MANAGING MANUFACTURING PERFORMANCE FOR

COMPETITIVENESS

Munir Ahmad, Nasreddin Dhafr and Haitham Mansour

School of Science and Engineering,
Teesside University, Middlesbrough, TS1 3BA
United Kingdom

Abstract
Purpose – The purpose of this paper is to presents a methodology to assist in the
performance improvement of the process. The purpose is to assist operation processes to
control and reduce cost of operations.
Methodology/approach – The paper is based on literature studies, research and experience
which can be applied by an organisation in order to identify the potential benefits.
Findings – This paper provides a methodology used in this paper suggested that there will be
a significant opportunity to improve the performance of the majority of the existing assets.
Through benchmarking, gaps are identified and an outline of a procedure to quantify existing
gaps was provided. All the tools provided by the methodology of benchmarking within the
process focus on quantifying a financial gap; this sets out the priorities and justifies the case
for continuous improvement. The improvement in the time of the process will lead to an
increase in the value of the production, thus creating financial savings.
Originality/value – This is the first attempt framework, measures and industry world class
targets, to benchmark best manufacturing practices in a company at the oil sector in North
Africa. The paper provides some useful insights and can help companies to implement best
practices and benchmarking to improve their practices.
Keywords Benchmark, performance Measurement, workover operation

INTRODUCTION

Benchmarking is a performance improvement tool and usually used to improve process

effectiveness, product quality and service delivery. One of the most commonly quoted
definitions is the word “benchmark” refers to a metric unit on a scale for measurement.
“From a managerial perspective, benchmarking has been defined as a continuous, systematic
process for evaluating the products, services and work processes of organizations that are
recognized as representing best practices for the purpose of organizational continuous
improvement” (19). It enables an organisation to compare existing performance to others, and
identify elements that can be adopted and adapted in their business context. The result is
often a business case for making changes in order to make improvements. Benchmarking is
widely used, and there are many different approaches; ranging from models of quality
measurement to basic comparison undertaken on a pragmatic basis. Benchmarking is a
popular tool which is used universally as a tool to improve organizations’ performance and
competitiveness in business life. More than 70 percent of managers worldwide reported using
this tool in their companies (19).
Benchmarking itself was used as a methodology to improve the existing process of
benchmarking.(18). It is often necessary to tailor an approach that provides a sustainable
method of benchmarking in view of the organisational goals and business needs. There are
four types of benchmarking ( Zairi, M):

 Internal benchmarking: this type of benchmarking applies more to large organisations

that have various business units. It is about comparing internal operations from one sister
company to another.
 Competitive benchmarking: this specifically compares competitor to competitor, using the
product or function of interest. This goes beyond the traditional product or service
engineering, but it is important to learn and understand about competitors’ methods, their
processes, innovation, strategies, markets, etc.
 Functional benchmarking: this is the comparison of similar functions within the same
broad industry, using wide industry leaders as partners.
 Generic benchmarking: this involves establishing the comparison of business functions or
processes that are the same, regardless of type of industry. Generic benchmarking is a
long-term challenge and reflects a total change in the culture. It is usually found in
learning organisations.
The benchmarking often uses a number of key performance indicators (KPIs) for
comparisons of performance. The KPI is a number, or value, which can be compared against
an internal or external target ‘performance benchmark’, to give an indication of performance.
That value can relate to data collected or calculated from any process or activity [3], [4]. The
KPIs are often classified as; ‘strategic-in-nature’ KPIs, or ‘operational-in-nature’ KPIs.
Operational KPIs are used by managers to plan and control programs at operational level,
while strategic KPIs provide guidance to both managers and policymakers who have to make
decisions from a more global perspective. Generally, KPIs should be selected according to
how they relate to the strategic aims of the organisation and how they can support the
corporate-level performance indicators. This means that KPIs, whether they are operational or
strategic in nature, must tie in to strategy. They describe how KPI can be used as a measure of
the performance of a process and how the best performance on an indicator can be the
benchmark. (20)
The first task for the persons undertaking the benchmarking is to use their experience and
mature judgment of improvement processes, plus their knowledge of the operation process, to
determine what is practically achievable in the future and what the priorities are for that
particular process. For example, while the hidden plant may represent the largest financial
opportunity, the plant operates in a low cost restricted market so the focus will be to reduce
the costs.

THE PROCESS PLANT’S BENCHMARKING METHODOLOGY

The methodology of benchmarking the process plants as shown in Figure 1 was developed
[5] to assist in the performance improvement of the process plants. The manufacturing
performance assessment introduced by this methodology is presented in Table 2.
 Figure 1: Methodology of benchmarking the process

In this methodology the authors have presented a framework on how to measure and
benchmark the performance of the operation process. They have defined the following
measures for use in benchmarking the process as shown in Figure 2:

1. Customer services
 On Time In Full (OTIF)
 Customer complaints.
 Due date reliability.
 Adherence to production plan
 Stock turn.
2. Reliable assets
 Product rate
 Quality rate
 Availability
3. Operational excellence
 Statistical process control
 Manufacturing velocity
4. Motivated people
 Absenteeism
 Training days
 Staff turn over
5. Safety, health and environment
 Annual reportable injury accidents
 Environmental performance

The sequence of these KPIs, however, gives a complete set of strategic performance
measurements, related to different strategic dimensions. The appropriate combination of
measures is determined by the nature of the actual industry. A bulk chemical industry, for
example, may focus more on the adherence to sales and operational planning (S&OP),
whereas a consumer product industry is encouraged by its final customers to pay particular
attention to issues such as OTIF and customer complaints. In general, these KPIs support the
corporate performance indicators at the corporate level of the organisation, such as ‘return on
investment’, ‘return on assets’, ‘market share’, ‘customer loyalty’, ‘stakeholders satisfaction’,
and so on. It was also recommended [5] to use fewer focused measures to make the process
more effective. As a guideline it was advised that the total number of measures should be less
than 15.
The benchmarking targets are decided and made available once the type of benchmarking
has been agreed upon [5]. It was stated [6] that many companies have a problem when
performing benchmarking activities. This problem is caused by a difficulty in retrieving
quantitative data relevant to world-class or competitors’ performances. It was also highlighted
[6] that there is little work being done to address this problem or, at least, to propose a
dynamic technique that can help manufacturing organisations in this area. When data for
benchmarking are not available, the organisation is advised to establish targets the best way it
can [6]. Organisations have always set performance targets and used measurement systems to
track the achievement of targets [7], [8], [9], [10]. There are four methods that can be used to
set or generate performance targets [7], [8]. They are as follows:

 Historical targets: this method is often used, owing to its simplicity in implementation
[11]. The best historical performance of an activity would be defined, then used as a
performance target.
 External targets: by using this method, the world-class performance of best-in-class
operations is collected, to use for benchmarking purposes. Table 1 shows some superior
performances of process industries’ world-class plants that are often used as performance
targets. Importing external benchmarks from competitors’ performances, however, is
often an essential requirement for competitiveness in any business.
 Table 1: World-Class Performance of Process Plants (Source: [5])
World Class
No. Key Performance Indicator
Performance
1 Adherence to Production Plan > 99 %

> 95 % for continuous

Overall Equipment effectiveness
2 plants
(OEE)
> 85 % for batch plants

3 Process Capability (CpK) >2

4 On Time In Full (OTIF) > 99.9 %
5 Stock Turn > 25

Value Added per Manufacturing

6 £400K
Employee

7 Training Days per Employee 12 days

8 Absenteeism <1%

 Internal targets: these targets are based on comparisons of the performance of internal
processes. In this method, the performance of the best performing process in the company
will be used as a benchmark. This method is myopic, however, in the sense that it looks
only within the organisation and may limit the company's performance relative to its
external environment [11].
 Theoretical targets: in this method, the targets are determined by the use of theoretical
calculations, or by simulation analysis. Setting performance targets on a theoretical basis
is exceptionally useful, as it defines the performance capability and limitations of the
process. A considerable disadvantage of this method relates to the difficulty and time
needed to define it. The theoretical targets of the process would enable effective
comparisons of process performance to benchmarks from external sources; they would
help in assessing the capabilities of operations and whether or not they are able to
perform similar to best-in-class operations.
Some calculations on how to define performance gaps in the process manufacturing plants
can also be used [5]. Some of these calculations are as follows:
Variable cost gap = (actual variable cost – world class variable cost) × output
Fixed cost gap = (actual fixed cost – WC fixed cost)
Stock savings gap =

1 1
( Actual stock turn
−
World class stock turn)x Turnover
 World Class OEE
Hidden Plant = Output x ( Actual OEE
− 1 )
OEE: is the overall equipment effectiveness measure.
A benchmarking report [12] revealed that the competitiveness of the UK process industries
is average when compared with world class levels and that there is a ‘hidden plant’ of 28 %
of the UK’s current effective capacity. That is, if the UK’s average OEE performance was
raised from its current level to the world class levels then the UK process industries’ effective
capacity would increase by 28% for minimal capital expenditure. Releasing this ‘hidden
plant’ would support additional sales of nearly £10b per annum which increases value to
shareholders.
Additionally, a lean manufacturing study [13] highlighted that for most production
operations only 5% of activities add value; and 35% are necessary non-value activities; while
60% of activities add no value at all. This study highlighted that fact that the elimination of
waste represents a huge potential in terms of oilfield improvements and the key is to identify
both waste and value; develop knowledge management base; and realise that sustainable
improvement requires the buy in of the people operating the processes and managing the
business, and therefore a culture of continuous improvement.
The relationship between application of best manufacturing practices in manufacturing
plants and the ability to achieve superior performance (see, Fig. 2) is usually studied and
findings are used to drive improvements.

Fig. 2: Practice - performance relationship

OPERATIONAL PERFORMANCE MEASURES

Performance measurement and benchmarking are often required for definitions of

performance targets, in order to assess the proximity of the business results in achieving a
required level of performance. The performance measurement tool requirement, in general,
highlights the need for a proper performance measurement tool to measure the performance
of the process.
Operational performance measures are in some cases selected for benchmarking, with
respect to their relevance to the operational objectives and the strategic KPIs. Some of the
commonly used operational measures are as follows:
 Manufacturing cycle time: the total time that the process takes, from start to finish,
producing the required production. This time normally comprises of the time required for
cleaning, loading, processing, and emptying the equipment.
 Value of stock in warehouse: all the money the system invests in purchasing things the
system intends to sell.
 Cost reduction: KPIs under this category measure the achieved cost reduction through an
improvement program.
 Amount of wasted materials: material losses from processing, quality control inspections,
handling and transfer of materials.
 Quality measures: these measures comprise of ‘right-first–time’ performance, defects per
unit of production, and detailed pareto diagrams, etc.
 Equipment uptime: uptime is defined as the time a process operates at its standard
maximum proven rate, while making a defect-free product. The ratio of uptime in the
total available time is often calculated as follows:
Valuable operating time
Uptime =
Valuable operating time + Total losses

 Equipment downtime: downtime is defined as the period when the equipment is not
available to fulfill its intended role. Downtime can consist of planned activities, such as
scheduled maintenance, repair and overhaul activities and unplanned activity as a result
of a failure, or accidental damage.
 Resource utilisation: resource utilisation is defined as the proportion of time that a
resource is used.
 Final product yield: it’s the percentage of transformed raw materials into salable product.
 Production capacity: production capacity is defined as the maximum rate of output that a
production unit is able to produce under a given set of operating conditions.
The basis for calculating operational performance measures, however, differs from one
sector to another, from plant to plant, or even from one operation to another operation within
the same plant. The manufacturing cycle time is an example, as, in some cases, it might be
calculated by simple, straightforward equations, or in other cases, may require complicated
calculations.
6. BENCHAMRKING IN THE OILFIELD

In this study, every well in the oilfield is a small manufacturing plant and each plant needs
different equipment as the conditions for each plant are unique. Oil wells require maintenance
and repair from time to time due to normal wear and tear, age and the effects of the
environment where equipment is exposed. Changing Electrical Submersible Pump (ESP)
failures in each well are undertaken by workover rig which needs to change the ESP and
repair any other failures in the downhole well; workover operations include any number of
activities performed on a well after initial completion, including recompletion and remedial
repair work. Workover usually involve a service rig to solve the problems in oil wells with
proposed program. The workover program is an orderly step by step procedure to be followed
to a chive required safely at the minimum cost with minimum expenditure of resources.
In the daily operation of an oil and gas production system efficiency problems affect the
produced volume and cost of production. During oilfield operations, different parts of the
production facilities may worn out resulting in an increased need for operations and
maintenance activities, and also affect the environment [2]. Production from oilfield need
many procedures to keep the well running, the well need equipment to produce, equipment
need tools to installation. . Those activities of wells; maintenance and repair have many
waste that could affect the total production from the oil wells. There are two operation
problems in the oilfield: ESP failures and maintenance and repair by workover rigs. These
problems usually attract attention because they can adversely affect output (total oil
production), quality and cost.
The improvements can be achieved with a basic knowledge of how much is needed to
improve workover activities. The actions need to be defined; efforts are then required to
investigate each operation, to define ease of reaching the performance level of the best-in-
class operation. For that reason a framework for the workover operation processes can be
introduced (Fig 3) to enhance quality and improve productivity for both the ESP system and
workover operations activities based on the lean manufacturing tool and technique.
The research focused within the selected example is a workover rigs activity at oilfield. It
operates under a company that is a leader in engineering, production in the oil sector in
Africa. The demand forecasting activities in this oilfield are based on judgment and depend
on experience. The output of the forecasting process defines the expected oil production and
this output is used to support planning decisions and total production. The management of the
company has been concerned for some time about the lack of performance measurement and
lack of benchmarks that facilitate the planning decisions.
The analysis of results revealed that the oilfield requires an improvement strategy which
can take the performance of the field to the world class levels. The overall performance of the
process scored 23 points (see, Table 3). And according to this performance the activities is in
division 3 ‘Below Average’, therefore, according to the performance index attached to the
assessment, the process has scope for improvement. A detailed analysis of the operational and
maintenance excellence is required to assess the potential improvements.
The process in the oilfield also needs to adhere to its workover rigs by elimination of
process variability that causes processes to take longer time, and also reduce downtimes
caused by setups, and breakdowns. The workover rigs have low OEE resulting from low
workover activity which is again resulting from process variability.
It was also identified that tools such as just in time (JIT), statistical process control (SPC),
business process reengineering (BPR), total productive maintenance (TPM), and single
minute exchange of dies (SMED) are some of the most appropriate tools to improve
operation performance in this oilfield. In general, a sustainable performance improvement
should be aligned to a firm's ability to continually achieve quality, reduce costs, and services
in the expected time. However, performance problems can arise from different causes;
therefore, there is no unique solution to solve all problems.
Table 2: Performance Assessment
Performance measure Actual
World-
Performan
Class
ce

Manufacturing Added Value/Employee

3.1 Added Value per Employee for the rig £87K £400K

Customer Service

3.2 OTIF Delivery performance % 70 % 99.9 %

3.3 Adherence to production plan % > 99.9

60 %
%

3.4 Customer complaints % of orders delivered 15 % > 0.01

Reliability and Consistency

3.5 Product rate % 70 % 90 %

3.6 Quality rate % 70 % 99 %

3.7 Do you routinely measure lost time

Scheduled downtime - % of capacity

Unscheduled downtime - % of capacity

Availability is 100% less the sum of scheduled and unscheduled

90 % 95 %
downtime

Calculated OEE 56 % 85 %

3.8 Maintenance cost as % of replacement asset value

Control Flexibility

3.10 Change time of routine tasks affecting production, including 60

grade changes (in minutes) minutes

Stocks

3.11 Value of material and source stocks

Value of work in progress

Total value of stocks

 Stock turn 0.00005 > 25

People

3.12 Absenteeism % 3% <1%

Safety: All injury frequency rate

Environmental performance

Average training days per employee 4 13

Total Score 23 > 80

After the analysis of performance, it was concluded that the oilfield requires some
improvements to start at the operational level. The operational effectiveness model (see, Fig.
3) is chosen as a tool for improvement of the operational performance. The aims were,
however, to achieve reduction in the total cycle time of some selected processes.
In an ideal operation, the processes would operate at full utilisation of all resources. For
example; there would be full utilisation of manpower, equipment time, and capacity.
However, this situation is rare in real operations. The difference between the ideal and the
real situation is due to losses [7], [8].
Table 3: Performance Index

0 - 20 The process has considerable scope for improvement. It requires a

detailed operational excellence assessment, with a high likelihood of
Division 1: Poor significant benefits through process, maintenance, and operational
changes.

21 -40 The process performance has scope for improvement. A detailed

analysis of the operational and maintenance excellence is required to
Division 2: assess the potential improvements.
Below Average

41 -60 The process appears to have maintenance practices which, while

average, could be improved. The assessment has highlighted some
Division 3: areas of the process with further potential.
Average

61 - 80 The process has good operation and maintenance practices and it

appears to be exploiting learning opportunities.
Division 4: Good

81 -100 The site is aware of the scope for further maintenance and process
improvement. The process is approaching a winning standard and
Premier demonstrating leading operation and maintenance practices.
Division:
Winning
 The operational effectiveness model is used to reduce the losses in the plant to the
minimum levels. The operation objectives of the oilfield were defined by informal interviews
with some key individuals in the plant. It was concluded from the study that, the minimum
production cycle time, and minimum total production costs are the main three objectives of
the oilfield. This was a good input for design of the operational effectiveness model.
There are several benefits of cycle time reduction and some of them are: minimum waste
in time, cost reduction, increased flexibility, less time for risk probabilities on hazardous
processes, and efficient employees.
The ESP processes have the largest portion in the operation costs. The main bottleneck
steps in this workover process are considered to be ESP processes that affect the overall
workover performance and oilfield production, a waste will be created which will create an
environmental problem.

Figure 3: The operational effectiveness model for measuring performance

The economic batch quantity is a best practice to achieve minimum cost of the operation
process. The capacity decisions are vital to the oilfields as they are affecting number of
dimensions in the business such as delivery date, operation cost, and warehouse
requirements. Costs associated with production setups, resource utilisation, and inventory
holding are all related to the batch quantity and contributing to total operation costs. The
organizational objective ‘maximizing return on assets’ is a good example of this link. An
advantage of manufacturing at economic batch quantity is the tuning of the output of
economic batch quantity to either meet only the market demand, or to produce for demand
and for inventory. When the process optimised for cycle time to be the least possible time,
and yield to be at its maximum potential level; then the economic batch quantity will ensure
that the plant will not overproduce to meet the objective of those two factors.
8. CONCLUSION

The methodology used in this paper suggested that there will be a significant opportunity
to improve the performance of the majority of the existing assets. Through benchmarking,
gaps are identified and an outline of a procedure to quantify existing gaps was provided. All
the tools provided by the methodology of benchmarking within the process focus on
quantifying a financial gap; this sets out the priorities and justifies the case for continuous
improvement. After identifying the gaps, guidelines were given for companies on how to
introduce process improvements which are realistic and achievable. The paper also has
investigated the techniques that used to define a performance targets to assist operators in
attaining their goals. No one target setting method is enough in itself as the competition may
have deployed better equipment, technologies or innovations to generate high performance
results. Therefore, it is advisable to use the different target-setting methods in conjunction, as
none of these methods are adequate, individually, for determining performance targets. The
results of application at the selected case study oilfield service revealed that there are
significant losses on time and money. The improvement in the time of the process will lead to
an increase in the value of the total production, thus creating financial savings.

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