Summary
Cendris, division of TNT NV, supports organisations in building sustainable customer relations and optimising their internal data and document processes. This research is performed at Cendris Document Presentment (as from May 2008 TNT Post Billing & Document Solutions), business leader in print and mail in the Netherlands. Cendris Document Presentment offers services by printing personified documents and put them in envelopes to create mail packs for (potential) customers of organizations. Cendris has two production facilities, in the Hague and Utrecht. At the Hague facility an average of 115 million mail packs are produced each year. This volume consists of 95% transaction mail (TM) and 5% direct mail (DM). TM is periodic, addressed mail like invoices, bills, salary slips and others. DM is made up of personalised advertising and company rectification mailings.
Cendris has hardly any insight in (real-time) realisation figures concerning the production process and therefore finds great difficulty in controlling, let alone improving, the production process. Data collection is very labour intensive and often results in incorrect or incomplete data. A problem faced at Cendris is a lack of adequate data supply by the production process and not having a methodology to analyse the data. This combination results in very limited relevant information to meet the demand for management information.
The aim of this research is to provide Cendris information by way of Key Performance Indicators (KPIs), to support in controlling and improving the production process. This should enable Cendris to work more efficient, effective and innovative. This means less cost, increased revenues (savings), better quality and more flexibility. The main question is: Which Key
Performance Indicators provide Cendris information, supporting Cendris to control and improve the production process?
In order to be able to provide an answer to the main question, firstly an analysis is made on the present situation at Cendris. The production process at Cendris consists of three primary
bottleneck, because the production time per order is higher than other processes in the factory. The complexity and sensitivity to errors of the enveloping process account for this long production time. In this research, KPIs are being developed for the bottleneck process, the enveloping process.
The absentness of correct realisation figures at the desired time, disables production coordinators to directly and effectively control the process during an 8-hour shift.
An analysis is made on the information request at Cendris. A strategic approach revealed that in the EFQM Excellence Model the Critical Success Factors (CSFs) lay in the field of finance and operations. Main goal of both CSFs is to work more efficient and effective. Cendris can achieve this goal by improving the performance of the enveloping process.
A systems approach has shown planning of capacity occupation (hours) needs to be based on demand forecast of volume (envelopes) and normal productivity (envelopes/hour). Realisation is the factual execution of the process. Based on historical realisation figures, planning has to set a realistic norm for the enveloping process. Productivity, also known as Overall Equipment Effectiveness (OEE), is defined by three factors; utilization, speed and quality.
Management at various levels require information regarding capacity occupation, productivity and volume, throughout different production periods.
During the analysis for measures, Key Performance Indicators (KPIs) are determined to fulfil the need for information. These KPIs are:
• Capacity occupation (man/machine). The number of hours an operator is logged onto
the machine (machine ON), compared to the maximum production time. The remaining time the machine is logged off (machine OFF).
• Capacity utilization. The number of hours the machine is actually producing products
(machine ON and producing), compared to the total production time. The rest of the time the machine is down (machine ON, down).
• Net productivity. Number of envelopes (or documents) produced per hour, when the
machine is on and producing.
• Volume. Number of envelopes (or documents) produced.
• Quality. Percentage of envelopes produced first time right, compared to the total
volume. Other envelopes are diverted by the machine.
During a three-week period, three enveloping machines have been connected to a production management system called Böwe One. This system has measured and collected data of the realisation process of these three machines. Based on all data, an average shift has been determined, as performed on an average machine.
Next, the results of the measurements are presented in a timeframe of one 8-hour shift. The results per KPI:
• The capacity occupation during a shift is 6:38 hours, or an occupation rate of 83%. This is the time an operator has been logged on to the enveloping machine (ON). On average, the time logged off is 1:21 hours (17%) (OFF).
• The capacity utilization of the total production time is 2:25 hours, or an utilization rate of 36% (ON, producing). On average the down time during a shift is 4:13 hours (64%) (ON, down). Relatively to the total shift of 8 hours, this is 30% en 53% respectively. Down time is caused by standby time (35%), error time (20%) and setup time (8%), relatively to the total production time. Standby reasons are poorly picked, since 71% of the standby time no reason has been selected by the operator. Error reasons mainly consist of processing and information errors, together accounting for 88% of the error time.
• The net productivity throughout the gross production time is 7.716 envelopes per hour. In documents this is 13.882 documents per hour.
• The volume produced on average is 18.659 envelopes. In documents this is 33.572 documents.
• The quality (envelopes produced first time right) compared to the total volume is 99,5%.
• The OEE is formed by capacity utilization, net productivity and quality. At Cendris the OEE is 26%.
The capacity utilization, net productivity and quality (forming the OEE) can be improved by reducing down time, error time and the diverting of envelopes respectively. At short notice this can be achieved by planning and performing the following actions:
1. Increase operator skills. This can be achieved by (basic or advanced) operator training. Also, sharing of knowledge by operators and a ‘best practice’ manual with standard work instructions will increase operator skills. This action will reduce down time (error and setup) and result in less envelopes being diverted by the machine. 2. Increase operator discipline and motivation. Operators need to develop discipline in
logging on and off and in selecting standby reasons. Management need to develop discipline in delivering reports on time and with the correct information. Stimulating periodic feed forward from operators and giving periodic feedback to operators by means of KPIs should motivate operators to perform better, resulting in higher productivity. The RADAR improvement cycle should be an integrated part of working routine.
3. Renew the reading system. New techniques like barcode or data matrix possibly reduce down time (error) and short stops. Also, less envelopes will be diverted.
In addition, it’s advisable to directly obtain more insight in:
• Capacity occupation. Discipline of operators in logging on and off at the beginning and the end of a shift, will provide a more realistic view on the capacity occupation. It might be interesting to collect reasons for not being logged on. If the reason to not log on is planned, then the planning department has to provide a reason. If the reason to not log on is unplanned, then the operator has to provide a reason.
• Standby reasons. Again, discipline from operators is required, in this case to provide reasons for standby time.
• Setup reasons. Find out how time is spend during setup of a machine. • Orders. Differences in processing (time) of various order types. • Operators. Differences in operator performance.
This research provides a design of an KPI-overview with many functionalities, to serve as an effective decision support tool. The dynamic KPI-overview presents real-time information in an orderly manner, allowing Cendris to control the enveloping process. Generating static reports of various production periods is also possible.
The KPI-overview possibly provides an non objective view on capacity occupation and capacity utilization, since operators are able to influence the registration. Nevertheless, the effective (net) production time shown by the OEE is the factual time the machine is producing products. This can not be falsely affected in any way.
Implementing KPIs and working with the KPI-overview requires several organizational conditions and information and communication technology (ICT).
In the organization, clear understanding has to be made about responsibilities of employees (at all levels) and the duty to create periodic reports. This should ensure a constant flow of information about the realization process. The planning department is obliged to provide information on (capacity) planning. This should guarantee a realistic planning based on capacity demand and capacity supply.
ICT has to provide a software solution in order to make the KPI-overview operational. Possibly this can be developed internally at Cendris, by Böwe or an other external company.
Cendris should be aware of the consequences the introduction of KPIs and the KPI-overview will entail. During the first months, support, involvement and discipline should be created by using straightforward communication and securing a recurring improvement cycle. In about a year the KPI-overview can be expanded to other processes (renewed bottleneck or printing process) and the production facility of Cendris in Utrecht.
Investing in development of a KPI-overview by Böwe, a new reading system and operator training will cost Cendris about € 300.000.
The investments result in a reduction of down time, short stop time and diverts, potentially creating an extra 1:11 hours of effective production time per shift. The OEE will then rise to 44%. This means an increase of effective volume of 69% (80 million envelopes) compared to the prior situation. Cost of unplanned outsourcing are about € 83.000 each month. As a result of the increased potential of effective volume, these cost of outsourcing can be saved. For this reason, return on investment is about four months. Including start-up time like training, the total return on investment will be reached within 10 months.
