Holistic OpEx optimization: a three-step approach

Mar 21, 2023
  • operations

Reducing costs without negatively impacting operations is key to running a healthy and future-proof business. Sounds simple – if you’ve never tried it before. Most business professionals know that there are many ways to keep operational expenses, or OpEx, in check. Identifying the right opportunities in your own organization, let alone prioritizing and implementing key initiatives, is often a different story. “Successful, long-term OpEx optimization requires a structured, step-by-step approach, a rational, objective view, and the involvement of all stakeholders,” says Michael Bulthé, Operational Excellence expert at delaware.  

Thinking beyond the crisis

On the face of it, the drive to reduce OpEx seems pretty obvious: by spending less on everyday operations, organizations can improve their bottom line in the short term, making them healthier in the long run. But there’s more to it. “Managing OpEx is also essential to minimizing the impact of macro-economic trends like labor shortages, rising energy & labor costs, disrupted supply chains, and more,” says Michael. “It allows firms to safeguard the critical, long-term investments that will give them a competitive advantage once the crisis is over.”  

But first things first, let’s take a closer look at delaware’s approach to OpEx optimization. 

1.   Screening: people, processes, and technologies

The first step to reducing OpEx and increasing operational excellence is identifying opportunities for optimization throughout the entire organization. “To do this well, you need a holistic view that includes people, processes, and technologies. How are shifts organized? Where are the inefficiencies in a specific process? Which technologies are we not yet using that could significantly boost productivity or reduce waste? The key here is to be brutally honest. Taking on board an external partner with an objective view can certainly be beneficial.”

From top-down to bottom-up

Michael’s team breaks down the screening phase into two discrete parts: a top-down analysis to identify priority departments, and a bottom-up analysis that allows for further refinement. 

“In the top-down OpEx breakdown, we identify the main operational cost drivers, study overall productivity, and locate all pain points in the organizational model, business processes, and enterprise architecture. The findings from this exercise are the starting point for more granular, bottom-up opportunity screenings. In that second phase, we talk to team leaders, operators and other stakeholders who can provide more detailed insights into specific bottlenecks, labor and storage inefficiencies, value streams, and so on.”

e-book: building a resilient supply chain

2. Roadmap: the quickest way to success

“Depending on the size and complexity of your organization, the screening phase takes about one to three months. At the end, you get a comprehensive list of optimization opportunities. Most likely, you won’t have the time or resources to tackle them all. Which is why the next step is to set priorities by building quantified business cases for each.”  

“First, you need to identify the limitations and dependencies of every initiative. At delaware, we accomplish this primarily during the screening stage. For instance, we engage robotics specialists in our walkthroughs to quickly determine the feasibility and expenses of automation opportunities. When we discover valuable use cases for AI, we seek the input of a data science expert. Our broad technology expertise – both internally and through our extensive partner network – provides us with instant insights on possibilities, feasibility, and costs. This helps everyone save time and turns unclear ideas into more tangible and actionable ones.”

Once the constraints are clear, the next step is to determine how the required investments will impact the organization, how much value they’ll provide, and their strategic importance. “In the beginning, you want to prioritize the ‘low-hanging fruit’: initiatives that are relatively cost-friendly and easy to implement but create a lot of value. This generates momentum, and often frees up more resources to tackle less obvious initiatives.” 

The result of this second phase is a realistic, 3-to-5-year roadmap with insight into all planned initiatives and their value delivery over time. Michael: “But we don’t just put this roadmap on paper: we also ensure buy-in and resource commitment throughout the organization and confirm that the first projects and initiatives are ready for kick-off.”

Initiatives that are relatively cost-friendly and easy to implement while creating a lot of value are perfect to generate momentum and get more resources to tackle the harder work.
Michael Bulthé, Operational Excellence expert at delaware

3. Implementation: putting ideas to the test

Then, of course, comes the time to start implementing the initiatives in their predetermined order. “This step takes the most time, but it’s also the most rewarding. This is where ideas can really be put to the test through their interaction with everyday reality. That’s why it’s a major advantage to team up with a partner who goes beyond strategizing and building roadmaps to handling the execution as well.”

There is, of course, a fourth step to all of this, which has everything to do with sustaining cost optimization efforts in the long run. “Most companies conduct operational excellence exercises when there’s an urgency or they risk exceeding their budget. And while costs will go down initially, budget creep is often unavoidable. As humans, we just don’t like to be restrained. So, an important additional step to all of this is making operational excellence and OpEx management a part of the company’s culture.”

Don’t go there alone

Are there any key factors that determine the success of these projects? “Every organization is different, and every business will have some unique struggles. But the most important piece of advice I could possibly give is: don’t try to do this all by yourself, or with a single team.”

Michael’s advice works on two levels: internally, and externally. “Some of these initiatives will likely have a major impact on many of your coworkers and how they’re currently working. You absolutely need to get them involved right from the start. Not only does this allow you to explain the value of the project, it also opens up new avenues for knowledge sharing and problem solving. In this way, you’re creating a sense of ownership, which helps lay the foundation for meaningful and lasting change.”

But there’s also a major advantage in working with an external partner, as evidenced by a recent OpEx exercise that we conducted at Umicore PMR. “They have the in-depth expertise and cross-industry experience you need to be successful. Moreover, they are less constrained by company culture and will tell you right away whether your goals are realistic – which is often an undervalued quality. Most importantly, their involvement will add accountability, so you will actually get the job done."

Contact Michael

Ready to face the music about your OpEx and operational excellence? Get in touch with Michael Bulthé & his team of experts via mail or LinkedIn.

read more