Two Levels of Operational Effectiveness

Podcast Series: Finish Strong® – Fulcrum ConsultingWorks Inc.

You’ve all heard that great strategy with poor execution is no better than poor strategy with great execution. Operational effectiveness requires excellence at both levels.

My writings and podcasts have long focused on the strategic aspects of operations, specifically how to build a manufacturing business that endures. This episode reminds the listener of the laws of math and physics that impact near term execution.

The book Factory Physics was written about 30 years ago, and updated several times since. Its primary intent continues to be for undergraduate and graduate students in Operations Management.

To overlook its value for production leaders, plant managers, and financial leaders in manufacturing operations is a mistake.

Most of you are likely familiar with multiple order quantity formulas, from EOQ to Kanban, even if you’ve only seen them as options in your ERP system. Any order quantity formula impacts operational effectiveness, as it is designed to determine inventory levels and scheduling.

It can be overwhelming, and seem to require great judgement, to determine what to do next on what machine or with which supplier. The more inventory you see the uglier it gets.

There are laws of math and physics that are true whether or not recognized. Those fundamentals can help you make better decisions, lowering costs and increasing throughput and on-time delivery.

Batch size, equipment utilization, and work-in-progress inventory are all integrated. When the boss insists on high utilization because he wants to absorb overhead, he may not understand the secondary impacts on inventory, throughput and lead-time.

You should. And a good boss does as well.

As someone who worked her way up through shop floor operations to plant and divisional operations, I’ve found understanding the details required by operational execution to be of great value in setting strategy. No, I can’t write out most of the equations without help anymore, but I know the concepts and what drives them.

If you want to enhance the quality of your operations strategy thinking, don’t turn your back on Factory Physics.

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