AAOM Handbook

ST.08 Develop Scenarios

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. Constraints and opportunities to process performance fall into two distinct categories. The first category is the one that is most commonly recognised, limits in the capacity of one or more of the Business Structure elements – i.e. bottlenecks. The second category of constraint is less commonly recognised, it is high variation in dependent processes, which just as effectively as a single bottleneck, restricts process performance. Every constraint represents a potential opportunity to deliver improved process performance. Constraints and opportunities can be identified by looking in detail into the performance model of a process. The first types of constraint that should be identified and dealt with are those related to un-buffered high variation. Reducing the effects this variation typically yields several times the output benefit of trying to shift the process operating point without reducing the variation. When variation has been adequately dealt, with the capacity constraints in the process should be dealt with. The potential process constraints can be identified by examining the probability distributions defined for each element of the calibrated Business Structure Performance Model. The width of the distribution will be an indication of where excessive variation may be a constraint. The skewness of a distribution, and the value of its end points, will be an indication of where capacity may be a constraint - a skewed distribution is typically associated with the increasing non linearity that occurs towards the top of the performance/effort curve for a process. The actual process constraints can be defined by developing modelling scenarios where the potential constraints are systematically reduced – i.e. either the range of variation is reduced, storage is increased to buffer variation, or the distribution is shifted. The outcome of testing of these scenarios in the Business Structure Performance Model will allow constraints to be validated,

© McAlear Management Consultants 2006

Operational Planning: Set Performance Targets

Updated: August 2018

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