Performance Measurement

and Process Analysis

Learning Objectives
To understand and critically analyse
• Performance measures
• Performance measurement systems
• Performance standards
• Process analysis and process improvement
The Strategic Importance of Performance
Measurement

• Plays a central role in operations management

• The means of linking strategy to action

• Will influence people’s behaviour

 Performance Measures
• Economy
• Based on the total cost of acquisition, which includes: purchase cost, quality, quantity,
timing, supplier
• Efficiency
• Productivity = output / input
•Effectiveness
• Being effective means providing what customers want

3 Es of performance measurement
Performance Measurement Systems

The balanced scorecard

Performance Standards
• Standards may be based upon:
• The organization’s past performance
• The organization’s own targets
• Competitors’ performance
• Best practice
• Market requirements
Benchmarking
• Acts as a springboard to drive performance improvements by:
• Signals the importance of activities to the organization
• Encompassing the study of the practices of the benchmarked
organizations

• There are three main approaches to practice benchmarking:

• Internal benchmarking
• Competitive benchmarking
• Best practice benchmarking
Performance Improvement

• Three key issues

• The scale and scope of the performance improvement required
• The priorities for performance improvement
• The approach to making the performance improvement
Determining the Scale and Scope

• The choice of performance measures used within an organization

sets the scope of performance improvement being considered.

• The scale of improvement required will depend upon the choice of

performance standard.
Setting the Priorities

The performance importance matrix

Determining the Approach to Performance
Improvement
• Step change
• New technology
• New working methods
• Business process Reengineering
• Continuous improvement-Kaizen
Process Analysis

The set of tools used to identify opportunities for

improvement, document current processes, evaluate
processes to find performance gaps, redesign processes, and
implement desired changes.
Process Analysis Steps
Mapping processes
Flow Charts
A tool to trace the flow of information, customers, equipment and
materials through the various steps of a process.

Flow chart of consulting

 Swim Lane Flowchart in Manufacturing

A visual
representation that
groups functional
areas responsible for
different sub-
processes into lanes
 Service Blueprint

A special flowchart of a
service process that
shows which steps
have high customer
contact.
Fish Bone Analysis- Example of Delayed Flight Departures

Equipment Personnel

Other Aircraft late to gate Passenger processing at gate

Mechanical failures Late cabin cleaners
Weather
Air traffic delays Unavailable cockpit crew
Late cabin crew Delayed
flight
departures
Late baggage to aircraft Poor announcement of departures
Late fuel Weight/balance sheet late
Late food service Delayed check-in procedure
Contractor not Waiting for late passengers
provided with
updated schedule
Materials Procedures
What is a Constraint?

• Constraint
Any factor that limits the performance of a system and restricts
its output.

• Bottleneck
A capacity constraint resource whose available capacity limits
the organization’s ability to meet the product volume or mix, or
demand fluctuations.
Theory of Constraints

1. Identify the system bottleneck(s)

2. Exploit the bottleneck(s)

3. Subordinate all other decisions to step 2

4. Elevate the bottleneck(s)

5. Do not let Inertia set in

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Key Principles of the TOC
• The focus should be on balancing flow, not on balancing
capacity.
• Maximizing the output and efficiency of every resource may
not maximize the throughput of the entire system.
• An hour lost at a bottleneck or constrained resource is an
hour lost for the whole system.
• Inventory is only needed in front of bottlenecks and in front of
assembly and shipping points.
References
• Barnes, D. (2008). Operations Management: An International
Perspective. Cengage Learning EMEA.

• Krajewski, L. J., Malhotra, M. K., and Ritzman, L. P. (2015). Operations

Management: Processes and Supply Chains. Pearson Higher Ed.

• Slack, N., Brandon-Jones, A. and Johnston, R. (2011). Essentials of

operations management. Financial Times Prentice Hall.