When you measure plant performance, what are you measuring? The most obvious starting point is profit margin – income vs expenses. There is no doubt that this is an important one, but it doesn’t really tell you how well your plant is performing. To understand that, you have to delve deeper into the data.
So you run a performance analysis and work out how each area of the plant is doing. Hopefully you follow the advice in my earlier article about benchmarking, and rather than run the data collected against other plants in the group or in the region, you run it against what you know your plant ought to be capable of. You find discrepancies – your mill isn’t running at the rated capacity, or your fuel consumption is abnormally high. The data is telling you that there is a problem, but not what’s causing it. What is your next step?
The solution has a cost – and so does a lack of action
There are a number of options here: troubleshoot the problem in house (which is a good option if – and these days it’s a big if – you have the necessary expertise within the company), refer it to your company’s Technical Centre, if you have one, or to a consultant, or go back to the OEM for guidance. You may need to do more than one of these to get the answers you need. But even then you only get an answer. To actually reach a solution takes another step altogether and we often find that this is where the bottleneck occurs.
There is a difference in perception, isn’t there, between the money we are not making and money we are spending? Agreeing to spend tens of thousands of dollars on a project feels like a much greater expense, somehow, than knowing that every day we do nothing we are missing out on revenue that over the course of the year may add up to twice that amount.
The “Cost of Delay”
This is a well-known phenomenon, by no means unique to the cement or even the manufacturing industries. It is known as the Cost of Delay. What it basically comes down to is a very simple calculation – what is the cost of doing nothing? If, for example, a problem with the rollers on the raw mill resulted in higher energy expenses and reduced production amounting to £250 000 per year, each month that passes with no solution undertaken costs the plant more than £20 000. What about the cost of procrastinating over whether to embark on an alternative fuels project, only to find in the meantime a competitor has stepped in and taken the source of alternative fuel? Or thinking about the cost of reviewing the manning levels on the plant without considering that payback for the study could only be a matter of months?
"The land of delaying decisions is littered with missed opportunities!"
Factor in the Cost of Delay to decision making
Part of the problem is that the Cost of Delay is rarely given the high priority that it deserves, whereas the cost of the solution is discussed at length by various entities within what can be an extensive chain of command. Getting these people together to have a meeting can in itself take several weeks if not months. And every day the decision is delayed, the Cost of Delay increases. What would happen if you said to the board that delaying a decision until next month’s meeting would cost £20 000?
We don’t advocate rushing a decision – it’s important you have established that the solution you are being offered is both necessary and appropriate. However, if it’s bureaucracy or budget that’s stopping you in your tracks, we would recommend that you calculate the Cost of Delay and factor that in to your decision-making.