Concept for a Performance Measurement Method for the Organization

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ScienceDirect Procedia CIRP 16 (2014) 56 – 61

Product Services Systems and Value Creation. Proceedings of the 6th CIRP Conference on Industrial Product-Service Systems

Concept for a Performance Measurement Method for the Organization of the IPS² Delivery Friedrich Morlocka*, Thomas Dorkaa, Horst Meiera a

Ruhr-Universität Bochum, Chair of Production Systems, Universitätsstraße 150, 44801 Bochum, Germany

* Corresponding author. Tel.: +49 234 32 29890; fax: +49 234 32 09890. E-mail address:[email protected]

Abstract While the IPS²-Execution System (IPS²-ES) supports the IPS² provider during the IPS² delivery, there is still no adequate tool to measure and evaluate the performance of the organization of the IPS² delivery system. Especially the complexity of the automatic planning and control mechanisms of the IPS²-ES leads to the problem that the output of the system cannot be manually controlled. Hence, an automated method has to be designed to measure and rate the resulting IPS² with a focus on IPS² delivery planning and the IPS² network. This paper presents a concept for an IPS² performance measurement method for the organization of the IPS² delivery. It considers resource planning, partner network and IT. Key figures have an important role for the performance concept and will be introduced in the concept. Additionally, a prototypical software implementation will be demonstrated.

© 2014 Elsevier B.V. This is an open access article under the CC BY-NC-ND license

© 2014 The Authors. Published by Elsevier B.V. (http://creativecommons.org/licenses/by-nc-nd/3.0/). Selection and peer-review under responsibility of the International Scientific Committee of “The 6th CIRP Conference on Industrial ProductSelection and peer-review under responsibility of the International Scientific Committee of “The 6th CIRP Conference on Industrial Service Systems” in the person of the Conference Chair Professor Hoda ElMaraghy.

Product-Service Systems” in the person of the Conference Chair Professor Hoda ElMaraghy”

Keywords: performance measurement, key performance indicators, service delivery planning, organization

1.

Introduction

During the last years, product-service systems (PSS) have become more and more important for research and industry [1–3]. The market for the manufacturing industry is very competitive and therefore companies have to differentiate themselves from their competitors on the market. Industrial product-service systems (IPS²) offer this differentiation by representing a paradigm shift from traditional product selling and service offering to provide customer value [4]. “An Industrial Product-Service System is characterized by the integrated and mutually determined planning, development, provision and use of product and service shares including its immanent software components in Business-toBusiness applications and represents a knowledge-intensive socio-technical system” [5]. In this context, the connected business models can be function-, availability- or resultoriented [2]. However, [6] describes the possible business models as a continuum between function and result orientation with a wide variety of possible business models.

The lifecycle of IPS² is divided into the five phases of planning, development, implementation, delivery and use as well as a closure [7]. Because of its long duration, delivery and use is a very important phase. Manufacturing systems have an operating life of 10 to 15 years [8]. Therefore, the delivery and use phase of an IPS² has at least the same duration. Moreover, the customer integration renders the delivery and use phase in a very complex way, making the studies about this phase highly important. The most important task of the IPS² provider in the use and delivery phase of IPS² is the organization of delivery processes and resource planning. The IPS²-Execution System is a software system that supports the provider during the use and delivery phase. For an effective as well as efficient organization and resource planning of the IPS² delivery, an IPS² performance measurement method is required [9]. Only measurable elements and objectives can be improved [10]. After introducing the state of the art of the IPS² delivery (chapter 2), this paper will present a concept of an IPS² performance measurement method (chapter 3) and a

2212-8271 © 2014 Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/3.0/). Selection and peer-review under responsibility of the International Scientific Committee of “The 6th CIRP Conference on Industrial Product-Service Systems” in the person of the Conference Chair Professor Hoda ElMaraghy” doi:10.1016/j.procir.2014.03.003

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Friedrich Morlock et al. / Procedia CIRP 16 (2014) 56 – 61

corresponding software prototype (chapter 4). A conclusion will summarize the results and give an outlook for further research. 2.

Conceptual Background for an IPS² performance measurement method for the IPS² delivery

The IPS² performance measurement method has to measure and evaluate the organization and planning of the IPS² delivery. Hence, the organization and resource planning (chapter 2.1) and the management software IPS² execution system (chapter 2.2) will be presented as well as the state of the art of performance measurement (chapter 2.3). 2.1. Organization and resource planning

algorithm (see chapter 2.1). IPS² networks are of a very dynamic nature and hence it is necessary to continuously establish, replace or cancel connections to the partners’ software systems, e.g. enterprise resource planning (ERP) or manufacturing execution system (MES) [14]. The plug-in approach presented in [15] supports this mechanism. A schematic overview of the IPS² execution system is shown in figure 1. IPS² customer HLB-Kunde HLB-Kunde ERP

IPS² provider HLB-Anbieter

IPS²-ES

2.2. IPS² execution system as a management software for the IPS² delivery For the offering of IPS², software support is required [12]. Especially when looking at the delivery of IPS² including organization and resource planning, it becomes obvious that the IPS² provider needs software tools to support him. The organization and resource planning of IPS² is executed with a software system named IPS² execution system. Meier et al. define an IPS² execution system as an “essential software system for the IPS² operation phase that supports the IPS² provider in the provision of customer value by adaptive IPS² delivery planning, IPS² network management and an integrated performance measurement method” [13]. The IPS² execution system runs the adaptive IPS² delivery planning as an implementation of the described genetic

…

IPS² supplier HLBHLBZulieferer 1 Zulieferer ERP 1

VOU

ERP Planning Service

SMS

The complexity of IPS² leads to the necessity to offer IPS² in networks. It is too difficult for one provider to offer all required resources for the delivery. An IPS² network consists of different roles. The IPS² network contains customers, the IPS² provider, IPS² module suppliers, component suppliers and service suppliers. [4] Each network partner has to hold his resources to be available for the delivery processes. Due to the complexity of IPS², a special organizational type of network is needed. Meier et al. [11] analyze a high number of organizational approaches like self-configuration or modularization. They find out that virtual organization is most suitable for IPS² networks. For the provision of customer value, a resource planning method is required. Multiple delivery processes (e.g. repair or maintenance processes) have to be planned and scheduled. The delivery processes are defined in the IPS² product model. The IPS² product model is the result of the development phase of IPS². It contains developed processes with needed resources (e.g. technicians, tools etc.). Adaptive IPS² planning uses the IPS² product model to schedule the delivery processes depending on customer needs. It is divided into the strategic capacity planning and the operational resource planning. The result of the adaptive IPS² planning is the delivery plan for all resources and network partners. To execute the planning, a genetic algorithm is used. This algorithm can be influenced by planning weights for punctuality, costs and utilization. [4]

MES

MES

External Services

VOU Performance Measurement Method

…

IPS²-CS

SMS VOU VOE VOE

MES …

IPS²-LMS IPS² software systems

Figure 1: Schematic overview of an IPS² execution system [13]

2.3. Performance measurement in research Performance measurement is the further development of traditional ratio systems [16, 17]. Here, the advantage over traditional ratio systems is that performance measurement is designed to be future- and process-oriented instead of only considering the past [18]. A further strength is that performance measurement supports decision making. In literature, there is no common definition of performance measurement due to its complexity and permanent development [16, 17]. However, most definitions have in common that performance measurement should control and improve efficiency and effectiveness and that the focus lies on the strategic enterprise level [9]. Performance measurement approaches are used in many different sectors such as supply chain management (e.g. [16]), services (e.g. [17]) or computer science (e.g. [19]). Some approaches consider performance in IPS². Richter and Steven [20] developed a balanced scorecard as an instrument of performance measurement for strategic use in IPS². They extend the classic balanced scorecard developed by Kaplan and Norton [21] by a relationship perspective because offering IPS² requires many network partners (see chapter 2.1.). Abramovici et al. [22] present an indicator framework for IPS². This approach considers the lifecycle performance on a strategic level. Kim et al. [23] developed an evaluation for the development of IPS². In summary, existing performance measurement approaches for services and IPS² consider the measurement and evaluation of effectiveness and efficiency of a system from a strategic or development perspective. For the use phase of IPS², there is currently no approach for performance measurement. This is now provided by a new conceptual approach presented in the following chapter.


3.

Concept of an IPS² performance measurement method for the IPS² delivery

The need for a concept of an IPS² performance measurement method for the IPS² delivery will be presented in chapter 3.1. Based on this, the concept will be introduced in chapter 3.2. A software prototype of this method is shown in chapter 4. 3.1. Necessity and requirements for an IPS² performance measurement method The main aim of the IPS² performance measurement method is to make sure that the targeted effect of the IPS² execution system is reached [9]. Referring to the definition of the IPS² execution system (chapter 2.2.), the main tasks are the delivery planning and the network management. The IPS² network is exposed to a changing environment. Change drivers like globalization or new technologies have an influence on companies [24]. The connection of several companies in supply chains increases the problems as seen in the bullwhip effect [25]. For IPS², there is a similar effect. The high number of network partners from different markets or industries leads to an increase of change and dynamics [9]. This correlation is shown in figure 2. Service supplier

IPS² provider

IPS² module supplier

Industrial ProductService System

Product supplier

customer mer

In summary, the performance measurement has to consider the following three evaluation fields for an effective and efficient IPS² delivery: x x x

Resource planning Network IT system

The realization of these requirements will be shown in the following concept. 3.2. Concept and key figures for an IPS² performance measurement method A first step to fulfill the requirements is to design an appropriate concept. The requirements are divided into the three fields of resource planning, network and IT system. It is crucial to observe these fields with regard to performance dimensions. Finke et al. [26] suggest the performance dimensions of quality, time, costs, flexibility and customer satisfaction. The classical and approved performance classification is time, costs, quality [27]. Hence, the concept of the performance measurement method also has to consider these performance dimensions (see figure 3). Performance measurement method of the IPS³-ES

Performance dimension

58

Resource planning

Network management

• Quality of the delivery plan

• Evaluation of network partners

IT system

• IT performance • Identification of bad services

Key performance indicators

Figure 3: Overview of the IPS² performance measurement method = Change Drivers

IPS²-ES

Figure 2: Changing environment for the IPS² network

An important challenge and task for the IPS² provider is to select the best network partners for the IPS² network. Especially the collaborating delivery of customer value requires good network partners. This leads to the conclusion that the network management is a crucial task for the IPS² provider, and the IPS² performance measurement has to support the IPS² provider in this task. The resource planning has a significant relevance for the IPS² delivery, too. It schedules the delivery processes and hence participates in the delivery of the customer value. This leads to the necessity that the resource planning has to be measured by the IPS² performance measurement method. It is also necessary that the network partners send up-to-date data to the IPS² execution system. If the data is outdated, the execution system is not able to generate a good and valid delivery plan. Due to the fact that the IPS² execution system is a software system, a control of this software is, of course, obligatory. This is required to guarantee a high availability of the system.

The difference to conventional performance approaches (see chapter 2.3) is that the IPS² performance measurement method of the IPS² organization is designed and used for the operational delivery and use phase of IPS². Therefore, the usage of operational key figures is very important. Key figures provide an overview of a current state of a system and can be used for a comparison of current and targeted states. The use of key figures is company-specific and depends on the company strategy. Nevertheless, for the IPS² delivery and the management software IPS² execution system it is necessary to structure the key figures and performance indicators. For industrial services there are a huge number of key figures (e.g. presented in [28–30]). The fields of resource planning and network management use a similar key figure basis. For IPS² delivery, it is helpful to classify the operational key figures into delivery planning key figures and delivery performance key figures [31] (figure 4). This differentiation supports the IPS² delivery planner and IPS² execution system user because he is able to know whether planning or delivery is the cause for a bad key figure.

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INPUT

Planning objectives

Customer needs

disturbances

Planning parameters

Delivery planning

Service delivery

Rescheduling quota [%]

Number of delivery processes that were rescheduled after the customer has been notified or after required resources have been booked in relation to the total number of delivery processes.

Acceptance rate [%]

Number of times that the customer’s desired date for the delivery process could be accepted, related to the total number of delivery processes.

Customer satisfaction

Targetperformance comparison

Planning performance indicators

Delivery performance indicators

OUTPUT

Target-performance comparison

These key figures are elements of the above mentioned fields resource planning and network management. In figure 5 the exemplary described key figures of table 1 are sorted to the performance fields.

Figure 4: Planning and delivery performance indicators [31]

The selection of key figures is organization specific [26]. Therefore, an IPS² specific target system is needed. A wide range of influences like the strategy, the industry sector or the production type have an impact on the IPS² target system and the selection of key figures. According to the presented performance dimensions in figure 3 some important key figures for the dimensions resource planning and network management are presented and described in table 1 (e.g. [28– 32]). These dimensions are very crucial for the performance of the IPS² organization. IT key figures are necessary for a high availability of the running IT system. IT key figures like response time or availability of the IT services like route planning are useful for this aim.

Planning performance indicators

Delivery performance indicators

MTPS MDT MTBF Travel time proportion Resource utilization Rescheudling quota …

OTD FTF Operating time Process stability …

Figure 5: Exemplary key figures for the planning and delivery performance

The presented results have to be considered in the concept of the IPS² performance measurement method for the organization of IPS². 2

Table 1: Description of some key figures for the operation phase of IPS² [2832]

1

Add or remove of network partners New planning service or algorithm

Strategical and tactical level

Description

First time fix rate (FTF) [%]

Proportion of service delivery processes that could be completed at the first attempt.

Operating time [hours]

The operating time needed for the completion of the service task on site, excluding preparatory activities.

Process stability [%]

The operating time for all delivery processes of the same type minus the average standard deviation of the operating time in relation to the operating time.

On time delivery (OTD) [%]

Proportion of delivery processes, which could be completed within the time window promised to the customer.

Mean time to problem solution (MTPS) [hours]

Only relevant for time critical repair activities: Average time from the moment of arrival of the fault report until the moment of function checkout. (According to [19], function check-out describes an “action taken after maintenance actions to verify that the item is able to perform as required”, which is usually carried out after down state.)

Mean time between failure (MTBF) [hours]

Average time between failures.

Mean down time (MDT) [hours]

Average breakdown time of the equipment within a specific time period, e.g. a year.

Travel time proportion [%]

The average travel time of service technicians in relation to the total working time (including operating and travel time).

Resource utilization [%]

Resource working time (including operating and travel time) in relation to the overall availability time of the resource.

Planning weights 1 2

IPS² execution system Delivery plan

1 KPI

2 KPI

1 planning 2 network 3 IT system

PMM

KPI

3 IPS² planner

KPI

Resource planning Virtual organisation units

Real network

IT services

Figure 6: Concept of the IPS² performance measurement method for the organization of IPS²

During the IPS² delivery and use phases, the IPS² delivery planner and user of the IPS² execution system is connected to the higher business levels of the strategic and tactical level [33]. The opportunities to influence the IPS² delivery organization by the three fields of the IPS² performance measurement method are listed below. The influence paths are shown in figure 4, which illustrates the concept. Resource planning (path 1) The result of the IPS² resource planning is the delivery plan. The planning performance indicators like the travel time proportion or customer acceptance rate gives the IPS² delivery planner information about the performance of the delivery plan. With the information of the performance measurement method he has three options to influence the resource planning. It is highly advisable to thoroughly use the broad knowledge and experience of the planners. Additionally,

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machines are not able to fulfil all tasks more efficiently and effectively than humans [34]. Therefore, the IPS² delivery planner can change the delivery plan by manual intervention. Another option is to change the planning weights (punctuality, costs and utilization) of the planning algorithms (see chapter 2.1). A further reason for a bad performance of the delivery plan can be an inappropriate use of a badly chosen algorithm. On the market, there are many planning algorithms for different problems. Hence, it is necessary that the IPS² delivery planner has the opportunity to escalate this problem to a higher level so that another algorithm can be chosen. Network (path 2) The performance measurement method gives information about the performance delivery to the IPS² delivery planner. This information is important for the network measurement and evaluation. As the delivery of IPS² is performed in networks, information about the network partners is required. Therefore, delivery performance indicators are key figures about the network partners. The IPS² planner can use his own knowledge and experience with the performance indicators to give a recommendation for the configuration of the provider network and escalate the information to a higher level. On this level, network partners may be chosen to be replaced or excluded. The new partners are then added by the IPS² execution system to the virtual network in the system. After that the new partners are included in the delivery planning process. Another important aspect in the network measurement is the communication between the IPS² execution system and the network partners. For the resource planning it is very crucial to calculate and plan with up-to-date data. This is also an indirect measurement of the ability of the network partner to participate in an IPS² provider network as a virtual organization unit. Therefore, the performance measurement method has to measure the response times of the network partners for accepting a newly generated delivery plan. The confirmation of a delivery plan is a sign of the fact that the network partners have submitted up-to-date resource data now to be registered by the performance measurement. If the resource data is accurate, the partner can simply accept the delivery plan. This indirect measurement gives an answer to the question of up-to-date data. The acceptance rate of delivery plans and the response time together create a new key figure about the virtual organization unit ability of network partners. The IPS² delivery planner has also to consider this ability in the overall network partner evaluation and escalate a bad performance to a higher business level. IT System (path 3) As the IPS² execution software is a software system, it is necessary to measure the performance of the software. A standard software performance measurement has to be implemented. The new challenge for the IT system measurement of the IPS² execution system is the proper use of services. The IPS² execution system utilizes many external (e.g. route planning service, logistic service etc.) or internal services. External services like route planning services are

very important for the resource planning. Hence, the access to the best external services has to be guaranteed by the performance measurement method. For this purpose, the performance measurement method measures IT key figures like the response time of external services. If a bad IT performance is indicated, the IPS² delivery planner can replace an external service and use other services instead. 4.

Software prototype of the IPS² performance measurement method

The IPS² performance measurement method is part of the IPS² execution system. So it is necessary to implement it into the IPS² execution system. The concept of the IPS² performance measurement method (chapter 3) is designed as a service for the plug-in system of the IPS² execution system conforming to the specifications in [15]. The screenshot of the prototype presented in figure 5 shows the KPI first time fix (FTF) rate (see table 1) of network partners. This visualization helps the IPS² delivery planer to compare and evaluate network partners. A conclusion could be to replace a network partner due to his bad FTF performance. Other key performance indicators can be selected from the list on the left.

Figure 5: Screenshot of the implemented software prototype

5.

Conclusion and outlook

This paper presents the IPS² execution system as management software for the IPS² delivery. The IPS² delivery is mainly influenced by the IPS² network and the IPS² resource planning. For an effective and efficient IPS² delivery organization, the IPS² execution system and its user, the IPS² delivery planner, have to be supported by an integrated performance measurement method. This paper shows the necessity of this method and presents an appropriate concept. The performance measurement method has to measure and evaluate the three fields of resource planning, network management and IT system. The usage of key figures is very important to give performance information to the IPS² planner. First, a differentiation of key figures into the categories of resource planning and delivery performance is necessary. Therefore, the IPS² planner has the information whether the delivery plan or the delivery itself has a bad performance. Additionally, the concept provides options for the IPS² planner to influence the IPS² delivery with the performance measurement. Some influences are made internally in the IPS² execution system while others have to be escalated to a higher


business level. However, the knowledge and experience of the IPS² planner is required and has to be taken into account. In further research, the correlation of the IPS² specific target system and the performance key figures has to be determined. Also the software prototype can be extended. In this context, the measurement method can be evaluated in a use case or an application in an industrial context. Acknowledgements We express our sincere thanks to the German Research Foundation (Deutsche Forschungsgemeinschaft, DFG) for financing this study within the Collaborative Research Center Transregio 29 (CRC/TR 29) on Industrial Product-Service Systems – dynamic interdependencies between products and services in the production area. References [1] Goedkoop MJ, van Halen CJ, te Riele HR, Rommens PJ. Product Service Systems: Ecological and Economic Basis. 1999. [2] Meier H, Kortmann D, Uhlmann E. Hybride Leistungsbündel: Nutzenorientiertes Produktverständnis durch interferierende Sach- und Dienstleistungen [IPS²: use-oriented product understanding with products and services].. wt Werkstattstechnik online 2005;95:528–532. [3] Aurich JC, Clement MH (Eds.). Produkt-Service Systeme: Gestaltung und Realisierung [PPS: Development and implementation]. Berlin: Springer; 2010. [4] Meier H, Völker O, Funke B. Industrial product-service systems (IPS²). Paradigm shift by mutually determined products and services. The International Journal of Advanced Manufacturing Technology 2011;52:1175–1191. [5] Meier H, Roy R, Seliger G. Industrial Product-Service Systems – IPS². CIRP Annals - Manufacturing Technology 2010;59:607–627. [6] Rese M, Meier H, Gesing J, Boßlau M. An Ontology of Business Models for Industrial Product-Service Systems. In: Shimomura Y, Kimita K, editors. The philosopher's stone for sustainability: Proceedings of the 4th CIRP International Conference on IPS², Tokyo, Japan, November 8th-9th, 2012. Berlin, New York: Springer, 2012. p. 191–196. [7] Rese M, Meier H, Gesing J, Boßlau M. HLB-Geschäftsmodelle: Partialmodellierung zur Systematisierung von Geschäftsmodellen "Hybrider Leistungsbündel" [IPS² buisness modells]. wt Werkstattstechnik online 2011;101:498–504. [8] Kuhn A, Keßler S, Luft N. Prozessorientierte Planung wandlungsfähiger und Logistiksysteme mit wiederverwendbaren ProduktionsPlanungsfällen [Process oriented changebale production and logistic systems]. In: Nyhuis P, editor. Wandlungsfähige Produktionssysteme. Berlin: GITO; 2010. p. 211–234. [9] Meier H, Morlock F, Dorka T. Delivery Management of Industrial Product-Service Systems – Challenges for a Performance Measurement. In: Shehab E, Ball P, editors. Proceedings of the 11th International Conference on Manufacturing Research (ICMR2013). [10] Brunner FJ. KAIZEN, KVP, Lean Production Management, Total Productive Maintenance, Shopfloor Management, Toyota Production Management. München: Hanser; 2008. [11] Meier H, Völker O. Aufbau- und Ablauforganisation zur Erbringung hybrider Leistungsbündel [IPS² organisation]. In: Meier H, Uhlmann E, editors. Integrierte Industrielle Sach- und Dienstleistungen: Vermarktung, Entwicklung und Erbringung hybrider Leistungsbündel. Berlin, Heidelberg:Springer; 2012. p. 137–161. [12] Sakao T, Berggren C, Björkman M, Kowalkowski C, Lindahl M, Olhager J, Sandin J, Sundin E, Tang O, Thollander P, Witell L. Research on Services in the Manufacturing Industry based on a Holistic Viewpoint and Interdisciplinary Approach. In: Hesselbach J, Herrmann C, editors. Functional Thinking for Value Creation: Proceedings of the 3rd CIRP

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