The OliverWight Class ChecklistA forBusiness Excellence SIXTH EDITION John Wiley & Sons Inc. Class A Business Excellence For ✓ Managing the Strategic Planning Process ✓ Managing and Leading People ✓ Driving Business Improvement ✓ Integrated Business Management ✓ Managing Products and Services ✓ Managing Demand ✓ Managing the Supply Chain ✓ Managing Internal Supply ✓ Managing External Sourcing ® The OliverWight Class ChecklistA forBusiness Excellence SIXTH EDITION John Wiley & Sons Inc. Copyright © 2005 by Oliver Wight International. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. 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For general information on our other products and services please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002. Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our web site at www.Wiley.com. Library of Congress Cataloging-in-Publication Data: The Oliver Wight Class A checklist for business excellence / Oliver Wight International, inc..—6th ed. p. cm.—(Oliver Wight manufacturing series) Rev. ed. of: Oliver Wight ABCD checklist for operational excellence. 5th ed. 2000. Published simultaneously in Canada. Includes bibliographical references. ISBN-13 978-0-471-74106-0 (pbk.) ISBN-10 0-471-74106-X (pbk.) 1. Industrial productivity—Measurement. 2. Strategic planning. 3. Total quality management. 4. Manufacturing resource planning. 5. Production control. I. Wight, Oliver W. II. Oliver Wight International, inc. III. Oliver Wight ABCD checklist for operational excellence. IV. Series. HD56.25.O38 2005 658.4�013—dc22 2005003952 Printed in the United States of America 10 9 8 7 6 5 4 3 2 1 CONTENTS PREFACE vi INTRODUCTION ix FOUNDATION xiv HOW TO USE THE CHECKLIST xxi 1. MANAGING THE STRATEGIC PLANNING PROCESS 1 2. MANAGING AND LEADING PEOPLE 21 3. DRIVING BUSINESS IMPROVEMENT 47 4. INTEGRATED BUSINESS MANAGEMENT (SALES & OPERATIONS PLANNING) 75 5. MANAGING PRODUCTS AND SERVICES 101 6. MANAGING DEMAND 123 7. MANAGING THE SUPPLY CHAIN 147 8. MANAGING INTERNAL SUPPLY 169 9. MANAGING EXTERNAL SOURCING 193 OLIVER WIGHT BIOGRAPHY 213 Additional clarification can be obtained from the Oliver Wight International website (www.oliverwight.com) where a glossary can be found and the metrics to support Performance Measures. v PREFACE Welcome to the sixth edition of the Oliver Wight Class A Checklist for Business Excellence, which marks another major milestone on a journey started by Oliver Wight himself in the 1970s. His passion was to support companies seeking to be consistent winners by aspiring to excellence. This new Checklist is the comprehensive statement of excellence in busi- ness today. It looks very different from our last version, with its scope widened to embrace every part of the business to be pursued for total excellence. Additionally, it now requires a demonstrated superior business perfor- mance for the coveted Class A award. However the major features re- main and are unique. • It is direct and practical. It does not follow the trend of setting the- oretical business models for you to “fill in.” It sets out those busi- ness processes and practices that we see over and over at the heart of successful and excellent businesses. • Its chapters align with core business processes and the enablers of those processes, covering the entire Business. • It is aimed so that your people can see for themselves what “excel- lence” is and what each of them has to do for the company to be ex- cellent. • Its scoring method allows you to visualize and measure progress towards excellence in every part of the Business. The sixth edition offers the longest standing Excellence Award of in- ternational repute. It recognizes the efforts of your people and can be used with clients and customers to prove your efforts on their behalf. The first checklist in 1977 was a simple list of 20 questions that a man- ager could answer to evaluate his business. It was the very first such list in the world and, consequently, the checklist concept became widely ac- vi cepted. However, standards of excellence in business had started their own revolution. As a result, the list went from one page to a book, with each version building on the last. The questions were built from the accu- mulated experience of Oliver Wight’s organization throughout the world and from the many people they worked with in thousands of companies. The first checklist book was published in 1988 and was a major state- ment in defining excellent use of Manufacturing Resource Planning (MRPII) systems, continuous improvement processes and the realiza- tion of sustainable processes. The fourth edition followed in 1993 and the fifth some seven years later in 2000. With each edition, the standard for excellence increased, and the scope of the business that was assessed widened as the world became evermore competitive and companies be- came larger and more international. Throughout this adventure some things are unchanged: • The Oliver Wight International organization continues to grow and set the standards in global business excellence. • It operates throughout the world offering the same message in many languages for its multinational and multicultural client base. • It holds to the same core belief that education and training at all levels of the company are the keys to achieving excellence. • One other thing that remains unchanged is the role and purpose of this checklist. Many have contributed to the know-how in this book, but we must recognize some people who have been major contributors. • The book has been sponsored by the Oliver Wight International Board, and its development was led by Andrew Purton as its cham- pion. • The checklist architect, Lawrie Rumens, has brought his experience and expertise to the design forum to steer the journey to a superior Class A. • The project leader, Lloyd Snowden, has spent so much time and energy driving very busy people and has delivered the book on time. • Glyn Williams and Jon Minerich provided the global leadership. • Each chapter had its own champion and sponsor supported by ex- pert teams from the other regions. The chapters were led by Lawrie Rumens, Peter Hill, Andrew Purton, Les Brookes, Kevin Herbert, Liam Harrington, Ron Ireland, Rod Hozack, and Barry Linger. Preface vii Chris Radford, Paul Archer, and Shirley Harrison also generously contributed. • Last, where would we be without Jill Losik pulling it and us to- gether in such an uncomplaining way? So here is the sixth edition Checklist. It is no longer an MRP check- list or a manufacturing excellence standard. It is a standard of excel- lence for all businesses. We know that you will find it demanding, but then true excellence never did come easy. It will be rewarding as well. True excellence is the only way of consistently and reliably competing and winning in business. That’s what Oliver Wight Class A is about, helping you to be in a position to win consistently in your business. For those executives anxious to take up the challenge of raising their company’s performances to heights of excellence, this Checklist will show them the way. Walt Goddard Chairman Emeritus, Oliver Wight International, Inc. viii Preface INTRODUCTION Those of you familiar with the Oliver Wight checklist over a period of time will view this updated version with anticipation and perhaps a little nervousness. We have all experienced the moments before we open an examination paper when we are convinced that we will not be able to an- swer a single question adequately. Yet once we are into it, we find that of course it all makes sense. It is not so daunting when we make a start. This sixth edition of the renowned Oliver Wight Class A Checklist for Business Excellence has a familiar style and approach to assessing ex- cellence. Yet in content and structure you will find it very different and much more demanding—but then the journey to excellence is always demanding. Since we published the fifth edition in the year 2000, the pace of change and speed of advancement in business has raced on. What seemed advanced then is ordinary today; what was extra then is a part of the standard deal now; and customers expect and demand more and more. Companies clinging to that older view of excellence will be found wanting in the race to win in business. WHAT IS DIFFERENT IN THIS SIXTH EDITION? First, there is a new section at the front of the book called “Founda- tion.” We had to decide at the outset what few basic principles of excel- lence were important enough to be at the heart of the checklist. We have described these here in brief so that you can be familiar with the think- ing before plunging into the detailed assessment. Clearly, we have only provided an overview of these principles in this section. However, you can find out more through Oliver Wight’s global education. Second, the checklist range has been extended from a traditional ix operational focus to encompass all business processes and all business sectors. This will be no surprise, since across the world service sectors are growing and are influencing the traditional industries. Business dif- ferentiators are moving to managing products and services, managing the supply chain, managing the procurement of externally sourced items, and developing better relationships with customers and consumers. All of these issues are now extensively covered alongside the more tradi- tional foundation elements you would expect to find in this checklist. THE CHAPTERS The chapters are split into two groups. There are four priority chap- ters where we have brought together the processes and practices that are common through all business processes and which enable the whole business to be excellent. They are: • Managing the Strategic Planning Process: You have to be clear about business vision and strategy for your people to plan what has to be done to get there. This chapter will challenge your process for the longer term planning of the business. It will demand the setting of busi- ness priorities and clear communication when deploying your plans and your business excellence program throughout the business. • Managing and Leading People: People are the ultimate differentia- tor as businesses get more demanding and competitive. This chapter will demand that you think through your business values and its organ- ization for the tasks ahead, that you are clear about the company culture and behaviors that you need, and that you have active development pro- grams designed to improve the competencies of your people for the new challenges ahead. It will challenge your processes for Knowledge Man- agement and your culture of leadership and teamwork. • Driving Business Improvement: This articulates how you can assess the maturity of your business and its processes. It then challenges how you prioritize your Business Improvement Program to the early gains areas that also create a solid foundation for the future. This chapter will challenge you to walk before you try to run and to give value to those everyday issues that are at the heart of excellence in business. • Integrated Business Management: This is the natural evolution of the Sales and Operations Planning process. It has been designed and de- veloped by Oliver Wight over many years, building on client demands x Introduction and experiences in all sectors and in all parts of the world. This process is the unique, yet now standard, approach to managing the gap between company strategic goals and everyday activity; it is the prime tool for keeping all parts of the company to a common agenda and set of prior- ities; and it manages the entire business through one set of numbers and ensures timely decisions to maintain management control. These chapters support five following chapters of equal size and im- portance that address the prime processes in most companies: • Managing Products and Services: In every business sector, product life cycles are reducing. Our portfolios require an increase in new prod- ucts and services and a carefully planned phase-out of old. This chapter asks how well you set your product portfolio and manage products and services. It expects you to have a clear technology strategy to support this. It challenges your practices for delivering sales and profit to your business through an increased number of successful products and ser- vices into your market. It includes the latest practices in the Program Management of large complex projects. • Managing Demand: Greater understanding of customer needs and of what is happening in your market place leads directly to increased predictability in the short-, medium-, and long-term needs of your busi- ness. It enables better planning of your position in the market place and order-winning plans that are more successful. This chapter challenges how well you create and plan demand and how professionally you con- trol supply and demand in the very short term through sales activity. • Managing the Supply Chain: As the latest technology extends our target market, the increasing challenge to business is how to deliver the product and service to the point of use. This chapter challenges how well you understand your extended supply chain and how it is optimized strategically and day by day for best customer service and for business performance. • Managing Internal Supply: While business focus is moving to the extended supply chain, excellence in the core supply activities remains vital to live up to the promises and wishes of customers and consumers and to meet the challenge of global cost competition. This chapter chal- lenges whether your operations that make and deliver goods and ser- vices understand what is excellent today and how quickly they must respond to changes and the demand of the market place. • Managing External Sourcing: The increase in products and services and the wider market present new challenges to our Make/Buy decision Introduction xi process at product, component, and material levels. They also impact the sourcing strategies that follow those decisions. Technology offers new procurement approaches that have major potential for saving, and this has significantly advanced the use of Total Cost of Ownership in critical decision making. This chapter sets new standards for assessing excellence in your procurement processes and in the planning and coor- dination of movement of goods into your supply chain. ADDITIONAL INFORMATION You may seek information from previous checklists that is no longer expressed in this edition. To maintain a practical size Checklist with a broader base something had to give! However, this is not totally lost to you. Clients of Oliver Wight have free access through their Oliver Wight Associate to supplements to these chapters. This is where we have cap- tured the more detailed challenges from the fifth edition should your program require them. MEASURES Prime performance measures are included at the end of each chapter of this Checklist, but we have not published the detailed appendices of recommended measures. In a fast-moving world, we wanted to be able to update and add freely to these. So you will find them openly available on our website at www.oliverwight.com, along with a new glossary that is designed to take away the confusion of any new terminology. You will find this approach more relevant to your business needs. RECOGNITION OF EXCELLENCE Last, you will see a new scoring system, using a more natural 5-point scale, and a new way of recognizing your steps toward excellence. We are mindful that against a broader and higher standard it will take you longer from the same starting point to achieve Class A Business Excel- lence in practices and performance than the previous checklist. As you xii Introduction start this journey to excellence, we will invite you to set a total excellence program with prioritized projects and initiatives, each giving you busi- ness gains in a relatively short timescale while taking you a step further toward your longer goals. Our recognition of your success will come in three forms: • Class A Business Excellence: The full Class A award when an entire business meets the requirements of all chapters of this checklist. • Business Unit Class A Accreditation: To recognize the achievements of a stand-alone business within a larger multiunit business that meets all the requirements of its appropriate chapters. • Class A Recognition Award: To recognize predetermined projects and milestones in your business improvement program that have delivered their planned business gains on the journey to Class A Business Excellences. The demands on a successful business are racing ahead, and without an aggressive excellence program, you will fall behind your competi- tion. Your Business Improvement Program must be structured and tar- geted to deliver rewards for your customers and your owners. It is your route to winning consistently in business. Introduction xiii