Realtime performance measurement (RPM)

February 2002 News

The past decade has seen a globalisation of trade, together with the information technology revolution, causing increased levels of competition, resulting in a demand for improved efficiency in the manufacture of goods, products and the supply of services.

Improved efficiency, productivity and profitability can only be achieved if accurate information is available to management as to where improvements can be made in their organisations.

Various management tools have emerged over the past two decades, ie strategic planning, benchmarking, customer satisfaction measurement, growth strategies and so forth. According to Dr Robert Camp, pioneer and international benchmarking guru, finding benchmarks is only about 10 to 15% of the effort of a benchmarking study, while 85 to 90% of the effort goes into finding and studying practices to deliver exceptional performance.

The challenge that industrialists face is to adapt fast, optimise resources and make optimum use of available technology as a tool to stay in business. Nowadays, expeditious attainment of optimum use of assets and technology is a prime requirement for entrepreneurs. It is in fact a fundamental basis for growth and survival to improve performance throughout the organisation in order to match price, quality and service offered by leading competitors.

Why RPM?

Management needs to adopt modern methodology and make use of available technology to keep their finger on the pulse of their organisations by measuring the performance of their operation on an ongoing basis, to react to problems as they occur as opposed to leaving things as they are and learning through the month or year end figures that problems had been experienced and that profit targets were not reached. Even if a post mortem is held, it is impossible to reconstruct the situation to establish what has gone wrong.

Accuracy of measurement, short response time and a dynamic realtime system provides management with accurate ongoing measurement of performance at all levels in the workplace. It is also less expensive to take automated measurements and, in addition, modern technology makes it possible to take automated measurements that are often impossible to do by manual methods.

World-class standards are required, meaning that the best practices and techniques be adopted in the workplace to stay competitive.

At present South Africa is experiencing a brain drain, which leaves industry even more exposed to the scourge of inefficiency and low productivity - emphasising the need for improved management tools.

What is RPM?

At the core of realtime performance measurement is the goal of any firm and that is 'to make money' (Goldratt). How does a company achieve that? By increasing the throughput while decreasing the inventory and operating expenses (Goldratt). But how do you know you have increased your throughput and decreased your inventory and operating expenses?

By using a system that gives you up-to-date (to the hour) information about your operational efficiency. Realtime performance measurement is a dynamic measuring system that reflects the profitability of the organisation on an ongoing basis and it provides fast and accurate measurement of performance and reasons why performance levels are not attained. This enables management to identify and rectify problems before they become serious.

Data acquisition and measurements are done automatically with emphasis on:

* Process efficiency - measurement of raw materials flow into the plant and what are the proportionate levels of good and waste products. This encompasses all inputs consumed in the process, including raw materials, packaging energy consumption and the like that have bearing on the cost and profit of the final product.

* Work in progress measurement on a continuous basis.

* Efficiency of work scheduling in a batch process.

* Measurement of plant availability and recording of reasons for nonavailability of plant and machinery.

* Measurement of plant utilisation and factors affecting utilisation.

* Tracking and identification of final product into warehousing.

* Measuring the cost of plant downtime and inefficiencies at various levels.

* Measurement of human resource-related factors, ie levels of training and serving as a motivational tool.

* Realtime display of performance measurements to all levels of skills active in the factory and comparing that with established benchmarks.

* Constructing a financial model of the factory operation.

* Evaluation and interpretation of information, ie downtime as a result of ineffective maintenance practices, process problems, human resource requirements and also as regards the remainder of the input factors.

* Techniques that will be used are mass measurement, counting, bar code tracking and automatic identification, run and stop time of plant and machinery, recording types and volumes of transactions, stock control and related aspects.

* The measurement data provided by the techniques described above will be processed and converted into management information via a software system that will be part of the RPM product. The management system forms the interface between the electronic gadgetry and the users of the system.

RPM is in essence an ERP that focuses on the engineering level which is even often missing in the bigger ERP systems in use today.

Productivity and quality = profit!

RPM should, therefore, be adopted as a management tool for improved performance and profitability.

Tools to be used in the development of RPM

Since RPM is a realtime system it is necessary to measure realtime information as it happens. This can be divided into the following categories:

* Measurement of raw material flow into a process, ie making use of electronic mass measurement for solids and various flow measurement systems for liquid products. The signals from these devices will be interfaced into a data acquisition system via a datalogging device like the U-CON 2000 which was developed with DTI support and successfully commercialised.

* Various methods of counting electronically.

* Automatic time measurement of machine run and stop times for evaluation of plant availability and utilisation. This is normally derived from auxiliary contacts in the motor control centres of electrically driven equipment.

* Tracking of products in various stages of manufacture and in and out of warehousing by making use of laser scanners, bar coding of product and other suitable methods of automatic identification at logical enumeration control points in the production cycle.

* Entry of various fixed and variable cost parameters in the factory environment.

* Measurements of other variables like energy consumption or any other variable that may be relevant in the financial model.

* Development of comprehensive generic software programs to reflect realtime performance at various levels.

* Electronic hardware for interfacing signals and allowing man-machine interface on the factory floor.

* Machine condition-monitoring techniques to identify problems and ensure maximum plant availability.

* Creating software interfaces to communicate with existing systems to monitor relevant transactions and entries.

* Applying latest measurement techniques, principles and concepts to turn the raw measurement data into user-friendly and powerful management systems.

RPM in other industries

Realtime performance measurement is applicable to other industries as well and not only in the process and manufacturing industries. For example:

* Service industries - monitoring volume and type of transaction, monitoring the usage of any equipment used in delivering the service.

* Transport industry - condition monitoring and monitoring of vehicle usage.

* Mining - monitoring of all equipment used in the mine as well as the processing plants.

* Commerce - automatic stock control, monitoring the type and volume of transactions.

* Agriculture - feeding systems, dairies and condition monitoring of equipment.

The application of technology for measurement and control purposes are only limited by the imagination.

RPM in small companies

Small companies are, in most cases, always managed by the owner who has to overextend himself/herself to do everything. His/her entrepreneurial flair and skills are often what make the company successful. However, these skills and the fact that the person is overextended leads to the fact that good sound management principles are often not applied. This limits growth and often prevents the small business to take that next step to a higher level of excellence. Often these small organisations do not survive the transition from a small organisation managed in an entrepreneurial style to a large organisation where more formal management principles apply.

Good, sound measurements are more often than not in place in the smaller organisation. The administrative burden to collect and process all relevant measurements are often too much for the small business owner and, as a result, it is neglected to the detriment of the company. Therefore, RPM can be applied with great success in smaller organisations. The RPM system can monitor, process and report realtime management information to the owner with the minimum administrative burden. This will provide the management of the small company with that information he or she so desperately needs to manage their company better. PIT will also have a support group to assist those smaller organisations with the interpretation and use of the results provided by the RPM systems. Should the usage of RPM systems for smaller organisations grow substantially, PIT can form relationships with organisations such as Ntsika (DTI) and the Small Business Development Corporation to train their consultants to provide the required support.

The benefits

RPM is innovative because no product exists on the market that provides realtime financial (profitability) reporting to management and at the same time operational information to identify problem areas. Other systems specialise in specific areas like production scheduling and control, materials planning, financial management and so forth, but none of them gives you realtime information and none of them gives you the link between the financial aspects and certain operational variables - the benefits of RPM in the South African industries are enormous.

It is estimated that the total annual production output in SA is of the order of R400 000 million with approximately 26 000 industrial enterprise units in operation.

A benchmark of an annual improvement of 1% in productivity will result in a financial gain to industry of R4000 million per year.

At present, productivity in SA is low, the estimated utilisation of only 67% of capacity at present affords considerable leeway for improvement.

The payback period for an RPM system is modest, possibly of the order of six months on average if the benchmark of 1% improvement in overall productivity in the factory is attained.

The expression 'If it works, do not fix it' can well be changed in this context to 'If you do not know what is wrong, you cannot fix it'.

RPM will shortly become arguably one of the most valuable management tools and productivity measurement yardsticks available to entrepreneurs.

By developing a basic core competence in the area of realtime measurement in one industry would enable PIT to expand into other industries, creating a multiplier effect on the initial investment.

Because the RPM product to be developed will be applicable in more than one discipline and industry, it will provide an integrated measurement approach that companies can use in all the different sections and disciplines in their industry. For example, they will be able to use it in the process plant, controlling their vehicles, automatically tracking sales, monitoring time and attendance, integrated switchboard information into the measurement and controlling of stock. All this information will be integrated by the management system and made available to the right person, in the right format when they want it. This will substantially improve the decision-making capability of all persons who must have access to accurate, timely and meaningful measurements.

Calculus Systems Projects

(011) 789 1207

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