A key element in an effective Due Diligence study is to be able to quickly identify the Key Performance Indicators (KPI's) on a current, historical and projected basis. These KPI’s include safety statistics, operational performance, status of maintenance programs and overdue activities. The KPI’s can be presented in numerical or graphical format however it is important to understand trends in the KPI, comparison to world class performance and in the case of graphical presentation the slope of the improvement or decline in performance. It is also important to understand the basis and calculation method for the KPI. Plant reliability is a critical KPI however we find a variety of methods used to calculate this very important factor. We have done due diligence in plants where just having the lights on or a critical compressor on turning gear is considered running at 100 percent reliability. The devil is truly in the details. Therefore, the assessor must peal back the onion to find out how the KPI is being calculated and then be able to convert it to conventional calculation methods to compare plant performance to other similar plants and world class performance.
All of the KPI’s can be rolled into an easy to understand format that can be frequently communicated to the plant employees and used by the Leadership Team. The best operating plants will have a comprehensive scorecard for overall plant operations and departmental scorecards drilling down into key performance indicators for each part of the operation. A technique that I have used is a red, yellow and green stoplight scorecard system. Performance where the KPI meets the target is color coded green, performance below the target is yellow and performance around 20 percent or more off target is color coded red. This produces a great visual tool to quickly identify problem areas in the plant. Percentages can be adjusted as needed to drive performance and alert management if areas are off target. For example, the plant may decide critical interlock preventive maintenance must absolutely be done. Therefore, a green light might be awarded for 99 to 100% compliance and the red light might start at 95% or less compliance. A more relaxed target could be used for general PMs. A common system is 90% or better compliance is green and below 80% is red.
If the plant has comprehensive, accurate and properly calculated KPI’s rolled into a scorecard the confidence an accurate picture of the plant can be developed is increased. These KPI’s can then be compared to world class performance and a performance improvement plant can be developed and used as a roadmap for improvement after the acquisition.
Unfortunately, in some cases when we ask for the plant scorecard prior to kicking off the due diligence effort we are greeted with blank stares and asked, “What is that? The Super Bowl score pool?” This kind of response and lack of KPI’s and scorecard is considered a red flag for how well the plant is operating and makes it very difficult to conduct the due diligence study. In some cases, the plant utilization is so low, reliability issues don’t impact getting product out the door. However, this can mask chronic, high cost repeat failures, production bottlenecks and waste in the process.
We consider the following KPI’s critical for monitoring plant performance:
- Safety statistics including Total Recordable Injury Rate (TRIR), Lost Time Injuries and near misses.
- HSE statistics such as reportable releases, spills, flaring incidents and leak detection program performance.
- Operational statistics including utilization, total production, reliability, off spec product and inventory.
- Maintenance and mechanical integrity statistics including Maintenance Cost Index, budget tracking, leaks, leak clamp inventory and trends, CUI leaks, overdue inspections, backlog, craft utilization, planned vs actual hours and warehouse inventory.
Becht Engineering has significant experience in due diligence, maintenance and reliability assessments and can support improvement and KPI development for your plant.
If you have a question relating to this blog, you may post a comment for the author at the bottom of this page. If you would like to submit an Information Request please click below: