themanager.org

Embrace CPM, and escape Excel hell

By Gavin Halse*

Corporate performance management (CPM) has existed in some form or other since companies first started making things, and is therefore not a new concept for manufacturers. Increasing competitive and regulatory pressures are resulting in an increase in formal CPM acceptance.

However, the concept only now appears to be getting requisite attention from the IT community. Does the relatively slow uptake of CPM by IT mean that IT professionals are simply slow to understand how manufacturing companies are run, or are there more fundamental factors involved?

In a typical manufacturing organisation CPM is intrinsic to the way things are managed. Engineers love quantitative measures of performance and create metrics for anything that moves.

Manufacturing metrics may include simple, process-related indicators such as production rate, yield, efficiency, and waste with associated financial measures such as sales, working capital, and cost of production. Even safety, health, environment and quality (SHEQ) measures such as incidents, accidents, and non-conformances are useful measures of performance.

Regulatory pressures are requiring that these be measured and reported on with the same rigour as financial results. The sources of data to extract these measures are widespread and include plant control, manufacturing execution system (MES), accounting, human resources (HR) and enterprise resource planning (ERP) systems.

Finding one version of the truth

With most of the relevant data already resident in structured electronic form in IT systems, why is it then that CPM is inevitably out of the hands of IT and almost always managed by line-of-business owners through a multitude of spreadsheets? There is nothing fundamentally wrong with spreadsheets, but it must be recognised that in the wrong hands they frequently suffer from unstructured logic, multiple versions of the truth, and often they can hide an embarrassing systematic error in obscure formulae, misunderstood macros and the hidden assumptions of multiple authors. Worse still from an IT purist's perspective, these spreadsheet "electronic scraps of paper" on which key business decisions are made are found in multiple similar but not exact copies on almost every senior manager's notebook. Fortunately, there is a good chance that their competitors are in this same, uncomfortable situation.

Of course, IT will protest that it has provided dozens of "reports" and that managers simply need to use these properly: "It's all there." However, if report usage were measured, it would be found that the most frequent consumers of reports are usually not management, but rather end-users who enjoy lists of data and use these to check the accuracy of their data capture. From an IT perspective the situation is even more bizarre when these end-users maintain separate spreadsheets of the same information that they diligently capture into the ERP system, "just in case". Business managers hardly ever run ERP reports, citing complexity and barriers to extracting the information they need. The reality is that their interaction with the ERP system is so sporadic that they all too often forgot their logon password.

To further add to the IT manager's predicament, IT vendors are providing views of plant data, with at least one vendor proudly proclaiming that it can give you a 24-hour view of your plant through a PDA, SMS or even voice messages delivered through your telephone. What plant manager truly wants this in the middle of the night? Are our operations people so incapable of running their plants after hours that this sophisticated technology is really required? Are we fixing the symptoms, or are the technology pundits truly gaining the upper hand at the expense of business sense?

Aligning IT with the business

Unfortunately, in many companies the pains described above are there to stay because of cultural factors: IT is poorly aligned with the business; there is no architecture in place that supports CPM; IT management has "other priorities"; and there are often political barriers between IT, operations and business management.

To deliver successful systems that support CPM, it is important to deliberately conceptualise a well designed architecture to deliver data from disparate sources into a consolidated, user-friendly, easy-to-maintain single point of access. Only IT professionals with their knowledge of the way data is structured can design this architecture. A number of options exist: collate, massage and deliver the information through a best-of-breed business intelligence platform; use the existing business intelligence tool in your ERP system; or use a managed combination of both.

During the 1990s it may have been more than sufficient to construct a management information system (MIS) with ODBC connectors to many data sources. Today, the infrastructure on which CPM is built is far more complex and needs to be an event-based and service-oriented architecture.

The solution for many IT managers is to start by acknowledging the cultural problem. IT managers need to be able to stand in the shoes of business managers and ensure that the increasing complexity of service-oriented and event-driven architectures is well hidden, and that simple, meaningful and useful metrics are available quickly, reliably and accurately. A simple measure of the success of this approach will be a reduction in variety of ad hoc spreadsheets calculating key business metrics. The objective is to enable better business decisions, and IT's role is to deliberately simplify and manage the technology that delivers the information required to make these decisions.

Unfortunately, the many entrenched practices of the past have not made the IT-led transition to effective CPM an easy objective. IT managers need to be particularly good change agents because only half the solution is about technology; the other half is about a fundamental cultural change that is going to take plenty of time and a lot of patience on all sides. But for those who get it right, the benefits will be seen through improved competitiveness and ultimately survival in a ruthless market.

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*Gavin Halse is MD of ApplyIT, a local IT specialist for the process manufacturing industry.

About ApplyIT

ApplyIT is one of South Africa's leading developers and implementers of software solutions for companies involved in process manufacturing. ApplyIT offers a range of specialised business applications to support an operating business, including supply chain, asset management, SHE-Q (safety, health, environment and quality), ERP and customer relationship management.

ApplyIT's solutions combine leading-edge technology with industry best practices and have been proven in a wide range of process manufacturing companies. ApplyIT has been developing and implementing software solutions in the chemicals sector since 1995. Through direct experience and strong relationships with the manufacturing sector, ApplyIT has learned the complex issues that companies face, and the many factors that contribute towards the success or failure of software solutions in this environment.

ApplyIT has a dynamic, customer-centric, motivated and highly skilled team of people who comprehensively understand the issues in their customers' industry. In-depth knowledge and understanding of their customers' requirements allow them to implement world-class IT solutions to solve complex business problems.

Contact

Tineke Smith, ApplyIT, (031) 275-8080, 082 378 6052, smitht@applyit.co.za

Frank Heydenrych, FHC Strategic Communications, (011) 608 1228, frank@fhc.co.za