With rising labor costs, ever-changing raw material pricing, global competition and supply chain disruptions, the pressure facing manufacturers is greater than ever. But just making small improvements to address the problem of the day isn't enough. It takes a structured management system designed to increase throughput, improve quality, reduce waste, and strengthen margins in a sustainable way.
Companies that successfully achieve operational excellence make the shift from putting out fires to being in control of their company's performance. They're able to build out systems that drive performance gains over time.
This eBook explores steps to create a framework that works to increase throughput, reduce waste, improve on-time delivery and expand margins for lasting results.
What's inside.
What is Operational Excellence
Measuring What Matters
Identifying & Managing Bottlenecks
Reducing Waste
Improving Equipment Reliability
Increasing Throughput
Continuous Improvement
Conclusion
What Is Operational Excellence?
Operational Excellence "is a business philosophy and methodology that aims to improve processes, reduce costs, and enhance customer satisfaction."1 Also called OpEx, it began decades ago as part of the Toyota Production System (TPS), with continuous improvement at it's core, emphasizing consistent refinement for more efficient operations.
For manufacturers, operational excellence is achieved when the whole system runs smoothly, not just when one-off metrics are hit. It's about making processes predictable, consistent, and efficient, while reducing waste and mistakes. The focus is on making steady improvements. Two of the philosophies behind this approach are Lean and Kaizen.2
Lean Manufacturing
The purpose of lean manufacturing is to eliminate waste and create value while improving supply chain operations.3 It's comprised of 4 key concepts:
- Eliminate waste through data-driven demand planning and inventory management
- Improve quality to reduce waste due to defects
- Reduce lead time to deliver more value to customers
- Limit expense by reducing unnecessary steps during production and fulfillment
Kaizen
Translating to "improvement", Kaizen is a Japanese philosophy referring to a means of continuously improving processes. For manufacturing, it involves creating a business culture that strives to improve efficiency.4 There are 6 steps to the Kaizen approach:
- Brainstorm repeatable processes to improve specifi c activities
- Measure results using quantifiable data
- Compare the data to pre-set desired results
- Innovate by searching for improved ways to accomplish work
- Standardize approved ideas by making them repeatable
- Repeat the approach to improve more activities
Manufacturers that successfully attain operational excellence establish a system for performance. They set clear metrics, employ continuous improvement to key processes, support their people to make data-based decisions and build in accountability to standardize changes.
Measuring What Matters
There's no shortage of data in the modern manufacturing plant. In a recent study by the National Association of Manufacturers, "44% of manufacturing leaders say the amount of data they collect is double what it was two years ago, and they anticipate it will triple by 2030." 5 With so much data being collected, the challenge is managing it and putting it to use. Operational excellence demands clarity around which key performance indicators (KPIs) will drive improvement.
Overall Equipment Effectiveness (OEE)
Overall Equipment Effectiveness (OEE) is one of the most commonly used manufacturing metrics. Simply put, OEE reveals how your equipment is actually running, as opposed to how it should be performing.
OEE looks at three big factors:
- Availability – How often the equipment is actually running when it's supposed to be
- Performance – How fast it runs compared to its designed speed
- Quality – How much of what it produces meets standards without defects
Taken together, these three factors provide a clear picture of productivity. If machines are running all day, but frequently stopping or running slower that expected, real output is lower than it appears. While ideal OEE is often set around 85%, your real goal should be continuous improvement.
100% 85% 60% 40% Perfect World Class Typical Low
Waste OEE
Source: Leanproduction.com
Measuring, continued...
Throughput
Throughput is where operational performance turns directly into revenue. It measures how fast finished products move through the production process and out to customers. When you can produce and ship more, fixed costs are spread across more units, ultimately improving profitability.
First Pass Yield (FPY)
Every time a product needs rework, your schedule, labor plans and margins are impacted. First Pass Yield (FPY) measures how often a product is made correctly the first time: without rework, fixes or do-overs.
Low FPY creates hidden costs including extra labor, production delays, material waste and even unhappy customers. High-performing operations closely monitor FPY and address issues when performance slips.
Making Metrics Matter
Metrics can't drive improvement if no one actually puts them to use. Gathering KPIs in a spreadsheet once a month won't improve performance. Making them visible on the floor, reviewing them daily and ensuring both supervisors and operators understand them drives accountability. Once that's consistent, improvement becomes part of a culture of continuous improvement.
Identifying and Managing Bottlenecks
Every production system has a weakest link KPIs to measure for bottlenecks that determines the pace of everything else. That point is a bottleneck. Do you know Cycle time: The time it takes to where yours is? Regardless of what efficiency complete a process or operation. you gain in other steps, output can't overcome the capacity of that constraint. Takt time: The rate at which products must be manufactured Start by looking at where work piles up. It to meet customer demand. may be the slowest process, the one with Throughput: The rate of producthe most downtime, or the department that's tion output over a given period. constantly working overtime while others have spare capacity. Wherever the pressure Inventory levels: The amount consistently builds, that's usually where the of work-in-progress and finished constraint lives. goods inventory. Once you've identified it, the goal is simple— Defect rates: The percentage of start optimizing: products that fail to meet quality standards. First, keep it running. Downtime at the bottleneck doesn't just slow one area, Overall equipment effectiveness it reduces total system output. Second, (OEE): A measure of how minimize changeovers and disruptions so effectively a manufacturing more time is spent producing. Third, remove operation is utilized compared non-essential tasks from that process so it to its full potential can stay focused on value-added work.
Source: 6Sigma.us
Reducing Waste in Manufacturing
Small inefficiencies add up quickly in manufacturing, making waste reduction a powerful tool to increase performance. Waste can be anything that uses time, money or effort without adding value.
In manufacturing, some waste is obvious—like scrap and rework—while other forms are more subtle like operators spending time searching for tools or failing to fully use employees' skills and ideas. Over time, these little inefficiencies compound to affect margins.
Cutting waste starts with zeroing in on where it lives. By mapping processes, studying cycle times, and reviewing quality data you can help uncover inefficiencies. Once identified, targeted improvements can be implemented.
One system of addressing waste is 5S. It's a system of organization, but its effects extend to supporting people and processes.6 The 5 steps are:
- Sort – remove any unnecessary items from the workspace
- Straighten – organize what's left to be easily accessible
- Shine – clean and inspect the work area
- Standardize – make the process repeatable by creating standards
- Sustain – build in accountability to make the changes stick
Implementing these changes can help move manufacturers toward lean operations. Results can include greater productivity, improved quality, enhanced safety, improved morale and reduced costs.
Increasing Equipment Reliability and Reducing Downtime
One of the more expensive threats to profitability is unplanned downtime. When an equipment failure occurs, productivity suffers while production schedules are disrupted and customer satisfaction is impacted.
Some of the causes of downtime include inadequate preventive maintenance, inconsistent setup procedures, lack of operator training, and delayed spare parts availability. Addressing these issues requires a structured maintenance strategy.
Companies need a clear, consistent approach to maintenance in order to keep equipment running reliably. Start by focusing on the machinery that matters most to production.7
Use past performance data to understand how often failure occurs. Review downtime regularly to uncover the causes of major breakdowns. Also, make sure operators are trained to perform basic maintenance like cleaning, lubricating, and spotting early signs of issues. Improving reliability can provide extra capacity and performance without requiring spend on new equipment.
Increasing Throughput Without Adding Labor
According to a recent report from National Association of Manufacturers (NAM), "nearly two-thirds (65%) of manufacturers cited attracting and retaining talent as their primary business challenge."8 But before adding more workers, it's a good idea to examine how well current resources are being utilized.
Often, companies are able to increase output through better scheduling to reduce changeovers and downtime, along with streamlining setups and balancing workloads to unlock productivity. Also, improving material staging can help keep wait times for materials in check. Even these small gains in throughput can significantly impact profitability just by driving output.
Building a Culture of Continuous Improvement
According to 6sigma.us, "companies with mature continuous improvement programs typically outperform their industry peers by 3-5% in profi t margins."9 But this type of success depends on more than just tools and metrics. It starts with leadership and building a culture of behavior that supports innovation. Employees across the organization should be empowered to contribute ideas for improvements.
Far from a limited time project, leadership must remain active and involved, reinforcing accountability and supporting improvement efforts. Teams should be supported with clear visibility into performance KPIs and opportunities for problem-solving discussions. When issues come up, the focus should be on understanding root causes and ideation around solutions, not assigning blame.
Conclusion: From Firefighting to Systematic Performance
With challenges popping up, seemingly at random, manufacturers often operate reactively. With operational excellence strategies in practice, reactivity is replaced by structure. Taking steps to align measurement, manage bottlenecks, reduce waste, ensure equipment reliability and enable continuous improvement, manufacturers can strengthen margins without the need for constant crisis management.
You don't need perfection to start on the road to operational excellence, just a commitment to improvement. Small gains in efficiency and productivity compound over time, leading to greater performance and competitive advantage. Operational excellence isn't a project; it's how high-performing manufacturers operate every day.
About Ultra Consultants
We help manufacturers drive business transformation with a focus on operational excellence. Our experts team with leadership teams to streamline processes, modernize technology, and align strategy with execution. From supply chain optimization to ERP-enabled digital transformation, we help organizations reduce costs, improve agility, and build high-performing operations that drive sustainable growth. To put our expertise to work for you, request a free discovery call at ultraconsultants.com.
REFERENCES
- Operational Excellence: A Blueprint for Business Success. https://sixsigmadsi.com/operational-excellence/
- What is Operational Excellence? https://www.ibm.com/think/topics/operational-excellence
- What is lean manufacturing? https://www.ascm.org/topics/lean-manufacturing/
- Trout, J. Kaizen: What It Is and How to Use It. https://www.reliableplant.com/Read/10818/kaizen-lean-manufacturing
- Manufacturing in 2030: The Opportunity and Challenge of Manufacturing Data. (2024).
https://nam.org/manufacturing-in-2030-the-opportunity-and-challenge-of-manufacturing-data-31423
- What Is 5S and Why It Matters for Manufacturing Efficiency. (2025). https://tmep.cis.tennessee.edu/what-is-5s-
manufacturing-efficiency
- Senk, J. How To Implement a Preventative Maintenance Program. (2019). https://emi-inc.com/articles/how-to-
implement-a-preventative-maintenance-program/
- Devonshire, J. Study warns U.S. manufacturing could face 3.8 million job openings. (2025).
https://www.themanufacturer.com/articles/study-warns-u-s-manufacturing-could-face-3-8-million-job-openings/
- Continuous Improvement Strategies: A Guide to Sustainable Business Excellence. (2025). https://www.6sigma.us/
kaizen/continuous-improvement-strategies/