A hybrid KB-AHP-GAP analysis forthe performance measurement system in a manufacturing environment
Part 2: The D€tailed PMS System
l. The Hybrid PMS Model Strategac Level In the Strategic Level, three modules t h a t w i l l b e a s s e s s e d a r e C o m p a n y Environment, Business Perspective and Cuslomer Perspective, shown in the Figure 1.
From Figure f. it can be seen that in Le\€l 0 Company Environment Module, the informatixl needed are type of industry number of employee, age of company, age ot industy, competitors and business lite cycle stage. The Company Environment Module is the slarling point ofthe KBPMS Model and is used to identity the existing condition of the company and ib operaling environment. The KB system processes the use/s company details through the rule-base to categorise lhe company bas€d on the iechnology implemented (high, medium, low), number of employees (big, medium, small), competition (high, medium, low) and b u s i n e s s li f e c y c l e s ( g r o w t h , s u s l a i n , haNest).The information ftom lhe'Company Environment Module, including the result ottlE KB process (e.9. classmcation of the company),
will then be used in lhe next module to p o s i t i o n i n g c o m p a n y i n w h i c h t h e perlormancestandards have to be applied (e.9.
a high{echnology indusiry has a higher performance standard of quality compared to low-technology industry). The necessary information is then stored in tle Information Base and the next module (Business P e r s p e c t i v e M o d u l e l i s l o a d e d . The Level 'l- Business Perspective Module is related to the procedures for measuring company perhmance in terms of financial ratios and market share. The assessing of tinancial perfoflnance in this rnodule is based on the lncome Statement and Balance Sheet of company for three years in which four financial ralios thal are Leverage, Liquitity, Profitability and Retums m lnvestment are then calculated.
The condusbn of financial Derformance is drawn, based on the benchmarking from literature. In lhis module. narket share is measured based on the percentage of business received ftom customers aiornestically and . globally.
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Abstract
This paperpresents on designingand managing pefiormance ofa manufacturing unitfromthe corporate level to the shop floor level. A Hybrid Knowledge Based (KB) Analytic Hierarchy process (AHP) Gauging Absence of Pre-requisite(GAP) analysisofPerformance l\,ieasurement System (pMS) Model is developed that considers five levels of company performance: Busrness perspecliye, Customer Perspective, Manufactudng Competitive Pduities Perspective, lnternal process Perspactive, and Resource & Method Availability Perspeclive.fhe research validation was confined to tour induslry sectors: aircraft component manufacturing, electronics manufacturing, computer and ofice equipment manufacturing and telecommunication products manulacturing. The results of the, validation exercise indicate that the preser$ Hybrid PMS Model is a suitable decision-making tool to,' assisi the practitioners of P MS and provides consislent and detailed resu lts.
Key words: Performance Measurement System, Knowledge Based, Analytic Hierarchy process, GAi, analysis, Manufacturing
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Referring again to the Figure 1, the Customer Perspeclve Module consists ot lhree sub-modu/es namely Customer Salisfaclbn (CSr, Customer Lbyalty (CL) and Cuslomer Acquisition (CA). Sttucture of the customer Pe'spec[ve Module shows, in Figure 2. lt can be seen that the KB system tirstly assess lhe company concerns on the cs. The KB syslem will then assess the CL and the CA in a similar manner. Based on the assessment of CS, CL and CA, the KB syslem, using the AHP approach embedded in the model, lhen determines what improvement priority should be taken by the company. lt should be noted lhat the CS Sub-module has been covered in great detail in this section, to show lhe breadth and depth of the Hybnd PMS Model and its Knowledge Base. Subsequenl suFmodules (CL, CAland modules for levels 3,4 and 5inthe Operational Level (Section 2) will not be cov€red in the same levelofdelail, due to brevity rcasons.
From Figure 2, it can also be seen that there are two types of question implemented in the Cuslomer Perspe ctive Modulei genenl and specitic. The deneral type of questions is relating to company commitment, company ptogrammes and programmes achievenpnt in
the last three years. The specfic gueslions such as communication- (in the ComqanY Commitnent), progrcmmes content (in lhe Cdmpany Programmes) and detail of programmes achievement (in the Prognmmes Achievement) appear within the specific aspects ofthe Hybrid PMS Model.
R e l a ti n g t o t h e m a n a g e m e n t commifnent on the CS, not only are the top managefnenl being assessed in the CS Sub- module but also Sales/ Marketing, Product Designand Production Management, as shown in Figure 3. An example of rule-base {or assessing the Production Management comminenl is listed below (only few rutes are given)
AND
P rod u c t i o n M a n age mert is responsib/e for establishing petormance indicatos on CS (Good Point)
is not responsible for determining key benchmatus & competitors on CS (Problem Categoty 1)
is respons,b/e. for determining data source of Customer Sat,sfaction relatives to iE competitors (Good Point) ,b nol responsible for developing e m p l o y e e s ' c a p a b i l i t i e s o n implementation of CS programmes in production department (Problem Category 1)
b responsible tot prepaing production facilities related to CS programmes (Good Point)
is responsib/e for monitoring CS p r o g r a m m e s o n s h o p f l o o t imple me ntati on (Good Poi nt)
Ptgduction Management commitnent on CS achieves 4 Good Po:nts and 2 Problem Category 1
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The structure of assessing CS programmes content can be seen in Figure 4.
From Figure 4, it can be seen that the programmes content relates to the existence o, CS programmes on quality of product, qualityof service, safety and value for money which the procedures to assess this asDect is conducted through the rules-base as the previous explained.
T h e a s s e s s m e n l o f c o m p a n y prografifites achievement on CS in the last three yeas basically refers to the achievement of program content stated iit the above section,
ln summary in the CS sub-module output, the number of querbtions for each asDect and the Problem Category @n be shown in Table 1.
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Based on the inputdata from CS, CL and CAsu[modules, the KBPMS Modelthen determines the improvement priority that has to be undertaken bythe companyto improve its competitiveness for th-e CuslomerPerspecliye Level. The process oftransferring from tie eroitem Categorito the lnfensity ot Impottan@ oI Saaty (1980)forthe AHP approach has been explained in the paperpart 1.
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The three modules that are assessed in lhe operational level include Manufactuino Competilive Ptiorities Pe5pective, lntemal Pro@ss Percpeclive and Resource & Method Availabiliil Perspeclive. shown in Figure 5.
2. The Hybrid PMS Modsl Oporational Level
Figure 4 shows the Manufacturitq ComDetitive Pdoities Module consists of lhree sub-;odules that will be assessed: Quatil,
Flexibility and Delivery. The KB systems assess the company commitrient on Quariy - Flexibilv - On-tine delivery, th€ exislence of programmes, lhe employee participation m the programmesdevelopment, ihe existerce and reliability ol project manager, the reliability of ihe programmes and the statistic of the programmes achievement in the last three years lhrough similar procedures with lltce for th€ Customer Satisfaction SuFmodule in the context of Quality-Flexibilityon-time delivery.
Referring to Figure 4, in the ,nlemal Process Perspecrve Modu,e, four sub- modules that will be assessed are lnnovalbn, Mmufactudng Prccesseq Mafueting aN Post-Sales Se/vica. Figure 4 also shows the Resource & Method Availability Module lhat consists of four suFmodules namely Hunan Resourceq Technology, Method and Sudier that will be assessed in the Hybtid PMS Modsl. Again, the struclure of lhe KB system of those sutmodules follows the general pattems of queslion illustrated in the sedbn 1.
3. A Case Study
The next stage after developing the Hybrid PMS Model is the testing, verification and validation of lhe Model. Validation of a KB syslem involves the validation of the
knolvledge (rules and conditions) incorporated into tt|e system and the conect use ot the kno,ledge io solve a pmblem (Hussain, 1998;
Razmi, 1998). Real information is obtained from bur Indonesian manufacturing companies. The validation process of the Model b based on inte.views, questions and inpufdomation. The inpuvinformation (an$vers to questions and input data) provided by each person in each company is their orn data (based on heir cunent and prevbus daia, past experiences and judgement). The knowledge contained in the model is also tested and verified (through user feedback during the system testing). The profile of the companies for the verification and yalftlation Drocess€s is listed in Table 2.
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As menlioned in Section 1, lhe Company Environment Module is the starting point of the KBPMS Model and is used to idenlify the existing condition of the mmpany and its operaling environment. The Company Envircnment Module is tested and verilied for the acqJracy of the info.mation entry and knowledge- The user tested trc behaviour of the KBPMS system regarding S|e KNoWLEDGE (RULE-BASE) contained in the Module. The Model performs a check in detecting any possible incorrect input. The general information provided in the Company Environment Modulewillthen be exported to the next module (Financial & Market Share Module).
Since the data input lot lhe Company Envionmenl llodule is mostly raw and general information needed for the subsequent modules, hence therg is no crucial issue in this module regarding the company performance itself, rather[|e KB mechanism implemented in the system b to process these data for the other modules-
Ihe Eusiness PersDeclive Module is the first level of the KBPMS Model that is to be used as starling point to analyse the company competitiveness. Based on the data of Income Statement ard Balance Sheet, the KB system uses its intemal rules to produce lhe output shown in Table 3, which preseots examples of various financial ratios of company A in terms of leveage, ti.luidity, protitability and Return on
lnvestment(ROl).
D.scription Lest ycat 2 Y.aF aso 3 Years eso Trcnd
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N.t WoftingCapitd to Tot8l Ass.ts 0.43 N/A 0.27 NiA D.07 N/A tmprovcd
Curran! Btio 2.88 Excess idl. | . 9 7 C o o d L I 5 O o o d Irnprovcd
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Sel.s to Nct Working capiial 5 4 3 N/A t 9 9 N/A 1 . 7 5 N/A irnpror.d
Nct Profr MEcin \6.92 G o o d 28.30 C o o d 9.96 G o o d Fluclu.td
lnvmtoo/ Tumovcr Good L23 C o o d L09 G o o d
Avarsgc Co Ilcct bn P.iiod 2t8.92 Bed 2tt.92 B.d : 1 8 9 : Bsd stcsd)'
Raturn on Tolal Assets 23.31 N/A N/A 1.44 N/A Improved
Rctumon Eqrity 3 2 t t. 8 l I 1 9 5 . 1 9 G o o d .{94.53 Oood Fluctuard
ROI 24.5485 G o o d | 4.65d) O o o d 4 . 6 1 l 7 F a ' r
Table 3 E>enp le of Financial Performance for Conpany A
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company acfiieves 69 Good Poi rl and 1'15 Probtem Category IPC ) that consists of 7 7 PC 1 ' 13 PC 2.3 PC3, 1 PC 4 and 21 PCs.In the sub- rlFd]ule Cornmilmenl. Company A has a good commitment for top management but very poor for sales/ marketing, production designers and production managemenl, indicating that the commitmenl f.om top management is not being implemented lower down. The lack of co;mitment ftorn this middle management has furlher impacl on the programmes achievement (again vety poor tesults), lor customer satis/actor,. From this table it can be seen that the Cuslo'ner Satistaclion for product quality, service quality, salety and value for money are all very poor with the total Problem Category 1 for these four aspects being 115outol184. This is a trernendously negative perfomance tor Company A and drastic actions are needed.
From 184 qu€stions of CS, th€ Fot lhe Customet Loyaily (CL) aspect, lrom a total of 87 questions, the company achievement is 33 Good Points and 54 P/obrern Categon€s (PC)consisting of26 PC 1.6 PC 2, 1 PC 3.0 PC 4 and 21 PC 5, again indi€ling very poor pertormance.
Finally, tor the Customer Acquisition (CA) aspect, from 79 questions asked, Company A achieves 22 Good Porhls and 57 Problem Category @nsisting ot21 PC 1, 12 PC 2 , 3 P C 3 . 0 P C 4 a . r d 2 1 P C 5 .
Based on the results of the GAP analysis, the HybridPMS Model then processes lhe results using the AHP approach to determine which aspect should be in priority of improvement and how the weight of priority between CS, CLand CA should bedetemined.
Table 5 shows an example ot the Pd?,ity Veclor br CS, CL and CA based on the result of the GAP analysis shown inTable 4.
Tabb 5 Pnon t! Veclo r fot Cu sto ttv I Pe rc??cllre
both 0.250. lt m€ans that based on the GAP analysis aqd AHP process embedded in lhe svstem, the company should place its improvement pdority firstly on the CS as two ti;es compared to CL and CA aspect' and improvement for CL and CA as a similar priority- The similat procedures of performance a s s e s s m e n t a r e c o n d u c t e d f o r l h e Manulaclutitg Competitive Piotilies Module, tntemal Proesses Module and Resourc€ &
Method Avai!*iw M od ule.
The orocess of verification and validation of Hybrid PMS Model through the other three manufacturing companies is conducled h a similar manner as has been oxplained for lhe Company A. Tables 6 and 7 shbw the summary resulls tor the GAP analysis The Table 5 shows that lhe Priotity Vector for CS b 0.500, for lhe CL and CA are
and the AHP analysis (in ierms of Pfbnty Vector). lt ne€ds to be r€iteraled lhat the GAP ygctor). lt ne€ds to be r€iteraled lhat the GAP analysis provires the priorities adbns needed irrlemal lo eech sub-rnodule fn terms of(n terms of inigmal to eactl
provides the priodlbed aclions between thesub- rnooutes.
Table 6 stlows the content firdings by the Hybrid PMS Model for the four cornpanies, irdicating that the present performance of these companies is disiant from the benchmark standards rontained in the model. The tesults i.rdicate for eadr company where it needs to 'locus for each ofthesub-module.
Table 7 proriles a summaryofthe AHP analysis and shor6, relatively, whidt issuss to be tackled initially. The bold figures show the priorities for eadr major perspeclive. Hence in lhe Cuslomer Petsective, for Company A the pdority is deerned b be CS (ovet cL and CA), for Company B it b all tree, for Company C it is cs and tor Conpany D it is Cl-. Similar observations can be coped oul for lhe other p€Epectives, to determine the key actions .equired al the sr$module. Thus lhe Hybrid PMS Model has nd only provided t|e details of whore the perfomBnce can be imFoved, but it has also provtled an in-depth and Fioritised decision-making tod lor the praciitioar€ts.
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References 4. Conclusion
The design of PMS is a complicated process as it involves many pertonnance variables and formula. Using a hybrid (Knowledge Based, GAP analysis and AHp approach) methodology, the PMS model consisting five pertormance levels was developed to serve the purpose. The hypothesis of this research was to show that the application of KB systems was a viable PMS methodology to improve company competitiveness based on
the linancial and non-financial variables and bolh based on the qualitalive and quantitative assessment processes. This has been shown to be a valid hypothesis, wtEreby the development and the subsequent application of the Hvbrid Pl\,lS model in four indusitiat applications iave i d e n t i l i e d k e y a r e a s o t p e r f o r m a n c e rmp@vements. In the validation processes based on ihe industrial idormation, the Hybrid P['lS modelcan determine accurately (for every level) which performance variables-sirould bi tackled tor improvement bythe company.
lun l f .naj6men rek@i nB :: volume 3 oB€nbs 2003
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Jurullanai€mon Teknologi ITB :: Votume 3 Desember 2003