operational excellence

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Operational Excellence

The Path to Operational Excellence

through Operational Discipline

Brian D. Rains

Global OpEx Practice Leader

May 15, 2015


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What is Operations Excellence?

Operations Excellence is:

“The application of principles, systems and tools to engage and focus everyone’s efforts on meeting customers’ needs and continuously improving process performance.”

Said another way, Operations Excellence requires both:

1. Minimization and management of downside risks (prevention of incidents that negatively impact safety, the environment, assets, supply chains, right to operate, reputation, communities, etc.)

2. Maximization of operations’ performance and value creation

“Prevent Value Destruction. Maximize Value Creation”


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The First Step is to Prevent Value Destruction

Operational Risk Management is an integrated system that identifies, evaluates, and controls a manufacturing process’ operational risks in a way that catastrophic incidents are prevented that could impact:

• People – the public, employees and contractors• The Environment – local community / work sites• Business – lost assets, business opportunities, loss of

customers, loss of shareholders


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1. Management Leadership & Commitment

2. Build a Safety Culture

How DuPont Manages Safety and Risk

3. Implement ORM Program

Operations Risk Management Model


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1. Management Leadership & Commitment

2. Build a Safety Culture

4. Operational Discipline

How DuPont Manages Safety and Risk

3. Implement ORM Program

1. Leadership by Example

2. Functioning Capability/Sufficient

Resources

3. Employee Involvement

4. Active Lines of Communication

5. Strong Teamwork

6. Common Shared Values

7. Up to date Documentation

8. Practice Consistent with

Procedures

9. Absence of Shortcuts

10. Excellent Housekeeping

11. Pride in the Organization

12. Risk Sensitivity

13. Innovative, Agile, and C.I.

14. Just & Fair

Operational Discipline Characteristics


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What is Operational Discipline?

Organizational View

The deeply rooted dedication and commitment by every member of an organization to carry out each task, the right way, each time.

Individual View

I am committed to working safely by doing every task, the right way, every time.+

Everyone

Individual

Operational Discipline

Organizational

ORMExcellence

Does It Right

Every Time


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The Case for Operational Discipline

Do you experience incidents when failure to have or follow good procedures is an important cause/contributor?

OD Involvement in Year 2000 Incidents

Yes53%

No47%

• In 2001, DuPont initiated a Six Sigma project to assess causes for significant Process Safety Incidents in 2000.

• OD was identified as a dominant factor in 53% of the incidents.

• In 2010, this percentage was 32%. In 2012, it was <10%


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Visible Felt Leadership, demonstrated commitmentClear, meaningful policies and principlesHigh standards of performance Challenging goals and plans

Supportive staff Line management accountabilityIntegrated team structuresPerformance measurement

Effective communication processesLearning & DevelopmentRich content, Proven Best Practices Effective assessments and re-evaluation

Strong Leadership

The best system in the world, poorly executed, is worthless

Appropriate Organizational

Structure

Focused Processes and

Actions

People-

Driven

Operational

Excellence

The Second Step is to Maximize Value Creation DuPont’s experience is that People drive Operational Excellence


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Operations Excellence is being achieved by DuPont and by our Clients through an integrated Production System

Focus on what really matters, with the right

People

The right tools and practices to solve root

level problems

People instinctively

doing the right things

People with the right skills and coaching

Mindsets and Behaviors

Role modeling/ coaching dialogue/ difficult

discussions

Capabilities Engine

Technical Model

Managing Process

Delivery example

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Current and

future

requirements

For capability

and

performance

Required Business Outcomes

An integrated system that fully develops People and organizational capability for effectiveness and creativity in utilizing assets and eliminating all waste


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Places to Change System Performance (1)

The Ability to Change Mindsets Visioning, Creativity, Flexibility – Systems Thinking

Understanding the Goal of the System & the Mindset Behind It

Guiding principles and what the system should be Knowing what the system wants to do

The Rules that Set Up the System Power to self-organize, improve the system Incentives and taboos

The System Drivers Information flows Changing the strengths of feedback loops Shortening / lengthening a time delay

Parts (Parameters of the System) Increasing some buffer or cushion Amount of current price, tax, subsidy

Higher Leverage

Lower Leverage(1) Leverage Points concepts by Donella Meadows (Sustainability Institute)


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Influence Model11

"I will change my Mindsets and my Behaviors, if ..."

" … I have the skills and confidence to behave inthe new way"

Skills and competencies

Understanding and commitment

"… I know why I need to change and in what way”

"... the systems reinforcethe desired change "

Aligned formal systems and structures

Role-modeling

" … I see my leaders behaving differently"


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Critical Mindsets Changes Before Starting

Openness to change and focus towards the future

Commitment to visibility and transparency

Willingness to prioritize and make choices

Action orientation – 60/40

People are not the problem

Accountability as personal choice

“Everyone, Everyday”

An expectation and explicit request that everyone must constantly strive to improve their skills and capability and performance


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Is Operational Discipline consistent with what is necessary to achieve Operations Excellence?

Poll Results:

During a recent conference, ~100 Operations and Safety Leaders were asked how well they agreed with the following statement:

‘Operational Discipline is a limitation to an organization’s ability to be agile and innovative’


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Is Operational Discipline consistent with what is necessary to achieve Operations Excellence?

Poll Results:

During a recent conference, ~100 Operations and Safety Leaders were asked how well they agreed with the following statement:

‘Operational Discipline is a limitation to an organization’s ability to be agile and innovative’

12%

12%

14%

59%

OD Limits Agility & Innovation

Strongly Agree - 12%

Somewhat Agree - 12%

Neither Agree nor Disagree - 3%

Somewhat Disagree - 14%

Strongly Disagree - 59%


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Panelist Comments

During this same conference, 4 panelists made the following comments:

• Operational Discipline releases time, energy and resources

• Operational Discipline is an essential ingredient to moving up the curve to Operational Excellence• Operational Discipline equals brilliance at the basics

• A good OD culture is when employees exhibit strong teamwork, a high degree of pride and housekeeping tends to be very good

• Today, the leadership we are looking for is the leadership that lies within our operators, within the people on the front lines

• It’s all about leadership. Leadership sets the tone. Leadership creates the culture. If the culture isn’t what you want, you have to change it


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DuPont Sustainable Solutions Case Study

SIBURSIBUR is the Largest petrochemical company in the Confederation of Independent States, Central and Eastern Europe

2013 sales of over $8 billion USDUSD, 27 production locations in Russia, as well as several joint ventures with major international companies in Russia and abroad

Founded in 1995, it rapidly grew into a holding company with numerous largely independent entities through a number of mergers and acquisitions

Company’s extremely fast growth has brought its own challenges. Senior management recognized that there were significant competitive gaps compared to world-class companies outside of the home market


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Challenges To Becoming World Class

Condition of SIBUR assets and the ability of the organization to improve and sustain performance

Fragmented structure as a result of operating as a very large holding company with 50,000 employees spread across 27 operation sites made operational control challenging

Need for transformation of the organization to a single corporation with a recognizable, unifying culture and highly engaged people

1

3

2


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Client’s needs Key questions & Approach Benefits

Design & implementation of an Integrated Production System for world-class operational performance

Operational performance improvement to be competitive in international markets

Maximizing returns from its existing portfolio of assets

Improving operational competencies

A sustainable roadmap with significant year-on-year payback that enables delivery of the business objectives

Significant increase in the daily production at the sites

Palpable cultural change towards an aligned and productive culture

World-class operational practices and culture in development

Key questions & Approach Benefits

Cultural Alignment

How can the organization accelerate progress towards operational performance goals?

Production System Design

Production System

Deployment

Executive leadership alignment around operational objectives

Leadership Development

Establish long-term operational goals

Establish case for change

Management process

Culture transformation

Capability building

Diagnose & improvement tools:

Operations Energy M&R Lean manufacturing

technology Safety

Sites implementation through structured approach: diagnose, implement, sustain

Focus on value release, optimizing existing process activities

Leadership, teamwork and problem solving empowering employees, driving cultural change

1 2 3

How can operations efficiency and effectiveness be improved in an integrated and sustainable way?

How should operations organize itself to ensure alignment and operational discipline in executing the corporate and business strategies?

Operational Excellence: Production System Deployment

SIBUR’s needs

World-class operational performance


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Results Acheived By The End Of 2013

Value of improvement projects has more than doubled

Reduced lost time injuries by 40 percent

Financial benefits estimated at 20 times the investment in consulting


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Sibur Feedback

Vladimir Razumov, Deputy Management Board Chairman and Executive Director of SIBUR

Vasily Nomokonov, Managing Director, SIBUR


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Source: The Conference Board, CEO Challenge, 2013

Operations Excellence is one of the most important issues for CEOs globally


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Benefits across operational value levers that companies realize*

1. Productivity & Quality improvements

2. Improved Maintenance and Reliability

3. Improved Safety and footprint reduction

4. Supply Chain Efficiencies

- Capacity release- Increase high quality product - Waste reduction

- Reduced downtime- Increased predictability- Reduced breakdown

- Maintain right to operate- Mitigation of injuries & incidents - Reduced energy consumption- Alternative energy sources

- Improved purchasing process- Reduced stock of raw material, MRO & finished

product- Reduced transition loss / waste

* Results extracted from individual cases. Actual results may differ according to their specific circumstances

Operational Excellence Value Proposition: The Benefits & Value


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