Author: Camilo Tristancho

Operational Excellence: Principles & Methodologies

Camilo Tristancho

PM Articles by ProjectManager.com. 

People often think of productivity on an individual scale: how can I be more productive? But most of us work for organizations, and if the organization isn’t productive, then you can’t be productive either.

Can there really be a magic bullet that can pierce through the complexities of collaboration and get everyone working together? Operational excellence is such a technique. If you’re tired of waiting for colleagues on assignments and dealing with overbearing red tape, then operational excellence can assist you.

What Is Operational Excellence?

Operational excellence is achieved when an organization executes its business operations better than its competitors in terms of costs, production output, quality assurance, customer satisfaction and profitability. By choosing an operational excellence strategy, companies attempt to outperform their competitors by executing their business processes more efficiently which helps them save costs and be more profitable. This creates value for the customer and shareholder alike.

The truth is, no matter how productive you are, there can be external obstacles blocking your path forward. If you’re looking to become more productive, then you must use work management tools and methods that help every aspect of your organization achieve that goal.

ProjectManager has planning, budgeting, scheduling and resource management tools to help you achieve operational excellence for your business. Choose between Gantt charts, kanban boards, workload charts and real-time dashboards to get your team working more efficiently. Get started today for free.

ProjectManager’s dashboards are ideal to keep track of costs, tasks and due dates. Learn more

Creating an Operational Excellence Strategy

To make sure an organization can effectively adopt an operational excellence model, it must be actionable and measurable. But operational planning alone doesn’t guarantee success. Your strategy should be consistent and have reliable execution. Also, operational excellence is systemic. It must positively influence all aspects of a business, including revenue, cost and risk. It doesn’t focus on one particular aspect but lifts all to the same standard.

Of course, for operational excellence to be successful, it must complement your business strategy. In a sense, the two—operational excellence and business strategy—are the formula to achieve strong performance in the marketplace. Without one or the other, a business will struggle with weak performance.

Here are some key business areas you should monitor when creating an operational excellence framework.

  • Business process management: A business process can be simply defined as any activity that your organization needs to execute to achieve goals. Therefore, your business is a sum of many business processes. By mapping them, you can find opportunities for improvement and get closer to operational excellence.
  • Customer service: Customers are the most important aspect of any business, so understanding your customers’ wants and needs is the underpinning for your operational excellence strategy.
  • Distribution channels: Choosing the best way to sell your products or services is an essential part of your operations. From an operational excellence standpoint, you should choose the distribution channels that let you get to your customers in the fastest, most cost-effective manner.
  • Supply chain & logistics: Sourcing your raw materials, parts and components is another key aspect of operations management. It’s also important to optimize your transportation methods so that your supply chain and logistics management are streamlined.
  • Stakeholder management: Every organization has different types of stakeholders such as employees, customers and communities. To achieve operational excellence, you’ll need to ensure your business stakeholders are satisfied.

Operational Excellence Principles

There is an award given to organizations worldwide for outstanding operational excellence called the Shingo Prize. It started in 1988 and is presented by the Shingo Institute at Utah State University. It judges winners by how well they adhere to these 10 key principles:

  1. Respect every individual
  2. Lead with humility
  3. Seek perfection
  4. Assure quality at the source
  5. Flow and pull value
  6. Embrace scientific thinking
  7. Focus on process
  8. Think systemically
  9. Create constancy of purpose
  10. Create value for the customer

Operational Excellence Methodologies

There are many different ways to execute operational excellence, but there are a few that have been codified and are regularly adopted across the globe. Let’s explore a few.

Lean Manufacturing

Lean is a project management methodology that focuses on adding value to customers. This is done by using a technique called value stream mapping, which helps manufacturers determine which product features add value to the customers.

Once they’ve determined what’s important for their customers from a production planning standpoint, they can remove other unnecessary steps from the production line to save costs and reduce lead time. Those unnecessary steps in the manufacturing process are known as “waste.” Lean manufacturing also uses the “kaizen principle” of continuous improvement, which involves a cycle of permanent feedback and improvement of any aspect of the manufacturing cycle, so that companies are always moving towards operational excellence.

Six Sigma

Six sigma is a method that allows organizations to improve their operational efficiency by using the DMAIC process, which stands for define, measure, analyze, improve and control. Is a systematic method that helps resolve operational problems of any kind. Like lean, six sigma also uses value stream mapping and kaizen as a way to add value to the customer.

Another important aspect of this methodology is the Six Sigma 5S’s which stand for sort, set in order, shine, standardize and sustain, which helps organizations improve their business processes.

FLEX or PBED Method

There’s also the flawless execution (FLEX) methodology, also known as PBED, for the plan, briefing, execution and debriefing, which is based on what fighter pilots use in combat. The methodology moved to the private sector in 1998 and has roots in the agile manifesto created by software developers.

It’s an iterative process that values adapting business strategy to changing influences in the real world. That is done through a practice called debriefing, which is a tool that organizations can use to drive cultural change. It offers a voice to all employees, which then can be heard throughout the whole organization. This begins with establishing a long-term strategy that’s focused on a common goal, which is the “plan” part of PBED. It must set a clear, measurable and achievable goal. Be sure to identify any risks and the resources needed to avoid them. For help, use lessons learned from debriefing after tasks, and develop objectives for team members that align with the overall goals.

In terms of the other parts of the PBED acronym, the “brief” refers to how the plan is communicated to the teams that must execute it. “Execute” is acting on the plan and focusing on its objects while remaining flexible to cultural change. Finally, “debrief” is when the team looks at the daily execution and measures that against the plan. Any difference is analyzed and then changes are applied.

Operational Excellence Example

There’s no single method to achieve operational excellence, so you should explore different techniques. Keep in mind that not all companies are the same so it’s important that you find the tools that work best for your organization.

Okapi Method

Iris Tsidon, co-founder and CEO of Okapi, a platform for improving organizational management, and Maya Gal, CTO of Okapi, created the Okapi method, which incorporates SMART key performance indicators (KPIs). Okapi is named after a unique mammal that has the features of a giraffe, dear and zebra.

SMART is an acronym for specific, measurable, achievable, relevant and timely. Applying this technique helps to by having more precise KPIs, which are measured by actions, not behaviors. They’re challenging but attainable, relevant to the organization’s objective and scheduled within a defined timeline.

The Okapi method notes several major challenges for any organization in achieving operational excellence.

  1. Okapi struggles when people are disconnected from the larger business needs of the company.
  2. A lack of progress can stymie Okapi. This is when tasks necessary for the growth of the business are stalled. People are devoted and hard-working, but the priority of tasks assigned is poorly structured.
  3. If a company is unable to change to stay competitive and adapt management infrastructure to adapt and thrive in these changing environments, the company isn’t staying competitive. A process of change must be applied quickly and efficiently for Okapi to thrive.
  4. When data is too complicated, then understanding what that data means can become an issue. Within Okapi, reports must be timely, add value and be easy to digest, so they can be effectively acted on.

Finally, without a coherent action plan, all operational excellence efforts are doomed to fail. If people in the organization aren’t using the management system, or don’t bother to set it up and follow a plan to use it, the ability to achieve operational excellence is severely compromised. While facilitating transactions, leading business development and solving immediate problems are important, managers must delegate responsibility.

ProjectManager Helps You Achieve Operational Excellence

ProjectManager is a project management software that lets you plan, manage and track projects for your organization. It’s equipped with task management, resource scheduling and cost tracking tools so you can streamline your business processes, cut down costs and achieve operational excellence.

Multiple Task Management Tools

Choose between online Gantt charts, kanban boards, task lists, calendars and much more to assign tasks to your team members. With ProjectManager, you can create work schedules in minutes, by simply dragging and dropping tasks on our multiple project views.

Manage tasks in the ProjectManager list viewManage tasks in the ProjectManager list view

Track Labor Costs With Timesheets

Timesheets are a great cost-tracking tool for any team leader. Simply assign tasks to your team members on the Gantt chart or kanban board and ProjectManager will automatically add those hours to timesheets you can print or share with unlimited file storage.

ProjectManager's timesheets help you keep track of costs as you strive for operational excellenceProjectManager's timesheets help you keep track of costs as you strive for operational excellence

Manage Your Team’s Workload

Use the workload chart to see who’s working on what and who might be over or under-allocated. This chart helps you quickly understand what your resource utilization is, so you can balance your team’s workload.

ProjectManager's workload chart is ideal to measure resource utilizationProjectManager's workload chart is ideal to measure resource utilization

Related Operations Management Content

Operational excellence requires a plan that is then tracked and measured against its progress. It’s a project, and like any project, it needs the right tool. ProjectManager is online project management software with features that allow managers to schedule with online Gantt charts and track changes with a real-time dashboard. See how it can help your organization achieve operational excellence by taking this free 30-day trial.

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What Is a Bill of Materials? Components, Purpose & Types

Camilo Tristancho

PM Articles by ProjectManager.com. 

Manufacturing is the process of putting together a product. Yes, there are many other factors, such as costs, time, quality and more. But all of those concerns are tied to the bill of materials, which collects the pieces that’ll be used to build the final product.

A bill of materials, however, is more than a mere list. If you’re manufacturing anything, then you need to know what is a bill of materials, what is it used for and the types of bills of materials you’ll find in production. We’ll even include a free bill of materials template to facilitate the process.

What Is a Bill of Materials (BOM)?

A bill of materials is the full list of all the materials, components and parts that are required in the manufacturing of a product. The BOM includes how many of each item is needed, with the name, a description and the costs for the item.

As we noted above, the bill of materials is more than a litany of what’s necessary to build the product being manufactured. It’s also an instruction manual of sorts, which explains how to get these materials and how they’ll be used on the production line.

Therefore, the bill of materials can be your central record of everything needed to build your product. It helps you plan what you have to purchase by estimating costs. The BOM also can assist in planning and controlling inventory in order to avoid delays and waste.

The more accurate your bill of materials, the more likely you catch issues with products on the production line and be able to replace the faulty part, material or component that isn’t working fast and reduce production delays.

In a sense, the bill of materials is the foundation of your production plan, which includes those resources and costs. You’ll then schedule them to meet your deadline for getting the product to market. ProjectManager is award-winning project management software with robust Gantt charts that help you plan, manage and track your bill of materials in real time. Organize your job with associated resources and their costs, then set a baseline to capture the planned effort so you can compare it to the actual effort and monitor your production variance. Get started with ProjectManger today for free.

ProjectManager's Gantt chartProjectManager's Gantt chart
ProjectManager’s Gantt charts plan, manage and track the BOM in real time. Learn more

What Are the Bill of Materials Used For?

The bill of materials has multiple uses as we’ve explained above. It’s used to help manufacturers plan their purchases of materials, estimate costs, plan and control inventory and help avoid production delays and waste.

It’s useful for identifying the parts needed to assemble a shippable product, including packaging, but it goes further in that it can direct how to get the items on the BOM and how to use them. It takes what can be a very complex process and provides transparency so everyone involved in the process of procurement, assembly or repair, knows what each item is being used for.

A bill of materials is also useful for inventory management. It shows what you need to have in stock and helps forecast orders to ensure they’re on hand when needed. This adds efficiency to the supply chain. Items that show up on time are less likely to create delays in production, allowing you to optimize your stock, which means less capital tied up in inventory and related carrying costs.

Types of Bills of Materials

There are many different types of bills of materials and some are unique to specific business sectors, for instance. As a point of reference, parent items are upper-level assembly that contains items, which are lower-level components needed to build a parent item. Here are some of the more common types of bills of materials.

Single-Level Bill of Materials

This is for products that might have some construction, but it’s not complicated. There are no sub-assembles, for example. A single-level bill of materials lists all the parts used to assemble the product, which is numerically ordered and used as instructions for construction.

Multi-Level Bill of Materials

When dealing with more complicated assemblage, you’ll be using a multi-level bill of materials. It includes sub-assemblies and is even sometimes further broken down into sub-categories. Except for the most top-level item, all item numbers will be linked to a parent item.

Engineering Bill of Materials (EBOM)

This is made during the design phase of the project and is usually based on computer-aided design (CAD) or electronic design automation (EDA) tools. The engineering bill of materials lists items, parts, components, sub-assemblies and more designed by the engineering team.

Sales Bill of Materials (SBOM)

The sales bill of materials differs from others on this list in that it details the finished product before it’s assembled in the sales phase. The finished product and components are separate items on a sales order and the parent is listed only as a sales item, not inventory.

Manufacturing Bill of Materials (MBOM)

This is used to show all the parts and assemblies that are necessary to make the finished product. Any part that needs to be processed before assembly is included in the bill of materials. The MBOM is then shared with all integrated business systems that order parts and build the product.

Configurable Bill of Materials

Here you’ll find every component needed to design and make materials that meet the customer’s requirements. This type of bill of materials is found in industries with highly configurable products such as in job shops, heavy machinery and industrial machinery.

Production Bill of Materials

This lists the components and sub-assemblies that make up the finished product but also includes prices, descriptions, quantities and units of measure. Then, during the production process, these components are made into finished products.

Assembly Bill of Materials

Instead of the parent item being listed as an inventory item, it’s listed as a sales item similar to a sales bill of materials. But unlike the sales BOM, only the finished product is in the sales document. Children don’t show up as sub-items. This BOM can be with single-level or multiple levels.

Screenshot of the inline banner ad for the manufacturing ebook by ProjectManagerScreenshot of the inline banner ad for the manufacturing ebook by ProjectManager

What Should Be Included In a Bill of Materials?

There are many different types of bills of materials, but most include the same key elements. We have a short description of the components, parts and more that can be found in a BOM. Note that a bill of materials doesn’t include labor.

  • BOM level: Shows where the item fits into the larger bill of materials hierarchy. It is designated with a unique number.
  • Raw materials: These are raw materials that are required in the production of a finished product.
  • Assemblies & sub-assemblies: Parts of a larger assembly or product accompanied by a drawing that shows how the assembly will be put together.
  • Part number: Each part or assembly has a corresponding number to make it easily identifiable.
  • Part name: Just as each part needs a number, they should have a unique name that makes it easy to identify.
  • Part description: Lists the manufacturer of the part, specifications and other general details to help distinguish between similar parts.
  • Unit cost: The standard cost for a particular item.
  • Total cost: Multiply the unit costs by the amount needed for each component or part and add them to get the total cost.
  • Quantity: The number of each item or part that’ll be used for the assembly or sub-assembly.
  • Procurement details: Shows how the part or component will be purchased, produced or manufactured by subcontractors.

Bill of Materials Template

If you’re looking for a document that already lists the key essentials that would be found in a bill of materials, you’ll want to download our free bill of materials template. It’s one of the dozens of free project management templates for Word and Excel that are free on our site. You’ll find free templates for every phase of your project and many industries as well.

ProjectManager's bill of materials templateProjectManager's bill of materials template
Free bill of materials template for Excel.

Use ProjectManager to Track Your Production Process

Having a bill of materials is crucial to manufacturing any product. But once you have the list, you need to implement that information into the manufacturing process in order to build your project. To keep on schedule, manage tasks and track your resources you’ll need project management software. ProjectManager is online project management software that helps you plan, manage and track in real time.

Track Resources With Dashboards, Workload Charts and Timesheets

The bill of materials is resources and resources must be tracked in real time in order to make sure you’re meeting manufacturing milestones. You can get a high-level view with our live dashboard that tracks cost, time and more. There’s no time-consuming setup as with other tools. It’s ready when you are. There are also color-coded workload charts to keep workload balanced and productive as well as secure timesheets to see how long everyone is taking on their jobs.

ProjectManager's dashboardProjectManager's dashboard
Manage Tasks & Schedules With Multiple Tools

While managers will likely use our robust Gantt charts to plan production schedules, not everyone in the production line will want to use this tool. That’s why we have multiple project views that share real-time data so everyone is always working off the most current information. Production planning can also be done on kanban boards that visualize workflows and reduce waste. Jobs can be assigned with robust task lists that show the percentage completed.

ProjectManager's kanban boardProjectManager's kanban board

Managers can also control their supply chain with real-time visibility, give teams the collaborative platform they need to work better together and get customizable reports to get in-depth data when the dashboard isn’t enough. All that, plus, you get unlimited file storage so your BOM, change requests, invoices and more are all in one central hub.

ProjectManager is award-winning project management software that empowers manufacturers to reduce lead time and keep quality high. Reduce waste and avoid costly bottlenecks with production planning. Meet quality expectations and improve processes. Get started with ProjectManager today for free.

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