employee's morale must be constantly monitored, both for employee health, as well as the health of the company. Indicators of employee’s morale are for example productivity (of employees), absence rate or turnover rate.

Overall Equipment Effectiveness (OEE)

In an operational context, a useful performance indicator is the Overall Equipment Effectiveness, first described as a central component of the TPM methodology in Seiichi Nakajima’s book ‘TPM tenkai’ (1982, JIPM Tokyo). OEE measures the total effectiveness of a plant. It is an index expressed in percentage points that summarizes three very important concepts from the point of view of manufacturing production: Availability: calculated as the ratio in which the machine is actually working (Uptime), purified of all the stops due to faults, setup scheduled maintenance that can be tracked (Downtime) and the potential time during which the machine could to work.

Availability= Uptime/(Uptime+Downtime) Efficiency: speed with which the machine is working compared to expected speed; ratio between the real cadence of the machine and the theoretical one. Given the difficulty of measuring micro-stops, efficiency is a variable that is calculated deductively, through the ratio between the number of pieces actually produced in a time interval of Uptime and the programmed theoretical number.

Efficiency= (Number of pieces actually produced)/(Number of pieces to be produced theoretically) Quality: percentage of compliant products compared to the total output; i.e. ratio between manufactured parts which are conform to product specifications, and the total number of pieces actually produced.