Imagine that you’re the manager of a department in a railway that rails sugar from the mill to the port. Your department takes orders from the mill for trains when they’re needed, to come and load up with sugar at the silos, and chug them along the tracks to dump the sugar at the port for export.
And you’ve just had a call from the manager at the sugar mill: “Where are those *%$# trains we ordered?! We’ve had to shut down production AGAIN because the silos are full. You know how much that costs us! When are you guys going to get your train problem sorted?!”
It’s not too far from the truth. Many years ago I worked with a pretty forward-thinking manager in the railways, and one of his processes was the flow of sugar from mill to port. And he probably had not too dissimilar words with the sugar mill manager on the odd occassion.
The problem was in the white space. The hand off points between parties in the sugar process, as sugar flows from the mill to the port. Actually, even as it flows from the canefields to the ships.
And how this railway manager solved the problem was basically looking at the whole process and using three types of key performance indicators to find the bottleneck and fix it.
#1: Process Outcome Measures – these set the priorities for the process.
A really important outcome of the sugar process was that it flowed without causing the sugar mill to have to stop production on account of not enough trains to keep emptying the mill’s silos. Stopping production is a HUGE waste of time and capital and labour costs. So this was a very important outcome measure for the sugar train process – the hours of mill downtime caused by insufficient train capacity.
#2: Process Output Measures – these help in diagnosing and testing improvements to the process.
The sugar train manager flowcharted the entire process from when the mill ordered a train to when the train left the port after unloading the sugar for export. An important output for the sugar train system is the number of tonnes of sugar delivered to the port on time. In a way, it’s a measure of the capacity or throughput of the train system.
#3: In-Process Measures – these are the powerful measures!
One of the problems in the sugar train system was that the trains, in fact, were not keeping up with production. And the railway’s first response – by tradition – was to put more trains into the system. Very expensive. But our forward-thinking sugar train manager looked deeper into the problem.
He discovered that increasing the number of trains or the number of wagons on each train would improve capacity at too high a cost. By modeling the sugar system, he found that he could increase capacity by using the same (or less) rollingstock in a way that was very different to traditional thinking: create trains that were a fixed length that cycled more frequently through the sugar system. No trains needed to be ordered, no need to change the number of wagons on the train each time. The unit-length trains just kept cycling through the system.
And to add insult to injury to traditional railway thinking, they made sure they had enough wagons on these fixed length trains so that one wagon would stay empty because it wasn’t needed. Sacrilege! Fancy running an empty wagon – that’s not earning the railway any revenue!
But that’s the key to the transformational measure: when that empty wagon was actually needed to empty the sugar silos, it was a lead indicator that production was beginning to exceed the railing capacity. So the railway could ramp up capacity before the mill ever had to stop production.
Transformational measures are almost always the in-process measures. But you have to really understand your process to find them!
About the author
Stacey Barr is a specialist in organisational performance measurement, helping corporate planners, business analysts and performance measurement officers confidently facilitate their organisation to create and use meaningful performance measures with lots of buy-in. Sign up for Stacey’s free email tips at www.staceybarr.com/202tipsKPI.html and receive a complimentary copy of her renowned e-book “202 Tips for Performance Measurement”.