AAOM Handbook

ST.06 Are Performance Target Confidence Levels Met?

Context

The overall purpose of the process of Setting Performance Targets is to define the confidence level of process meeting a set of business expectations. Achieving this requires that we compare the predicted performance of the process, under a specified set of conditions, with a set of performance targets derived from the Business Expectations. The predicted performance of a process is derived from the Operating Model processes of Setting Production and Service Strategies, Setting Operating Master Schedule, and Setting Expenditure Budget. If the above Operating Model processes produce a set of strategies, schedule and expenditure budget that meet the Business Expectations then we have an approach that can be locked in for execution. If not, then we need to look for areas of the process performance where changes to strategy, schedule or resourcing/pricing may be able to allow Business Expectations to be met. That is, we need to identify the constraints in the current approach, and the opportunities that can move performance to match the Business Expectations. A set of performance specifications can be either single or double sided. An example of a single sided specification is to produce at least 10,000 tonnes per week of prime concentrate. An example of a double sided specification is that prime concentrate will have a minimum of 15% and a maximum of 20% metal content. In some cases a further parameter, the target mean, is defined in order to further tighten the specification. For example, while all prime concentrate must fall within the above upper and lower specification limits, the target for the mean metal value is set to 17%. This will probably be a much more difficult target to meet. If the performance histogram for a process, predicted by the Set Operating Master Schedule and Set Expenditure Budget elements of the Operating Model, overlaps the target specifications for a nominated time interval then at least some of the performance will meet the target. The owners, shareholders and stakeholders in the business would probably like to know what percentage of the total process outcomes will actually meet their expectations in that time period. A simple way to answer this question is to calculate the area of the performance histogram that overlaps the target specifications. This will highlight whether 100%, 80%, 40% or 0%, etc. of the performance will meet the specification. Where three parameter target specifications are given it may be necessary to use capability indices such as Cp and Cpk to indicate the degree to which the process performance can meet specifications.

Purpose

To decide whether the predicted performance meets the target and confidence level derived from the Business Expectations.

© McAlear Management Consultants 2006

Operational Planning: Set Performance Targets

Updated: August 2018

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