Determining the effectiveness of key performance indicators in a steel manufacturing company
Kritzinger, Johan Andries
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The recent performance of Cape Gate Sharon does not measure up to expectations. This is, to a significant extent, due to the fact that there is no effective measurement and follow-up of performance. The implementation of an effective KPI- based, performance evaluation system, within a balanced scorecard structure, should lead to material performance enhancement in Cape Gate Sharon. This, however, requires significant investment in both capital, as well as management involvement. As a pilot study, it is therefore beneficial to focus initially on the before-and-after-effects of the implementation of the KPI-based performance management within Cape Gate Sharon Wire Mills division. The primary objective of this research is to determine the effectiveness of Key Performance Indicators in the product factories of Cape Gate. The specific supportive objectives of this research are the following. • To determine if effective KPI’s are measured • To determine if the implementation of KPI’s have been done successfully • To determine what the effect of specific KPI measurement in Cape Gate is. The literature study identifies what performance measurement and management is, as well as an in-depth study into key performance indicators. A simple, logical and repeatable closed loop model within a framework is suggested for the implementation of a KPI system. For the purpose of this mini-dissertation, the research is carried out through a process of a document analysis and a data analysis. Available reports are used to determine the current performance measurement system, to determine if effective KPI’s were chosen and to determine if the implementation was done successfully. Descriptive statistics were then used to analyse actual production data in order to determine the effect that KPI’s have on production. The results of each supporting objective were used to determine the effectiveness of key performance indicators in the product factories of Cape Gate. It is concluded that an effective set of KPI’s were chosen for Cape Gate product factories, with the exception of absenteeism. The closed-loop model was implemented successfully and all the required steps were taken. The effect of KPI’s was apparent on production, utilisation and downtimes. There is insufficient evidence that an improvement was made on absenteeism and the scrap percentage. This can be contributed to infrequent and delayed measurement of the two KPI’s, and the fact that absenteeism is not part of level 2 of the KPI framework.