In the first of a two-part series on OpEx in the food and beverage sector, Bob Hooper, Senior Industry Consultant at asset lifecycle intelligence specialist, Hexagon, explores some of the triggers that can spur an organisation’s OpEx journey, the role a healthy culture of continuous improvement can play, and what can be done to develop and nurture a sustainable OpEx organisation for long-term success.
Operational excellence (OpEx) is a holistic approach to business change that requires small, ongoing modifications capable of producing significant effects. Within food and beverage operations, some managers may apply the practice to reduce the high capital expenditure of modernising their facilities or tethering multiple entities to enhance operations. In doing so, OpEx applies to every person across an organisation. It flourishes best with a well-defined transformation strategy and a shared culture of improvement that, when implemented properly, is clear, concise, practical, actionable and teachable. In return, achieving sustainable OpEx can yield greater efficiency with reduced costs and increased customer satisfaction for a more competitive business.
While this sounds straightforward and feasible to implement, due to variations in interpretation and implementation, organisations often struggle to create a viable plan with the appropriate level of execution to achieve it.
The key drivers of OpEx
Business pressures remain much the same for food and beverage manufacturers as with any other sector, such as managing costs, decreasing cycle times, reducing waste, and eliminating errors and variances in processes. However, as a global industry, food and beverage, like other process industries, is also subject to three main key drivers. As noted in the “The Global State of Operational Excellence: Critical Challenges & Future Trends” report by the Business Transformation & Operational Excellence Summit (BTOES) (2019), these major influences include customers, competition and technology.
Customers: In food and beverage, customers can range from regulatory bodies and company stakeholders to regional and local communities — all desiring a seamless and transparent relationship. Any experience perceived outside their respective expectations can cause a negative reaction, especially regarding compliance. It goes without saying that you should seek out who your customers are, understand their concerns and consistently engage with them to provide information that fits their customer experience expectations. Without understanding the non-financial drivers of all your stakeholders, food and beverage operations will find it hard to access new resources, affordable capital to develop these resources, and workforces. In addition, decarbonisation and the green agenda has become a more prominent issue as social responsibility and broader stakeholder demands intensify in the wake of the pandemic. A separate cause for concern in food manufacturing operations is that of recalls. Pulling products involves a huge undertaking that can have lasting reputational damage, especially if they pose a risk to health and safety.
Competition: As organisations move to meet these customer expectations, competition continues to grow as new entrants enter the market and emerge alongside incumbent operators to vie for market share and resources. In addition, in a post-COVID-19, green new world, the global shift to reduce carbon emissions and increase investment in renewables will provide new opportunities. Companies that sharpen their focus on environmental, safety and governance issues can strengthen their license to operate (LTO) and boost their competitive edge in the fight for capital. Collaboration and communication are key to a company’s survival. Those who refuse to or are unable to embrace such key components will likely struggle and, ultimately, be squeezed out of the market. Those determined to move forward, even if starting from square one, will reap the benefits. Today’s amplified competition underlines the importance of OpEx. Unfortunately, lack of strategic vision is one of the most common reasons why OpEx implementations fail. While increased competition and satisfying customer expectations are key drivers, it’s essential to introduce and implement OpEx the right way from the start.
Technology: If we have learned anything from COVID-19, it’s that the disruptive impact caused by it highlighted the benefits of various technologies, such as automation, artificial intelligence (AI) and blockchain, to help ensure business continuity.
More than 73% of companies have reported that digitalisation — the advancement of Industry 4.0 technologies such as the industrial internet of things (IIoT) smart sensors, digital twins and threads, machine learning, AI and cloud solutions — is accelerating their ability to deliver sustainable OpEx. The ability to harness big data and connect previously siloed information allows organisations to make better, more timely decisions along the value chain.
The decreasing cost of implementing applications, hardware and cloud computing has encouraged organisations of all sizes to move away from costly, manually intensive, risk-laden, non-digital processes and instead to boldly and rapidly embrace digital initiatives, such as digital twin technologies, connected worker solutions, cloud computing and automation. By seizing this opportunity, companies are realising the benefits and return on investment in digitalising operations to remain competitive, lower operational risk, reduce downtime, increase worker productivity and facilitate compliance with important regulatory requirements.
A culture of continuous improvement
To reap the greatest rewards, the key drivers of OpEx must be balanced by support across the organisation. The most vital component of any OpEx program is building a culture of continuous improvement — doing the right thing, the right way, every time — from top to bottom within an organisation.
The role of management here — and arguably its sole purpose — is to engage personnel to work as a team. To achieve the company’s common OpEx goals, management must clearly articulate what the goals are, why they are important, and how the organisation will get there.
Ultimately, OpEx is not simply about reducing costs or increasing productivity in the workplace. It is about creating a company culture that allows you to produce valuable goods and services for your customers and supports long-term sustainable growth: a people-first culture, where the person who faces an issue can identify the problem, is empowered to act and is confident of resolving the issue at hand.
Changing mindsets throughout the company is usually the first and most difficult challenge encountered by those attempting to drive forward OpEx strategies. According to a BTOES (2019) survey, 40% of companies stated that they had an enterprise-wide OpEx program. However, 53.1% of respondents named changing and improving company culture as their top critical OpEx challenge.
Lack of leadership understanding and buy-in was the biggest threat for many. Without this buy-in, there is an absence of role models, budget, resources and long-term commitment to the OpEx program.
For others, sustaining the improvements made through OpEx was another key factor, with many organisations tending to move on to the next challenge once they felt an improvement had been successfully implemented, despite the lack of a plan to sustain it.
In the report, a third of the companies felt they faced major difficulties in driving an end-to-end business transformation, even though failing to complete the transformation strategy will always produce sub-optimal results.
OpEx is also closely linked with increased digitalisation. Only by achieving the greater level of data insight that digitalisation provides can companies make better, more informed decisions and implement them quickly. Thus, allowing organisations to rapidly identify the vital yet small improvements that will make a big difference to performance and build confidence in the program across the company.
Achieving OpEx does not come without challenges. Some of the common obstacles encountered are:
Detachment: People are often not connected enough to broader business needs. It is common for employees to not understand the business strategy or see how their role contributes to customer value.
Lack of Progress: People may be working very hard, but are tasks underway that are moving the needle on growing the business? Do leaders make room for growth-related activities?
Lack of Adaptation Appetite: Organisations need to be able to adapt their infrastructure to change quickly and efficiently. Many organisations don’t change courses in time to keep up with their competition.
Overly Complex Data: More data is better, but only up to a point. When data becomes too complex and difficult to understand, people begin making decisions without it.
Siloed Management: Systemic thinking is a principle of OpEx, but unfortunately, it is somewhat rare. Many organisations don’t have a management plan in place to bridge the gaps between processes and functional areas.
These are the issues that can deter staff and management from fully buying into OpEx. To overcome them, many organisations use a business methodology such as lean manufacturing, Six Sigma, kaizen or total quality management (TQM).
Whether or not an organisation chooses one of these models or develops its own, OpEx can be achieved when the principles become part of the organisation’s DNA.
Next month, in the second article of this two-part series, we will highlight the milestones on the road to OpEx, the role of leadership and change champions, and mechanisms you can use in your food and beverage operations for sustained and continuous improvement.