AAOM Handbook

an Operating Master Schedule and Expenditure Schedule that can deliver the scenario characteristics and meet the expectations set for the business. This is done through the Set Production Strategy, Set Service Strategy, Set Operating Master Schedule and Set Expenditure Schedule elements of the Business Process Framework. When the modelled predictions of output capacity and unit costs are developed, these need to be compared to the Business Expectations. The specifications for a performance outcome can be either single or double sided. Examples of single sided specifications are; to produce at least 10,000 tonnes per week of prime concentrate, to fulfil a recruitment request within 12 weeks, end of month accounting processes will be completed within 5 days. Examples of double sided specifications are; prime concentrate will have a minimum of 15% and a maximum of 20% metal content, the successful recruitment candidate will accept a starting salary between $X and $Y, accounts due will be paid no earlier than 5 days before and no later than the due date. In some cases a further parameter, such as a target mean for the distribution, 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 predicted (modelled) performance histogram overlaps the target specification then at least some of the performance will meet the target. The stakeholders in the business would probably like to know what percentage of the total performance will actually meet their expectations for a given period of time – called the confidence level on the performance expectation. Answering this seemingly simple question is complicated by the fact that, for a given process, the confidence level on meeting a specification varies with the time period that you are looking at, i.e. for a consistent process performance, the confidence level for meeting a specification is different for 1 day, 1 month, 1 quarter and 1 year. If a process can meet specification at all, then the longer the time interval the higher the confidence level. This is explained by the expectation that the more individual process outcomes you include in calculating the average for a period, the closer the average of those outcomes should be to the long term average for the process. The Central Limit Theorem, from statistics, allows us to calculate these results. To answer the question how much concentrate grade lies between the upper and lower specification limits, or how many accounts are paid within the time specification, given in the examples above, calculate the area of the performance histogram (constructed for data samples representing that time period) that overlaps the target specifications. This will highlight whether 100%, 80%, 40% or 0%, etc. of the performance will meet the specification. If the above work indicates that the business expectations can be met then we can lock in the strategies, Operating Master Schedule and the Expenditure Schedule. Otherwise, we need to see if we can develop alternate scenarios for testing. If all potential scenarios have been exhausted then we may need to rethink the Business Expectations that can be delivered form the current process, and consider major changes to the processes (Modify or Change the Business).

© McAlear Management Consultants 2006

Operational Planning: Set Performance Targets

Updated: August 2018

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