Modeling for real-time

performance measurement:
a strategic approach
A
s most mining companies are Operations have been going in full force at Codelco’s smelting plant in
taking advantage of the high Chile. Prices are high despite an uncertain future.
market prices for base metals
such as steel, copper and zinc, numerous
challenges still face them. While demand
is strong from countries like China and
the United States, demand is still mixed
in Europe. This leads to the question of
how long these high prices and overall
high global demand will last.
The tremendous market prices of
most precious and base metals have
enabled many companies to pay down a
significant amount of debt accrued dur-
ing acquisition and capital expenditure
phases. Additionally, mining companies
have been able to internally fund and
engage in large projects to address future
growth, (Less, 2006), thus maximizing the
performance of the existing asset base,
driving maintenance costs down, and
improving and empowering the work-
force (Mining Journal, 2006). Market
prices and general efficiency gains have
addressed these issues to some extent. However, critical measure and improve economic performance and ensure
issues still face operating managers in the mineral pro- continuous performance improvement in new or existing
cessing side of the industry. Energy prices, for example, mineral processing asset bases. This need is addressed
continue to have a negative impact on cash costs for by a real-time performance measurement system that
producing an ounce of gold or ton of a given base metal enables critical business intelligence and sustained per-
(Cummins, 2003). formance improvement.
Consolidation activities in the industry are still vi- As mining companies look to improve their op-
brant and can provide some companies with additional erations in the face of increasing global pressure and
resources to help with competition, continuous improvement programs, have
strategic and operational been undertaken by companies in an effort to remain
Russell Barr and execution. Recent merg-
ers and acquisitions are
competitive and improve their position. To ensure that
continuous improvement projects and initiatives are
Robert E. Cook helping companies expand
economy of scale oppor-
adding value to the company, a real-time performance
measurement system must be coupled with continuous
tunities. They also help
Russell Barr and Robert E. Cook, to diversify the product improvement programs. Real-time business intelligence
can also be applied to greenfield projects that provide all
member SME, are director, Performance and geographic portfolio layers with unprecedented view in to the business per-
Measurement Group and vice president, of holdings of companies formance in the mineral processing operation. With this
mining and metals, respectively, with as the global game in the business intelligence, people can make better decisions to
mining industry continues improve performance. By improving performance with
Invensys Systems Inc., 33 Commercial (Mining Journal, 2006). this system, performance can be expected to improve
St., Mail Stop B51-1B, Foxboro, MA 02035, This article addresses 2 to 3 percent. This enables operations to earn project
e-mail bob.cook@ips.invensys.com. a need in the mineral pro- payback in a shorter timeframe.
cessing industry to help A proper real-time performance measurement system

32 March 2007 Mining Engineering

that provides business intelligence is criti- Figure 1
cal to showing the value of projects to the
company, recovering investment as soon as Vollmann decomposition.
possible and ensuring the strategic nature
of initiatives and projects in a timeframe,
resolution and reach that makes sense.
It brings together the proper elements
of finance, strategy and operations to ef-
fectively measure performance, provide
timely feedback to the right people and
enable performance improvement.

The mining industry

The mining industry is continually
facing tough competition in addition to
the more recent phenomenon of filling
global demand. To compete successfully,
a mining company must use its assets in
the best way possible. It must also have
the best people and processes. Frequently,
companies have turned to continuous im-
provement programs, formal or informal,
that drive activities to solve problems
that were not aligned with the company’s
strategic direction or clearly measurable
in terms of benefit to the company’s busi-
ness performance. Through the careful use of real-time
performance measures to support continuous improve-
ment processes, additional productivity will be realized
and sustained.
As global competition increases, manufacturing has
become more strategic. Assets are becoming tools in
broad global corporate strategies that need faster and
better information to maximize profits beyond the previ-
ous standard of cost reduction. Competition has come
from developing areas of the world that had been off
the radar of many companies. To remain competitive,
companies must get the maximum out of their existing
asset base. Continuous economic optimization and im-
provement remains critical.
In the past, the results of continuous process improve-
ment efforts were measured in productivity terms, such
as tons per day, and not in financial terms, such as rev-
enue per ton. Even if these were measured in financial
terms, they were based on budgeted amounts that gave
misleading direction when used in real-time. It is easy
to see that these continuous improvement processes
helped, but they can be improved. For example, in the
mining industry, as assets are stretched to keep up with
demand while minimizing capital expenditures, measures
that provide information on incremental revenues per
ton become more important because nearly each dollar
in sales less the variable cost of production falls to the
bottom line.
In the current competitive marketplace, businesses
must bring together all-important elements of strategy,
operations and finance to successfully compete. With
global mining enterprises having worldwide scope, it is
imperative to have the ability to respond to opportuni-
ties with the best strategy for the collective set of assets.
Each operating plant must be locally optimized to remain
competitive. But all business assets must be optimized for
the company to deliver the best financial results.
A company today must be able to manage the busi-
ness elements of strategy, operations and financial per-
formance by providing the key decision makers, from
the executive to the operator, with relevant and timely
information. At the operator level, real-time performance
measurement information presented in a meaningful and
actionable way is critical to driving business performance
improvement on the production layer. At the plant
management level and executive management level,
performance measures that have a financial component
become more important. They provide management with
the opportunity to respond to financial issues before
being blindsided by some unknown problem that only
reveals itself after the financial reports are out.
Developing the right information
Information has become so readily available that
there is a flood of nonrelevant information being dis-
seminated in the form of key performance indicators
(KPI) and other pieces of purported meaningful informa-
tion. Not only is the relevancy in question, but so is the
timeliness, reach and usefulness of this information flood.
What is really needed is a methodology and modeling
technique leading to a real-time process for delivering
the right performance measures to the right people at
the right time. This process should include a review of
strategic business drivers, an operational and economic
decomposition of the existing business, a human resource
review, areas of critical productivity and the establish-
ment of an operational performance baseline. Once these
initial steps have been taken, the business will be in a
position to create and measure the change in productivity.
Since the production changes are measurable, they can
become the new benchmark of performance that leads
to sustaining the new performance levels.
Perhaps the most important undertaking is develop-
ing an understanding of the strategic business drivers.
This is done by working with executives and manage-
ment, understanding the current business conditions

Mining Engineering March 2007 33

Figure 2
Real-time performance measurement and business intelligence system.
(Martin, 2004).
and the relative advantages and disadvantages that
the company has. It is also important to understand
management’s response to these strategic conditions.
Mining markets frequently deal with constraint from
market conditions and production limitations. Given the
condition of the overall market, management must be
able to respond quickly and use performance measures
that drive the appropriate actions at both the plant level
and the business levels.
With the understanding of the business conditions
and the strategic response of management, operational
and economic decompositions should take place. These
decompositions are detailed studies of the production
process from raw materials shipment as well as the cor-
responding economic conditions that parallel the produc-
tion process. In a company using real-time performance
measures, the continuous process analysis can become a
real-time measure that guides personnel to change and
sustain the performance improvement.
Human resource analysis within this context should
also take place. As a company strives to improve its
competitive position, the employee is being looked at as
an asset that can be used to provide and drive more value
through the plant. A company that is looking to improve
and optimize performance should provide its workers
with better information and more authority (Woll, 2005).
By providing meaningful and actionable business infor-
mation in the form of real-time performance measures to
employees, performance can be measured and improved
in such a way to improve and optimize performance.
Once real-time performance measures are estab-
lished and implemented, they can be recorded over a
meaningful period of time to give a baseline performance
profile of the business or the plant. These baseline
measures can become the foundation for measuring im-
provements. If an improvement is undertaken, it should
have measurable results. If results are not measurable,
capital can be spent without true accountability for its
use. The performance measures add credibility to any
34 March 2007 Mining Engineering
performance project and enable acceptable
financial measurement of improvement gains
if implemented correctly. Typical measures of
the success of capital projects in manufactur-
ing are internal-rate-of-return and payback
period. The mining industry uses a metric like
this to measure the performance improve-
ment of projects.
Performance measures tied to the busi-
ness give significant visibility not only to the
improvement, but also to the sustainability of
the improvement. In a continuous improve-
ment environment, the plan-do-check-act
process sometimes becomes a project that
leads to improvements that are quickly lost.
This is because an improvement team declares
victory and moves onto other problems and
the value that was gained gets lost because of
a lack of continuing focus or measurement.
With the real-time performance measures,
improvements become institutionalized with
the best today becoming the standard for to-
morrow. Sometimes the measure alone will
provide focus that is adequate to drive change
by operating the facility more consistently
reducing operating anomalies.
Making the right information useful
Existing information system (IS) infrastructure can
sometimes be an impediment to wide-reaching business
intelligence and performance measures. This is the result
of most business infrastructure being built around finan-
cial reporting systems, which are transactional based.
Frequently, when information is needed to be shared,
whether financial or operational, the common language is
e-mail with an Excel spreadsheet attached. This leads to a
number of problems. Among them is lack of consistently
prepared data from different locations, different time
frames presented and the overall effort to continuously
maintain these critical information streams. A real-time
performance measurement database can help address
these needs and make critical data available in a con-
solidated location for easy availability.
The real-time performance database enables the
easier connectivity of systems, gathering of consistent
data, processing of the collected data according to com-
monly shared definitions and a common presentation
to the end users, most likely through Internet-enabled
information portals.
In the current technology environment, it is easy
to connect systems to share data. It is more difficult
to use this information meaningfully. Every IS vendor
today “integrates” with others. Unfortunately, they do
not integrate the data collection process which leads to
problems with data integrity. Because of this, the accuracy
and consistency suffers. With a real-time performance
database, data collecting and processing can be standard-
ized, leading to broader understanding of measures and
greater understanding across facilities.
The contextualization of the data is what makes the
information ultimately actionable. It must be presented
to the right user in the right time frame in a way that is
meaningful to his or her job and domain of responsibility.
Through the use of Internet-enabled portals, information
can be configured easily and broadly Figure 3
circulated. These portals typically
contain information that is relevant Strategic decomposition.
to the operator, with another being
relevant to plant management and
finally an executive level portal with
drill down capability.

Methodology
Developing performance metrics
that are actionable, relevant and tied
to the bottom line of the company is
serious. Providing performance met-
rics for employees must be the cor-
rect metrics for driving the business
in the correct strategic direction and
in a way that adds value. Providing
the proper business intelligence infra-
structure also takes a lot of thought
and analysis. However, neither of
these are impossible tasks. They can
be done with existing resources or
minimal outside resources in most
reasonably well-automated plants
with an accompanying IS infrastruc-
ture.
Developing real-time performance measures requires
a methodical approach to gathering, understanding and
analyzing critical business information and produc-
tion-related information. Business-related information
consists of business strategy, business drivers and objec-
tives, financial and accounting, operations and human
resources.
Business-related analysis should take place from
the top down. That is, when considering strategy, goals
and objectives, financial and accounting aspects and
operations, starting from management levels and work-
ing down. A business decomposition should take place.
When considering the process side, the methods in terms
of understanding and analysis should be developed using
a bottom-up approach.
Understanding and analyzing the business com-
ponents discussed above involves first gathering this
critical information from company management. Once
this information is gathered and understood, it is then
decomposed in an analytical way, using such techniques
as Vollmann decomposition analysis. Figure 1 provides
a representation of Vollmann decomposition of strategy,
action plan and performance measures (Martin, 2002).
Companies typically successfully decompose business
goals, strategy and performance measures from the top
corporate levels to the plant level. However, decompo-
sition from the plant level to the area and process unit
levels rarely takes place correctly. Using decomposition
techniques along with business acumen and informa-
tion relative to strategy, operations, finance and human
resources, proper performance measures can be devel-
oped for each unit and area in the plant as well as plant
level metrics.
Once the models for each process unit are developed,
they can be implemented using existing process automa-
tion to execute the algorithms and provide real-time
data in terms of consumption, usage, production rates
and uptime by using field measurement inputs. Existing
database resources can also be used to create a business
performance history on this basis.
Workstations can provide business intelligence
feedback to operations personnel. In plants that also
maintain connectivity between the automation layer
and plant network, real-time performance measurement
information can be viewed as business intelligence on
management’s personal computers, management reports
and in divisional and executive levels depending on the
IS infrastructure.
Automation
Throughout the years, mineral processing operations
have spent millions of dollars on automation. These
investments were mainly in supervisory controls and
human interfaces such as programmable logic controller
(PLC) and distributed control system (DCS). However,
while these investments were and are critical to the
operations of the plant, especially modern plants, their
application has not yet reached the level where these
investments will create a significant impact on the bot-
tom line of the business.
The primary function of a control system is to monitor
and control the manufacturing process, to reduce varia-
tions and deviations. While the primary objective of the
systems remains the same, the underlying objective of the
entire process is to produce the product that the company
sells to generate the value for the shareholders. While
significant investments have been made in the control
systems, little has been done to tie the manufacturing
operations and business decision process together.
The existing automation assets or additional auto-
mation assets can be used as a platform to manage and
execute real-time performance measures at the plant
level. Technology advances allow real-time performance
data to be integrated into business systems, enabling
management to see financial results as they occur. Real-
time cost of goods sold, real-time operating costing and

Mining Engineering March 2007 35

Drying - Optimize production of dry concentrate at the
lowest possible cost.
other important financial measures of performance and
financial accounts can be tracked and monitored during
the course of reporting periods, during the month, for
example, instead of at the end of the reporting period,
after the books are closed.
Real-time performance information in the form of
real-time financial and accounting data can be integrated
with business systems, like enterprise resource plan-
ning tools (ERP), to provide a snapshot of operating
performance on demand. The general architecture, in
terms of real-time finance/business intelligence system
is shown in Fig. 2.
Smelting operation: drying process example
In mineral processing operations, managers use many
managerial tools in an attempt to get a picture of busi-
ness performance of the operations. Such a picture can
include monthly income reports, variance reports, other
“home-grown” spreadsheets as well as other legacy or
custom tools for decision-making. The challenge for busi-
ness managers of manufacturing is to better understand
business performance in a timelier manner to enable
better decision-making in a more timely way. This can be
done by developing a real-time performance measure-
ment and real-time costing system.
In developing a real-time accounting model for a
smelting operation, operational decomposition analysis
would yield the decomposition of the manufacturing
process into areas and unit levels. This would lead to
developing the performance measures that would be in
line with the overall performance measure of the opera-
tion. For instance, in a typical smelting operation, the
operational decomposition will yield four to five distinct
areas: drying, conversion, refining and recovery (Fig. 3).
These areas can then be further classified into units such
as dryer, converter, slag converter, etc. The total variable
cost of the product, in principle, is the sum of all the
Cost per ton of dry concentrate = ((KWH * $’s) + (fuel Feed Rate * $’s) + Nitrogen Flow
Rate * $’s) + (Concentrate Feed Rate * $’s )) / Converter Silo Feed
36 March 2007 Mining Engineering
variable cost components within each area.
A typical smelting operation contains some variation
in process and organization of four major processing
areas as depicted above: material handling, white metal
conversion, blister conversion and material handling.
• The material handling and mixing area is the front
end of the smelting operations process. In this pro-
cessing area, the main raw materials are managed
to achieve proper moisture content of intermediate
product and proper ratios of other additives and cold
doping management.
• The conversion areas process dry concentrate
through conversion units. These converters produce
white metal (and slag at less than 10 percent cop-
per) that is then transported by ladle to the Pierce
Converters. The Pierce Converters are batch units
that further process the intermediate in to blister
copper (99.3 percent copper).
• The slag cleaning area processes slag produced by
the converters to extract as much copper as pos-
sible to be added back in to the Pierce Converters.
The processing units in this area are batch-oriented
units that separate copper and waste from the slag
input.
The blister copper is then processed in the refining
area. The refining area processes blister copper in to
either RAF product or anodic product via batch pro-
cessing units.
Drying process area
The drying process is a critical step in the smelting
operation at the front end of the process. Concentrate
is processed primarily to remove moisture to an accept-
able level for conversion processing. Concentrate is
typically received at about 7 to 10 percent moisture and
then processed to remove moisture to a level of about
0.2 percent. These percentages are process dependent.
Moisture is removed through dryers that require a heat
source, such as natural gas.
The drying area can be decomposed into strategic,
action and measurement components based on Voll-
mann decomposition principles and analysis of business
and process perspectives. Representative examples are
provided for each of these components.
The strategy, action and measures will change from
firm to firm and, within a firm, can change over time as
the environment changes. From this analysis, measures
of performance can then be developed, modeled and
implemented.
The sample equation below presents a measure of
performance based on decomposition and analysis ap-
propriate for the operation. This performance measure
is cost based and contains several cost drivers, such as
natural gas and electricity. In a typical plant, these cost
drivers can be derived in real-time by using the existing
instrumentation infrastructure as inputs to performance
measurement models providing consumption informa-
tion and other critical inputs in real-time. By using this
general design and implementation philosophy, real-time
measures of performance can be implemented and used
as feedback to visualization tools, reporting tools and
other business systems. These systems improve moni-
toring, tracking, decision-making and analytics of the
business at the plant floor. With proper aggrandization
and execution they improve business and enterprise at
all levels.
By employing a real-time performance measurement
model, all these cost components can be measured in
real-time, leveraging existing automation investment
and thereby delivering strategic advantage by respond-
ing to a cost deviation through real-time information
dissemination to the right people at the right time. This
general model can be extended to provide real-time
costing across the operation as well. By building and
implementing models of performance measurement and
accounting in real-time on a process unit basis, a busi-
ness measurement system that monitors and tracks the
plant’s strategic, operational and financial performance
can be deployed. This system will help manufacturing
operations improve business decision-making and thus
business performance significantly.
As organizations use tools such as balanced score-
cards more and more often propagate individual met-
rics along the dimensions of the scorecard, it can be
difficult to provide meaningful real-time performance
measures to support these scorecards. This is especially
so for operational and financial metrics for manufactur-
ing personnel. A properly designed and implemented
real-time performance measurement can support bal-
anced scorecard initiatives by providing personnel with
actionable performance measures, which enable better
decision-making to improve performance.
The usage components of the model above are mea-
sured from the plant floor and other algorithms and are
available in the control system. The cost factor for each
of the components is provided through the integration
with enterprise systems or through the manual loading
process that can be accomplished using any computer
based control system such as PLC/DCS or other PC-
based systems.
An example of such a dashboard application for
operators is depicted in Fig. 4. Similar models can be
developed for every unit-based asset that is employed
in the smelting process. Once cost and/or performance
measurement models for all the units are developed
and deployed, the real-time cost performance informa-
tion serves two purposes. It first delivers the real-time
information to the right people in a timely fashion to
address the deviation in real-time. Second, the real time
cost performance information becomes a contributing
component to the area of drying, conversion, refining
and recovery-based performance measures. The area-
based information becomes particularly critical to the
area and plant managers. The model, similar to the unit
levels, can then be developed to roll into the plant-based
performance measure, which, in turn can be expanded
into regional and national levels.
For corporate business and operations personnel,
real-time information can deliver help in short-term and
long-term planning processes. The financial implications
Figure 4
Real-time performance dashboard for operators.
of planning possibilities and decisions can be based on
more realistic and interactive information rather than
assumptions and allocations. Additionally, the real-time
performance measures also enable access to the validity
and feasibility of any improvement/investment initiative
in the light of actual real-time information provided
directly from the manufacturing operations.
Manufacturing management and executives need
better business intelligence, that reflects the changing
environment. Real-time business intelligence is criti-
cal to being able to respond to changing environments
(Menninger, 2003). Figure 5 depicts an example of an
executive portal display for a manufacturing operation
including three divisions and a corporate overview. Such
a real-time financial, strategic and operational view pro-
vides executives with unparalleled business intelligence
for decision-making.
A real-time executive dashboard is sourced by
plant-level, real-time performance measurement data.
Actionable, real-time business intelligence presented to
executive or business management can enable them to
affect appropriate business actions based on relevant
business intelligence instead of historic information that
may contain irrelevant and outdated information.
Benefits of better information
The benefits accrued by the implementation and
continuous usage of a properly developed, real-time
finance/business intelligence system are manifold. Pro-
viding all-levels in the organization with appropriate,
actionable business intelligence in an easy and timely
manner results in measurable performance improve-
ment of the business helps with business visibility and
decision-making.
These types of systems are being used in many
manufacturing industries such as mineral processing,
cement, industrial power, paper, refining, gas gathering
and commodity chemicals. Real-time business intelli-
gence systems can provide all layers of a manufacturing
Mining Engineering March 2007 37
Figure 5
Corporate executive portal.
organization with the relevant business information to
make informed decisions to improve the bottom line of
the business. Additionally, by integrating the business
elements, such as strategy, goals, finance and accounting
and other business component, a properly developed
and implemented system also functions to ensure align-
ment among the employees. As part of the methodology
used, strategic and economic components are built in
to the system development. This is so the performance
measures and other critical information presented as
business intelligence provides feedback of the employ-
ees strategic and economic performance and indicates
which direction performance improvement should be.
The contribution of the employee to the bottom line
and subsequent improvement activities as alignment
with strategic and economic goals are presented to each
layer of the organization in a domain-appropriate way.
That is, business intelligence is presented in real-time for
the right person with the right granularity and the right
reach in a timeframe that makes sense.
Organizations have used these systems to enable sig-
nificant bottom-line benefit. By providing the business
intelligence to operators, engineering and management
in the correct timeframe, resolution and reach, the entire
production operation can have a business view into the
performance of the plant. With the job-appropriate view
in to the plant business performance, each employee
can see his or her impact on performance. Whether an
operator is learning new startup or shutdown techniques
or operational moves, an engineer is developing new
control strategies and schemes to control critical op-
erational units, or management personnel is developing
plant scheduling techniques, the focus is on measurably
improving performance. In fact, plant-wide systems have
been seen to enable at least a 3-percent reduction in
costs and a 5-percent increase in production that is rec-
ognizable to the financial accounting people of the plant
38 March 2007 Mining Engineering
when developed and used properly. Financial
visibility in performance improving activities is
key to proving real value to the company.
Firms have been converging on a tighter
coupling of the business and plant floor execu-
tion. Real-time performance measurement,
real-time costing and real-time business intel-
ligence are helping achieve this convergence.
Business leaders now have real-time costing
data with proper reach, timeliness and resolu-
tion to make better budgeting decisions and
adjustments, simulated closings during the
month, real-time business overview on demand
and other reporting and analytic transactions
at any time instead of waiting for the end of
the month or the end of the year to access and
analyze business performance.
Ongoing usage and support of these busi-
ness intelligence systems enables a real-time
view of business performance and is required
for sustained performance improvement. Sub-
optimal results can occur from such things a
poor system maintenance, inadequate training
or human resource planning, or poor devel-
opment and modeling methodology for the
underlying performance measures.
Summary
With all of the technology available to manufac-
turers, the use of performance measures becomes an
increasingly important tool to deliver value. Continuous
improvement programs identify areas for improvement
along with solutions. Often, these programs suffer from
difficulty in providing end users with the key measures
that enable measurement of business performance in
real-time, enable the improvement to occur in real-time
and sustain the improvement once the improvement
team has moved on.
With the use of the real-time performance method-
ology, the resulting measures are delivered to the right
people at the right time. This is important to the success
of the continuous improvement process and the success
of the corporation in an increasingly competitive world.
Enabling real, measurable performance improvement
requires that the people throughout the organization
have actionable and relevant real-time performance
measures. Such business intelligence can empower
people and help drive value-adding activities that im-
prove the bottom line of the business. n
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