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Business Sustainability: A cleaner production approach to small business management

Student Manual

Environment Australia
October 2000
ISBN 0642547149


Business Sustainability: Session 28 - Detailed Study - Part 7

OVERVIEW
Objective of this Session To learn a method of formulating targets for process improvement.
The following topics will be covered in this session
Targets for Process Improvement.

Targets for Process Improvement

Element 4 of Detailed Study

Detailed study elements:

  1. Data collection and validation;
  2. Data assessment;
  3. Improvement options;
  4. Targets for process improvement;
  5. Business improvement plan.

Rationale

After deciding what improvement options are to be implemented, performance targets and indicators are developed to clarify what the improvement expectations are and how they are to be measured.

Definitions

A target is a detailed performance requirement, preferably expressed in quantitative terms that must be met in order to achieve a defined improvement objective.

An indicator is a quantitative measure used to gauge success in meeting targets.

Example

An example of an improvement objective, target and indicator follows.

Objective Option(s) Target Indicator
To reduce the amount of timber usage and wastage in manufacture of mousetraps. Mousetrap base slightly smaller and thinner; precision cutting of timber. To increase the number of traps manufactured per kg of timber from 160 to 180 (by January 2000). Monthly reconciliations between timber purchases and number of mousetraps passing quality control from that timber.

Targets should be Quantitative

Targets should be quantitative - in fact the more quantitative the better. For example, specify exactly what waste is to be reduced, by when and by how much. The corresponding cost savings should also be calculated and included in the target definition.

Target Setting

Targets should never be arbitrary - they should be justifiable performance expectations. For example, they may be derived from calculations based on process data, internal performance records ("we achieved it last month, so we should be able to achieve it every month from now on") or on industry benchmarks.

Obviously, the appropriate business employees must be involved in target setting, because they are the ones who will be trying to meet the targets after the team has finished the project and gone.

Performance Indicators

Performance indicators should be:

It is important to express indicators in units that are independent of the scale of the business' operations. This will allow performance indicator data to be used for benchmarking in the years to come when the business has grown.

Choice of Indicator

Choosing effective indicators is not always easy. Be careful not to choose indicators that will drive behaviour that looks good against the indicator, but does little to improve environmental performance.

In a mousetrap example given above, for instance, if an indicator was chosen relating to the amount of waste in the scrap wood bin, then employees may be tempted to discard some scrap wood in the general waste bin to ensure the target is met.

Useful Performance Indicators

Performance indicators related to business inputs and production of saleable product are often the best indicators, for example:

Direct measurement of waste can be used as a performance indicator so long as it can be measured reliably and doesn't cause employees to hide waste in order to meet targets.

Other performance indicators frequently used include production equipment utilisation time, production rate and down time. However, these parameters may not be directly relevant to projects.

Financial Performance Indicators

As well as expressing performance indicators in terms of quantities of materials (or energy) and products, they should also be expressed in terms of financial savings. This is important information for the business manager. It is also important in demonstrating the success of the cleaner production assessment.

Other uses for Performance Indicators

Performance indicators can be used by the business to monitor aspects of its waste performance, irrespective of whether such waste has been targeted for performance improvement.

Your team should review the business' performance indicators (see preliminary assessment worksheets) and suggest other performance indicators that might focus attention on level of wastage and its cost to the business. This is especially useful where there is significant variation in waste levels per unit of production over time (ie. where processes are, to some degree, out of control).

Example

The following graph shows energy consumed per unit of production, and three levels that could be selected as targets for electricity consumption in a general manufacturing business.

Internal performance

Target Average

Target Best Performance

Optimum Target

Figure 28.1: Setting a target for process improvement

Discussion of Example

Selecting the average electricity usage as the target (Target 1 - Average) will not lead to any significant overall reduction in annual usage or cost (though it may lead to improved process control - which is obviously poor at present).

If the minimum electricity usage was set as the target (Target 2 - Best performance), it may not be achievable because this usage level has been achieved only once in the previous 12 months. Setting an unachievable target can be discouraging and can erode support for the improvement plan.

Selecting a target at an intermediate level (Target 3 - Optimum target) will, if achieved, lead to a significant reduction in electricity usage and cost. It would seem to be a practical and achievable target (it was achieved in 3 out of the past 12 months).