The current economical situation we are facing here in Brazil brings one functional area that can clearly and strongly contribute to the business survival or growth with regards to its position in the market place. This area is called Operational Excellence, also known as Business Process Management or Continuous Improvement.
Regardless of which methodology is chosen by the company as a way to improve its processes, whether it is Lean Manufacturing, Theory of constraints, Toyota Production System, Six Sigma, or World Class Manufacturing, among others, the mindset of the organization is often focused either on cost reduction or towards capacity increase.
Cost reduction: the majority of the projects focus on cost reduction. According to my experience this is very much related to the company's culture and how they address Operational Excellence. Cost reduction, be it reduction of manufacturing cycle time, reduction of product engineering cycle time, or supplier's manufacturing costs, is of utmost importance for the Business to increase its profit or to keep or improve its position in the respective market segment. A good way to identify which processes have the highest potential for improvements is to make use of a Pareto Diagram showing the major causes for "Cost of poor quality" and then prioritize the ones which need to be addressed first.
Capacity increase: in this type of projects, Operational Excellence addresses the projects which aim to eliminate wastes in their processes and improve the utilization of existing resources (people and machines). Therefore increasing the efficiency of the processes and consequently the number of units produced with the existing resources. Often the focus of these projects is not related to investing in new equipment or hiring more people, the focus is towards eliminating wastes and getting the most out of the current installed capacity. This kind of project makes sense when there is higher market demand for the product or service you provide compared to your existing installed capacity.
During my 14 years of professional experience I have led projects which focused both in cost reduction as well as in capacity increase. Both type of projects are unique when it comes to details, challenges and motivators. A very important success factor for the projects is to assure that the project objectives are fully aligned to the company's strategy, therefore gaining synergy and full commitment of the team and activities related to the project and also minimizing the resistance for change!