A performance measurement model for a service partnership

Lategan, Jacobus Petrus (2010-03)

Thesis (MScEng (Industrial Engineering))--University of Stellenbosch, 2010.

Thesis

ENGLISH ABSTRACT: The problem with which many organisations struggle in the current economical environment is that of focus. They are trapped in a situation where limited resources or lack of inherent knowledge withhold them from increasing shareholder value. This research focuses on the strategy which an organisation pursues when outsourcing those business functions which are outside their core competencies. The outcome of this decision involves them entering into a partnership with a service organisation (or consultancy). The duration of the relationship between these parties is dependent on the value (actual plus perceived) which the service organisation contributes to its customer. Pragma (a service organisation in the physical asset management (PAM) environment) is, due to the current economic turmoil, in a situation where they need to indicate the value created through the acquirement of their service. This leads to a search for a model which would provide them with the required justification. A study was conducted on current available frameworks but none of those identified suited this type of measurement. This led to the development of a unique model (based on the principles of the Balanced Scorecard) called the performance measurement value index (PMVI) which identifies the generic elements required to measure the value of a service partnership. These elements are: 1. financial perspective; 2. customer engagement; 3. risk management; and 4. internal business processes. These elements are weighted (using the analytical hierarchical process) to represent the change in value, as contributed by the elements, and is then represented as a single value (ten is used as this arbitrary value in this research). The PMVI is introduced into the PAM environment which then produces the asset management value index (AMVI). The four elements of the PMVI are broken down into five elements required for the AMVI. These elements are: 1. cost reduction; 2. asset performance improvement; 3. customer satisfaction; 4. risk reduction; and 5. asset management maturity. The model was applied to three of Pragma’s customers. The type of application (within this environment) is dependent on the nature of both the customer and service. The first two customers are both from a manufacturing environment but they differ in the type of service (ACC@Pragma vs ACC@Client) rendered. The third customer operates within the utilities and facilities environment and receives an ACC@Client service. The period over which the model was applied varies due to the use and availability of historical data of these customers. An increase in value was noted for the two ACC@Client customers (from 7.68 to 8.51 and 4.54 to 7.73 respectively), where the service partnership is still in its early stages (one to three years old). However, the ACC@Pragma customer reflected a stagnating value (6.62 to 6.59) where the service partnership is older than ten years. These results reflect the expectations which Pragma had at the beginning of the study and consequently proves that they do add value to their customers.

AFRIKAANSE OPSOMMING: Die huidige ekonomiese omgewing veroorsaak dat baie ondernemings sukkel om te fokus. Hulle word vasgevang in ‘n situasie waar ‘n beperking in hulpbronne of ‘n tekort aan nodige kennis hulle verhoed om waarde te verskaf aan hulle aandeelhouers. Hierdie navorsing ondersoek daardie strategie van ‘n onderneming wat daartoe lei dat hulle sekere besigheids funksies, wat hulle nie beskou as hul eie sterktepunte nie, uitkontrakteer en gevolglik kan fokus op hul sterktepunte. Die gevolg van hierdie besluit verg dat die onderneming ‘n ooreenkoms aangaan met ‘n dienste onderneming. Die tydperk van hierdie verhouding word bepaal deur die waarde (beide werklik en aangevoelde) wat die dienste onderneming toevoeg tot hul klient. Pragma (‘n dienste onderneming in die fisiese bates bestuur bedryf) word huidiglik gekonfronteer met die situasie waar hulle die waarde wat, weens die lewering van hul diens, toegevoeg word tot die klient. Dit lei tot die soeke na ‘n model om die lewering van hulle diens te valideer. ‘n Studie was uitgevoer op die huidige beskikbare modele wat doeltreffendheid in ‘n onderneming meet, maar geen van die geїdentifiseerdes was toepaslik op hiersie situasie nie. Dit het gelei tot die ontwikkeling van ‘n unieke model (gebaseer op die beginsels van die Balanced Scorecard) genaamd die Performance Measurement Value Index (PMVI) wat die nodige elemente vir die meting van hierdie tipe doeltreffenheid identifiseer. Hierdie elemente sluit in die: • finansiële perspektief; • kliënte interaksie; • risiko bestuur; en • interne besigheids prosesse. Die geweegde uikomste van hierdie elemente (soos bepaal deur die Analytical Hierarchical Process) word gebruik om ‘n verandering in waarde aan te dui as ‘n enkele waarde (tien in die geval van hierdie studie).Die PMVI word aangepas vir gebruik in die fisiese bate bestuur omgewing en die gevolge hiervan is die skepping van die Asset Management Value Index (AMVI). Die vier elemente, soos gebruik in die PMVI, word aangepas na vyf elemente in die AMVI. Hierdie elemente sluit in die: • verlaging van uitgawes; • bate doeltreffenheid verhoging; • kliënt tevredenheid; • risiko verlaging; en • bate bestuur verbetering (verbetering in die interne besigheids funksies van bate bestuur). Die model was toegepas op drie van Pragma se kliente. Die tipe van toepassing (binne hierdie omgewing) is afhanklik van beide die kliënt en dienste gelewer. Die eerste twee kliënte is beide afkomstig van ‘n hoofsaaklik vervaardigings-omgewing, maar die dienste gelewer aan die kliënte verskil (ACC@Pragma vs ACC@Client). Die ander klient is afkomstig vanuit ‘n dienste en geboue omgewing en ontvang die dienste van ‘n ACC@Client. Die tydperk waaroor die AMVI toegepas is verskil weens die toepaslikheid en beskikbaarheid van historiese inligting. ‘n Toename in waarde is bevind by beide van die ACC@Client kliënte (vanaf 7.68 na 8.51 en 4.54 na 7.73 onderskeidelik). Dit kan toeskryf word aan die vroeë fase waarin hierdie diens ooreenkoms funksioneer (vanaf een tot drie jaar). Die uitkomste van die ACC@Pragma, aan die anderkant, dui op stagnerende waarde (6.62 na 6.59) vir die kliënt waar die diens ooreenkoms alreeds ouer as tien jaar is. Die uitkomste van hierdie studie bewys die verwagtinge wat Pragma aan die begin van hierdie studie gehad het en bewys gevolglik dat hulle wel waarde toevoeg tot hul kliënte.

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