Performance management is about metrics, from read-outs on key performance indicators (KPIs) to statistical charting, to the many fingers on the pulse of units pushed to the loading dock. Does the concept of operational excellence fit into this measured world? At first glance, it would seem not; there is no Operational Excellence Index. People might be justified in thinking that “operational excellence” is just a feel-good tag, useful in a rah-rah session, but not something that your chief financial officer can take to the bank.

Still, the idea is far more than marketing spin. A combination of people, strategies and technologies constitute the “magic formula” for reaching operational excellence. Industry analyst Julie Fraser, a principal at analyst firm Industry Directions Inc., in Cummaquid, Mass., says, “There are a number of broad-based systems that contain metrics you could watch to determine operational excellence. Operational excellence is about excellence of processes and people. Metrics that measure these tend to work best when they are plant wide or line metrics, put in place to make people more aware of their performance against the core things that matter—that is, things that the company cares about.”

Fraser adds that for any company with any degree of sophistication, specific metrics derived from comprehensive software are rapidly becoming the norm. “The world has become too complex for clipboards and isolated data,” she says. “Product lines have exploded, customer requirements become ever more detailed, and supply chain management is only getting more complex. No single person, no single group can keep tabs manually.”

No Excellence In Defects
Some sad realities emerge from Fraser’s study of metrics that matter for the Manufacturing Enterprise Solutions Association International (MESA). The number-one measure of quality remains a count of the number of defects. “For two decades or more, people have been talking about prevention of defects as the most valuable activity for quality control,” Fraser points out. “It’s a little disheartening to see defect counting still a leading indicator, rather than quality-by-design projects, the number of successful preventive actions or the number and length of initiatives for corrective measures.”

Then there is the low rate of adoption for standards. With the proliferation of outsourcing and its attendant supply-chain management demands, says Fraser, there is a concomitant need for well-understood standards that, when possible, are industry-wide. “Instead, we see companies at worst with ill-defined standards and at best, pursuing good but individualistic internal standards,” she says. “They send work out to other companies who in turn follow their own individualistic standards, and that is showing itself to be a formula for disaster. China has no national mandates around lead paint, but there are neutral and well-defined standards on paint for toys that can easily be included in product specifications and easily measured—why are U.S. toy marketers not enforcing them until the government or the newspapers step in?”

The good news is that there is a growing corpus of manufacturers who understand the issues, pursue metrics that buttress their business objectives, and standardize to a high degree. “I recently visited Johnson Controls,” Fraser said. “Automotive suppliers are going under at a frightening rate, but Johnson Controls is doing well. I saw a true lean shop from top to bottom. Everywhere we went, operators were able to tell us what they were doing and why they were doing it.”

Minding Zero Tolerance
California’s Monterey Peninsula mixes urban subdivisions with wilderness reserves, and art colonies with world-class golf courses. The Pebble Beach Community Services District (PBCSD) serves the area for drinking water and wastewater services—and much more, including emergency medical and garbage collection. Since 1970, the PBCSD has maintained approximately 75 miles of sewer lines ranging over the peninsula, handling wastewater flow from roughly 5,000 permanent residents and many thousands of tourists, via eight pumping stations fitted with electric pumps. Wastewater is processed into water at a tertiary level, suitable for irrigation, which is then purveyed for irrigation to two of the five best golf courses. The processed water is held in a new, 12-million-gallon tank.

The collection and distribution of the wastewater in this fragile ecosystem poses challenges. A national marine sanctuary is sited off the peninsula, and California has strict ecological regulations. “We have zero tolerance for spills,” says Michael Niccum, district engineer. “Plus, the State of California has zero tolerance regarding sewage encroachment on the Pacific Ocean, as does the U.S. government regarding the sanctuary. Pump outages can result in spills, so each pumping station has to remain in service no matter what ...