Wednesday, February 5, 2014

Operations Innovation & Transformation – Operations Control Loops, Part 3 of 5

by Stan Devries, Senior Director Solutions Architecture, Invensys|Schneider Electric

The 4 quadrants described in the article “Operations Innovation & Transformation – the 4 Types Part 1 of 5" positions the upper right quadrant as a strategy for governing business processes and teams of human assets in a new way.
In the upper right hand quadrant, managers and supervisors use consistent measures and business processes to adjust targets for specialists and other workers, using the industrial automation concept of a “control loop.”  One example of this control loop is where managers negotiate the next day’s production targets each day using the same business process for all specialists and industrial locations.

As an example, in the upper left diagram, supervisors use visual indicators to observe the ability of teams to navigate targets and constraints, in order to improve team performance and adjust targets based on team capability.  This method is used in conjunction with Value Chain Optimization and Fleet Management, and these are in the left quadrants of operations innovation.  These are described in separate articles forthcoming.  This visual management is used to reduce risk and evolve performance of multiple sites for the same operating shift, and multiple shifts for the same site.

In the upper right diagram, the supervisors use this business process (simplified) as a means to consistently govern targets so that a variety of activity, including different sites, shifts and responsibilities, can be adjusted at the same time and in a coordinated fashion.

Another example is where operators use visual management to address performance challenges that affect the business.

In the upper left image, a combination of organizational change management and visual management which helps teams to trust themselves and understand hourly operations performance with a business context.   Dark blue diamonds show a baseline for one month, and the unit cost variation is high, even at high output.  This operation has agility – a 2:1 range in throughput, and normally unit cost should be lower at higher throughput (due to higher efficiency of utilities equipment).  Magenta squares show the results of the first month; unit cost variation is still high, but most of the performance is near minimum cost.  Yellow triangles show the results of the second month, with excellent results.

In the upper right chart, key performance indicators (KPI’s) and Operating Indicators (OI’s) are arranged together so that performance challenges at all levels are addressed in a timely and consistent manner.  For each level of the organization, lagging and leading indicators with business and operations context are linked together. “WIG” is an acronym for Wildly Important Goals, which helps to maintain focus on the most import performance measures among numerous other indicators.  KPI’s are appropriately developed from the top down, and originate with business goals and measures; OI’s are appropriately developed from the bottom up, and originate with operations targets and measures.

The results have been spectacular, including double-digit improvements in efficiency, first-quartile industry performance, and more.

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