Architecture of the web-enabled performance measurement system at AFE
by Sai S. Nudurupati, Umit S. Bitici, Trevor J. Turner, and Stephen Creighton
University of Strathclyde, Glasgow, Scotland, UK
Abstract: In order to respond proactively to the new emerging challenges, management requires up-to-date and accurate information on performance. Such performance measurement systems are still not common because there is no sufficient research focused on management implications of IT enabled performance measurement systems. This paper presents an empirical case study where a fully integrated IT enabled performance measurement system using Quality Analyst Web Server was implemented and its management implications studied. The paper concludes that if properly implemented, such systems would promote a proactive management style and greater confidence in management decisions.
In today's dynamic business environment, change is the only constant, making companies struggle to understand and implement business strategies. This dynamic and volatile operating environment together with globalisation is changing the way we manage our business. In order to operate in this environment and to move ahead of others to gain competitive advantage, a company should be agile, where agility is defined as "a business's ability to change with little or no pain".
In order to be agile, companies require a more proactive management style. The word proactive is a very broad term, and hence it is defined as "a business making confident decisions quickly, focusing on critical issues, with up-to-date and correct information". In order to promote this proactive management style, companies require the following pre-requisites:
Most of the modern MIS have been developed to provide management with the right information required. However, most of today's MIS store information in different sources such as legacy systems, ERP systems, spread sheets, databases etc. In some companies the information is even maintained on paper based sources. The problems encountered with these systems are as follows:
As a result of these problems companies need to invest much of their people's time in data gathering. As the data is stored in different formats in different departments, some of the data is duplicated and updated by different people. Hence questions always arise on the validity of data. As information sources are not linked properly, information is not available dynamically (i.e. near real-time), which does not allow managers to make fast and confident decisions. As information is not shared or communicated throughout the organisation, managers cannot work as a team and changes occurring in one source are not transparent to everyone. This often leads to reactive and closed management style pointing fingers at one another rather than focusing on the issue in hand.
The performance measurement revolution started in late 70's and early 80's with the recognition of shortcomings with traditional backward looking accounting systems. Since then there had been a number of frameworks and models being evolved; some of them are the SMART model (Cross K F and Lynch R L, 1988-1989) and the Performance Measurement Questionnaire (Dixon et al 1990) developed in the late 80's. In the mid 90's the Balanced Score Card (Kaplan and Norton, 1996) and Cambridge Performance Measurement Systems Design Process (Neely et al, 1996) made a significant impact by creating a simple but effective framework for performance measurement. The QMPMS (Suwingnjo et al, 1997), Active Monitoring (Turner and Bititci 1997) and Integrated Performance Measurement System Reference Model (Bititci et al, 1998) are developed in the late 90's, Prism Model in 2001 (Neely et al, 2001).
Even though these frameworks and models are developed to improve the business performance, most of them do not include an IT platform to deliver effective MIS. Hence there are many software platforms emerging in the market, dedicated to performance measurement to support the above models and to address most of the problems mentioned in the earlier sections. They also deliver an effective MIS to provide active performance information in real-time or near real time.
One of the problems with current Business Intelligence Solutions and Performance Measurement Software is that the costs of investment are prohibitive ranging from £30k for software alone plus Consultancy costs plus Training costs plus development time. In order to address these issues, we at Centre for Strategic Manufacturing, University of Strathclyde had created a shell which is called Web-enabled Performance Measurement Systems (WePMS) using the web and NWA Quality Analyst Web Server (a low cost SPC software). This shell was first implemented and tested in a company resulting in significant benefits as illustrated with the following case study.
The objective of the Case Study presented in this paper was to study the management implications of web-enabled performance measurement systems. This was achieved by:
Alcan Foil Europe (AFE), Glasgow, is a profit centre owned by Alcan. The site specialises in the manufacture of thin aluminium foil (such as those used for cooking, food and confectionery packaging) and laminated aluminium foil (such as those used in the cigarette packaging). The main processes within the factory are rolling and laminating.
The IPMS Reference Model (Bititci and Carrie 1998) was used to guide the management team to identify and structure the key performance measures. The details of the structure of the performance measurement system has been the subject of previous papers, thus it has not been included in this paper.
The heart of the WePMS implemented at AFE is the Quality Analyst software product, which is essentially a software platform designed specifically for supporting statistical process control applications. It provides the best combination of power, flexibility, and ease of use. It conforms to the most stringent technical requirements and easily integrates into manufacturing data systems. It produces all standard SQC charts, plus many special-purpose charts. It allows us to dig into the information by "drilling down" into the charts.
With the Open Data Base Connectivity (ODBC), Quality Analyst can pull down data from different sources into its own database. In this case, it is being used as a tool to collect and convert numerical data into graphical shewhart charts (more commonly known as SPC charts). In AFE the numerical data is available from a number of sources including:
Figure 1 illustrates this structure where Quality Analyst provides the main interface between the web pages and the numerical data. This architecture enables the following:
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Figure 1 Architecture of the web-enabled performance measurement system at AFE |
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In AFE the WePMS is known as the Management Team Reporting (MTR) System. Figure 2 illustrates a sample of the performance reports available through the MTR System.
| Figure 2 Sample pages from the AFE's MTR System (WePMS). |
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 (a) Menu Page |
 (b) Laminate Gauge (daily) |
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The web-page in Figure 2a illustrates the main menu page providing access to performance reports for various parts of the business.
The web-page in Figure 2b illustrates a shewhart chart for monitoring variations in the laminate gauge during the rolling process. This is a critical technical measure captured by the data loggers on a continuous basis and the daily averages are reported automatically by the MTR system at the end of each day. The figure also illustrates that the tolerances were tightened in July 1999 and again in January 2000. Annotations against August 1999 communicate that the required targets were not achieved during these periods due to "bad metals with suspect rog's".
The web-page in Figure 2c illustrates AFE's performance with respect to customer complaints received each month. This information is captured manually. As customer complaints are received by the customer services department they are entered into a customer complaints log (MS Access Database), in accordance with the Company's ISO9000 procedures. Quality Analyst picks this information from the database and presents it on the web-page. The chart in Figure 2c shows significant reduction in customer complaints received by AFE.
Figure 2d illustrates two charts, one illustrating backlog against customer orders and the other illustrating delivery performance against customer orders. The chart shows that delivery performance has been within target of 95% except between weeks 36 and 41, where delivery performance has suffered considerably due to a problem with raw material supply (as annotated).
AFE reported profits for the first time for many years after implementing the MTR system. We cannot attribute all of the importance to the MTR system. However, many of the management team believe that MTR system facilitated them to focus on key issues and make the right decisions, which in turn improved the performance of the business. This view is strongly supported by the management team view in AFE before and after implementing MTR system as follows:
Recently, the Alcan Group, after its merger with Pechiney, announced the closure of a number of plants, which did not include the Glasgow plant. Some senior managers are of the opinion that the MTR system helped it to survive through this turbulent time by creating visibility and focusing improvement.
Before:
After:
The consensus of the management team view that the business performance would have deteriorated if the system was not in place.
Before:
After:
In one particular case a major customer was ready to take its business elsewhere. Having seen how AFE was planning to tackle the problem, they got involved in the process. As a team they improved the performance of the product using the MTR system to such an extent that the Customer was delighted with the results. They have now formalised a partnership agreement for AFE to supply other products.
Before:
After:
Before:
After:
Management team view that the MTR system has significant positive effect on management attitude and behaviour. However, in isolated cases some negative effects resulted mainly related to manual data collection and sorting.
Before:
After:
Previously, only a few people knew what was happening in the
company, but now every person
knows what's happening in the company.
Before:
After:
Here the main message was that before MTR system, people did not understand the effect of operational problems to business performance. Improvements were mainly driven by reactions to customer complaints. Now the cause and effect relationship is better understood and more visible, improvements are internally driven rather than being reactions to feedback from customers.
The results of this research may be summarised as follows. The web-enabled performance measurement system, locally known as the MTR system, implemented in Alcan Foil Europe's Glasgow plant resulted in significant benefits by:
Consequently, managers are:
As a result AFE Glasgow demonstrated considerable improvements in its bottom line performance, which is measured through EVA (Economic Value Added). Consequently the Alcan Group decided to invest in the future of this plant.
The researchers opinion is that the majority of the benefits gained are not only attributable to WePMS but also to other factors, which played a significant role in its success. These are:
This paper provided empirical evidence that appropriately designed performance measurement systems, if supported through appropriate IT platforms, will improve visibility, communications, teamwork, decision making and it will lead to a more proactive management style. However, this conclusion is based on a single case study. The authors are confident that the benefits enjoyed by AFE are replicable in other organisations.
Bititci U S and Carrie A S, (1998), Integrated Performance Measurement Systems: Structures and Relationships, EPSRC Final Research Report, Grant No. GR/K 48174, Swindon UK.
Cross K F and Lynch R L, (1988-1989), "The SMART way to define and sustain success", National Productivity Review, vol. 9, no 1, 1988-1989.
Dixon JR, Nanni AJ, Vollmann TE, (1990), The new performance challenge: measuring operations for world class competition, Dow Jones -Irwin Homewood Il, 1990
Kaplan R.S. and Norton D.P., (1996), Translating strategy into action: The balanced scorecard, Harvard Business School Press, Boston, Mass 1996.
Neely A., Mills J., Gregory M., Richards H., Platts K. and Bourne M. (1996), Getting the measure of your business, University of Cambridge, Manufacturing Engineering Group, Mill Lane, Cambridge.
Neely A., Adams C., (2001) "Perspectives on Performance: The Performance Prism", at http://www.som.cranfield.ac.uk/som/cbp/prism.htm
Suwignjo P., Bititci U. S., Carrie A. S., Turner T. J., (1998), "PMS: Auditing and prioritisation of Performance Measures", International Conference on PMS, University of Cambridge.
Turner T. J., Bititci U. S., (1997), "Maintaining reliability of business processes using active monitoring techniques", International Journal of Business Performance Measurement, vol. 2.
