The impact of real–time performance measurement on operations improvement

Thesis (MBA)--North-West University, Potchefstroom Campus, 2013The Industrial Revolution triggered the need for performance measurement and improvement initiatives and since then efforts to measure performance and improve manufacturing operations has gained considerable attention. The current globalised marketplace has placed increasing pressure on businesses to improve performance to gain a competitive advantage. The advances in information technology has now made the collection and transformation of raw data into usable information a simple automated process, which can be done in time with the manufacturing process, i.e. in real-time. The focus of this study is to evaluate the effectiveness of an implemented real-time performance measurement system in enabling operations improvement within a business unit of a South African petrochemical company. A comprehensive literature study was conducted where the topics of performance measurement, real-time performance measurement and operational improvement were discussed in detail. The broad nature of operations improvement was narrowed to meet the specific key operational focus areas of the business unit under investigation. The majority of the literature review was focused on unearthing key factors that contribute to the success of traditional and real-time performance measurement systems. An empirical study was conducted using a newly designed questionnaire that was based on the success factors identified in the literature review. The target population was the production, technical and operations management personnel of the various production plants within the business unit. The questionnaire tested the extent to which these employees perceive the success factors to be present in the real-time system and contribute towards operations improvement. The analysis of the collected data included descriptive statistics, to determine extent to which each of the factors where prevalent; analysis of variance models, to determine if the difference in perceptions of selected demographic groups regarding the success factors were statistically and practically significant; and correlation calculations, to determine the significance and strength of the relationship between selected success factors. Analysis of the collected data showed that the questionnaire was reliable and valid. Overall, it was concluded that respondents indicated there is good agreement that all success factors are present and hence that the real-time system is an effective tool in enabling operations improvement. The analysis showed that the highest ranked success factors were Awareness, Effectiveness of System in Improving Operations, Alignment with Strategy and Clear Visibility of Performance Metrics. The lowest ranked factors were Right Performance Metrics are being Measured, Review of Performance Measurement System and lastly Limited Number of Critical Performance Metrics. Furthermore, the analysis showed that, although employees perceive the real-time system to enable improvement in all operational focus areas, they perceive it to better enable improvement in operational efficiency, followed by improvement in full order on time and lastly improvement in variable cost. No notable statistically and practically significant differences in perceptions were found to exist among the selected demographic variables. The results of the correlation analysis showed the all factors except Limited Number of Critical Performance Metrics have a significant relationship with the effectiveness and use of the real-time system. It was concluded that the factors Effectiveness of System in Improving Operations and Use of System are strongly correlated with each other as well as with the factors Focus on Improvement, Facilitates Decision-Making, Stimulate Action and Clearly Defined Performance Metrics and Targets. Recommendations that were derived from the conclusions were presented, which suggests practical ways to improve the real-time system. The research study was evaluated against the primary and secondary objectives with the conclusion that both were achieved. Finally, suggestions for further research on this topic were proposed.Master