Operations

As market conditions shift and competitive pressures intensify, how do we achieve operational excellence?

Achieving operational excellence

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.

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.

What does this mean for your business?

Companies in a wide range of manufacturing and service industries are reshaping their operations to make them more agile, flexible and responsive to changing market conditions. That’s no easy task.

Over the past decade, most manufacturers have generated major business benefits by reducing operational waste, variability and inflexibility. But 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.

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Art Kleiner

Editor in Chief, Global Marketing & Insights, PwC United States

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