What Is Operational Excellence in Manufacturing?

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By Mirko Peters · 2026-11-11

Operational excellence is a management approach built on continuous improvement. Learn what it means in manufacturing, its principles, benefits and first steps.

Operational excellence is a way of running a plant so that improvement never stops. It is not a project with an end date, but a management approach that uses the daily work to get better at serving the customer. This article is for plant managers and operational excellence leads who want a clear definition before they build a programme. It explains the term, how it differs from lean and Six Sigma, the ten principles, the benefits, a worked example with numbers and the mistakes that stall programmes.

Key points

• Operational excellence is an approach to business management that emphasizes continuous improvement across all aspects of the business.
• It is a way of managing, not a single tool. Lean, Six Sigma and kaizen are methods that serve it.
• The Shingo Model builds on ten guiding principles, such as respect every individual, focus on process and improve flow and pull.
• Tools answer how, not why. Focusing on one tool is a common mistake, so anchor the effort in principles and culture.
• Start with one value stream, a few measures and a daily routine, then widen the scope once the habit holds.

What is operational excellence in manufacturing?

IBM describes operational excellence, often shortened to OpEx, as an approach to business management that emphasizes continuous improvement across all aspects of the business. The aim is a competitive advantage, and the article treats improvement as an ongoing journey, not a final destination.

In manufacturing, this means more than efficient machines. It covers how orders are planned, how material flows, how problems are found and how people are involved. A plant that has reached a good result once has not reached operational excellence. A plant that keeps finding and fixing the next problem is on the way.

Three ideas sit at the centre.

• Customer value. Every process exists to serve a customer, inside or outside the company. Work that the customer would not pay for is waste, and eliminating waste lifts customer satisfaction.
• Process focus. Results come from processes. When a result is poor, you look at the process, not for a person to blame.
• Everyone takes part. Operators, planners and managers all take part in improvement. The people closest to the work know the problems best. This is organizational learning, not a one-off event.

Mike Orzen, a lean coach and Shingo Institute faculty member, puts one objective plainly in his essay on flow: one objective of operational excellence and lean is to eliminate non-value added work, which improves the flow of value to customers. So operational excellence does not replace lean. It sets the frame in which lean works.

How is OpEx different from lean, Six Sigma and kaizen?

These words are often used as if they meant the same thing. They do not.

• Lean manufacturing is, in IBM's words, a systematic method designed to minimize waste while keeping productivity constant. It is a methodology for removing waste in every business process.
• Six Sigma is a set of methodologies, tools and techniques used to improve processes and minimize defects. It is another method, often combined with lean.
• Kaizen is a continuous improvement approach that relies on teamwork and incremental changes within defined areas of responsibility. Kaizen is the Japanese word for improvement through small, repeated steps.

The IBM article states that all three share the goal of continuous improvement, which it presents as the central aim of OpEx. A simple way to remember it: the methods are the tools in the box, and the management approach decides which tool you pick, who uses it and how the results are kept.

Think of it as a framework: the principles set the direction, and the methods fill it with practice. That is why plants that "do lean" but never change how leaders manage often fall back. They have the tools but not the system. A good operational excellence programme needs a continuous improvement routine as its bridge: it turns a method into a habit.

Which ten principles guide it?

The Shingo Model, which IBM names as the origin of the approach, rests on ten guiding principles. An overview of the Shingo Model lists them, and the Shingo Institute itself says the model captures ten timeless principles that apply to all. Sources word the ten names a little differently.

1. Respect every individual. Every person has value and potential.
2. Lead with humility. Leaders who seek feedback and keep learning enable improvement.
3. Seek perfection. Perfection is unlikely, but the pursuit builds a mindset of improvement.
4. Embrace scientific thinking. Improve through repeated cycles of experiment, observation and learning.
5. Focus on process. Fix flawed processes instead of blaming people.
6. Assure quality at the source. Get the work right the first time, and detect and correct errors when they occur.
7. Improve flow and pull. Create value in response to real demand, in continuous flow. Waste disrupts flow.
8. Think systemically. Understand how the parts of the system connect.
9. Create constancy of purpose. Be clear about why the organization exists and where it is heading.
10. Create value for the customer. Value is what the customer wants and is willing to pay for.

Orzen notes that flow is the least practiced of these principles. Any plant that wants operational excellence has to face it. In many plants it is easy to see why: batch production, large stocks and long queues feel safe, even when they hide problems.

How does the Shingo diamond fit together?

The same overview describes a "diamond" that shows how the parts of a business system relate to each other. It has five components.

• Principles. The basis of a sustainable culture of excellence.
• Culture. The foundation, where principles are embedded to guide behaviour.
• Systems. Layers of systems and subsystems that produce performance and behaviour.
• Tools. They answer how, but not why. The overview warns that focusing too much on one tool is a common mistake.
• Results. Key performance indicators (KPIs). Lagging KPIs can signal that culture needs attention.

The lesson for a plant is practical. When a KPI falls short, do not only ask which tool to apply. Ask what behaviour produced the result, and which principle is missing. If the same board, the same meeting and the same tool give a good result in one area and a poor result in another, the difference is often culture, not the tool.

What are the benefits?

IBM lists several benefits of the approach.

• Optimized workflows. Bottlenecks and waste are identified and reduced.
• Lower operational risk. Fewer surprises, because problems surface early.
• Standardized work and outcomes. Everyone follows the current best method.
• Accountability. Roles are clearly defined and performance is evaluated.
• Employee empowerment. Front-line staff receive resources and decision-making authority.

The benefits of operational excellence link to numbers a plant manager cares about: delivery performance, scrap, stops and cost. They also link to people: fewer fires to fight, and more time to improve. The benefits arrive slowly, though. Do not expect a single quarter to show them all.

How do you start on the plant floor?

Implementing operational excellence works best in small steps. Start small, keep it visible and copy the best practice you already have in your own plant.

1. Pick one value stream. A value stream is all the steps that take a product from order to delivery. Choose one product family with clear pain.
2. Agree on a few measures. Three to five: delivery, quality, safety and cost. Show the target next to the actual value.
3. Set a daily routine. A short meeting at the line to review the measures and the open problems. Keep it to 15 minutes.
4. Fix the top problem first. Use simple methods: five whys, standard work and small kaizen steps.
5. Walk the floor. Leaders go to the gemba, the real place of work, and ask questions instead of giving orders.
6. Review every month. Remove what does not help, keep what does, and widen the scope one step at a time.

Align operational excellence with the business strategy. If the company's goal is faster delivery, the first measures should show delivery, not only machine use.

Example: one plant, three measures

This is an illustration with made-up numbers.

A plant ships 400 orders per week. It starts with three measures.

On-time delivery. 88% of orders ship on time.

• Orders on time: 400 × 88% = 352.
• After six months: 94%, so 400 × 94% = 376.
• Gain: 376 − 352 = 24 more orders on time per week.

Scrap. The plant makes 10,000 units per week, and 3% are scrapped.

• Scrap: 10,000 × 3% = 300 units.
• After six months: 2%, which is 200 units.
• Saving: 100 units per week. At 20 currency units per unit, that is 100 × 20 = 2,000 units of currency per week.

Unplanned stops. The key line loses 12 hours per week.

• After six months: 8 hours, so 4 hours are saved.
• At 60 units per hour, that is 4 × 60 = 240 units of capacity per week.

None of these gains came from one tool. They came from a daily routine, a short list of problems and people who fixed them. The numbers are assumptions. Use your own baseline and review it every month. The metric matters less than the habit of reading it.

Common mistakes

• Treating it as a project. A programme with an end date ends the improvement too. Make it part of daily management.
• Starting with tools. Tools answer how, not why. Without principles and culture, the tools fade.
• Too many measures. If everything is a priority, nothing is. Keep a few that the team can influence.
• Leaders who delegate it. Operational excellence changes how leaders manage. If they send others to the training, nothing changes.
• Copying another company. The principles travel. The exact practices must fit your plant.
• Expecting quick results. Culture changes slowly. Plan for long-term success, and celebrate small gains.

How software can help

Improvement needs reliable data on plans, flow and results. iFAKT is a Stuttgart-based consulting company and software specialist for Industry 4.0, founded in 2001, that helps manufacturers plan and optimize production and logistics processes. It develops the Polaris software. Data-driven decisions need a clean source. Whatever you choose, software supports the routine and does not replace it. Check that the data matches what people see at the line.

Next step

Choose one value stream and write down three measures with targets. Then book the first daily routine, because operational excellence starts with one habit that the team keeps.