AAOM Handbook

A requirement for a normal performance distribution suggests that the Process or Productive Unit is not the chosen dominant constraint in the value chain, and hence flexibility and responsiveness is the prime requirement. These can be achieved by either flexible resourcing or sacrificing some resource productivity. In this scenario Utilisation (both equipment and labour) and Throughput Rate are likely to be less than the maximum possible, but should be balanced on the basis of the impact these have on fixed and variable costs. Good process management (control systems and work management), and flexible resourcing strategies, will produce a tighter performance distribution, with adjustability to match the demand of the intended value chain constraint. This will result in higher Efficiency. A requirement for a strongly left skewed distribution suggests that the Process or Productive Unit is an intended constraint in the value chain, and hence maximised productivity is required. In this case Utilisation and Throughput Rates should be maximised within the bounds of acceptable Efficiency and Sustainability – noting that Efficiency and Sustainability decline rapidly when a process is pushed beyond the inflexion point of the performance effort curve. Here as well, good process management (control systems and work management) will produce a tighter performance distribution, resulting in higher process Effectiveness and Efficiency. Resourcing flexibility is not likely to be possible or appropriate in this scenario – since the logical location for a designed value stream constraint is where capacity is the most expensive or difficult to add.

Output

Unit Cost

THEORY

In order to effectively evaluate potential Production strategies, and then to select the most cost effective combination, it is necessary to understand both the Performance Target distribution characteristics and the historical performance of the process. This will assist in identifying the type of strategy outcomes required and the most appropriate options to focus on.

© McAlear Management Consultants 2006

Operational Planning: Set Production Strategy

Updated: August 2018

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