Technical Foundations of ERP Architectures
Information technology is changing at a fast pace. Underlying ERP technology is needed to keep pace with first changing IT scenario and should also be flexible to adopt ever changing business scenario. ERP technical architecture basically defines layout of layers of application deployment between servers and desktops, interfaces and software objects. ERP architecture is no […]
Causes of Measurement Variation
The purpose of measurement system is to validate the measurements before they are considered as factual data and used as a basis for decision making. Any experienced Six Sigma executive knows the reality that the measurement system is nowhere nearly as good as you think it is. People who conduct the measurement system analysis for […]
What Businesses, Groups, and Professionals can do when Faced with Stagnation
What to do when Businesses and Professionals Stagnate Stagnation can happen to anyone. Whether they are businesses, nations, societies, groups, or individuals, the prospect of withering away due to lack of growth or career mobility or opportunities can make even the most resilient of the institutions to atrophy and stagnate. Indeed, the fact that there […]
Inventory Classification – ABC Classification, Advantages & Disadvantages
Inventory is a necessary evil in any organization engaged in production, sale or trading of products. Inventory is held in various forms including Raw Materials, Semi Finished Goods, Finished Goods and Spares. Every unit of inventory has an economic value and is considered an asset of the organization irrespective of where the inventory is located […]
Managing Technology in Operations Management
Introduction In last decade or so technology has changed the way organization conduct their business. Advent of technology in operation management has increased productivity of the organization. Technology and Operations Management The scope of Technology and operation management has evolved over a period of time and has moved from development of products into design, management […]
A KPI is a great tool to measure and control the performance of any given process. In management jargon, there is a famous saying which says “That which cannot be measured cannot be managed”. The whole process of control, therefore relies on real time measurement and transfer of information from the site where the task is actually being performed to the control room i.e. the management.
Definition of KPI: The KPI can therefore be thought of as a measurement that tells that management the precise state of operations at any given point of time.
There are 4 components to any KPI.
It is important that these 4 parameters are carefully defined keeping in mind the operational and technical capabilities. Measuring the wrong KPI or measuring the right KPI in the wrong manner can cause more harm than good to the organization that is measuring it.
While a KPI is a measure of performance, the Service Level Agreement or SLA is the ideal state of those measurements. For instance our body temperature is a KPI for our health, while 98.3 degrees Fahrenheit is the SLA i.e. the ideal state of affairs.
Hence, if we were to control our health, we would create a mechanism in which our temperature is being automatically measured. When the KPI deviates from the desired SLA i.e. temperature deviates from 98.3 degrees Fahrenheit, it must send some sort of a message to the management that management interference is required.
The beauty of KPI’s and SLA’s is that it provides required solutions in required time. Hence management can take preventive action instead of having to cure the problems.
Algedonics: While BPM solutions have built in functionalities to report any and every deviation from the SLA, it would not be in the best interest of the management. It is impossible for any process to function at uniform speed, if it is being performed by humans. Even mechanised processes do not function at absolutely uniform speed. Some level of tolerance, therefore needs to be built in the control mechanism.
The KPI’s and SLA’s should therefore allow for +/- 10% changes. Anything which goes above this is serious enough to require management attention.
The 10% is a ballpark figure and may be different depending on the degree of automation and criticality of the process. But the idea is clear, some tolerance level needs to be built in this system or else the managements mailboxes will be flooded with deviation messages which do not even represent an operational problem.
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Continuous Improvement and Business Process Re-Engineering
February 12, 2025
