The performance concept originated from the concept of firm management. The performance management of the firm involves improving its value-cost relationship, which means that the firm will be able to build a product or service, in terms of achieving cost and profitability targets, and compare the results with strategic forecasts. In addition, performance management also requires the firm's ability to develop a dynamic and continuous progress. In such conditions, its performance evaluation is not an objective in itself, but a means used by the organization to achieve progress. The paper will address issues which relate to improving performance and all the instruments used for this purpose.management, competitiveness, operational performance, performance management, production systems.

Ana-Maria GRIGORE

Catalina RADU (GHERASE)

Ioana Florica BADEA

English

Research Papers in Economics

Review of International Comparative Management                              Special Number 1/2011  19 
 
APPROACHESS ON THE OPERATIONAL 
PERFORMANCE OF PRODUCTION SYSTEMS 
 
 
Florica BADEA 
Cătălina RADU (GHERASE) 
Ana-Maria GRIGORE 
The Bucharest Academy of Economic Studies, Romania 
 
 
KEYWORDS:  management,  competitiveness,  operational  performance, 
performance management, production systems 
 
In  our  approach,  we  would  like  to  begin  with  the  definition  of  the 
performance  given by the  group L'Afnor, national and  international  operator in 
France  in  the  service  of  enterprises‟  and  civil  society‟s  performance  and 
sustainable  development,  according  to  which  “performance  measures  the 
effectiveness and / or efficiency of a process or of a portion of it, or of a real (or 
simulated) system, according to a rule, a plan or a goal settled through a company‟s 
strategy”. [8] 
This type of evaluation must reach the purpose for which it was created, 
namely to implement the company strategy and communication of the project and 
the vision of the enterprise. In this way, the management of the company together 
with its employees will be able to focus on ways to implement the project and the 
correlation of operational initiatives and actions.  
If we admit that an enterprise must succeed both with the real products and 
in the financial markets, an operational performance management strategy aims at 
combining  the  two  concerns.  This  will  establish  a  correlation  between  getting 
maximum value for the final client at the same time as the company owner.  
At present, neglecting one of the two markets will have consequences on 
the other, shareholder being the customer enterprise on financial markets, and the 
customer being the consumer on the products market.  
ABSTRACT 
The performance concept originated from the concept of firm management. 
The  performance  management  of  the  firm  involves  improving  its  value-cost 
relationship, which means that the firm will be able to build a product or service, in 
terms of achieving cost and profitability targets, and compare the results with strategic 
forecasts. 
In  addition,  performance  management  also  requires  the  firm's  ability  to 
develop  a  dynamic  and  continuous  progress.  In  such  conditions,  its  performance 
evaluation is not an objective in itself, but a means used by the organization to achieve 
progress. 
  The paper will address issues which relate to improving performance and all 
the instruments used for this purpose.           Special Number 1/2011                         Review of International Comparative Management  20 
From  the  perspective  of  product  markets,  firms  must  respond  to  the 
customers‟ and competitors‟ pressures, in order to have delivery periods as short as 
possible and various services, customized and innovative products, at lower costs, 
competitive  prices  and  an  increasing  quality.  Faced  with  such  situations,  the 
enterprise  has  to  evolve  in  the  same  direction  as  the  customer  demands,  while 
anticipating them.  All these  constraints generate a set  of transformations  in the 
enterprise,  which  will  lead  to  an  increasing  need  to  improve  operational 
performance.  
In order to improve operational performance, the enterprise has to respond 
to the increasing pressure of competition by improving profit in each period, or by 
simply maintaining profitability and competitiveness of its products. This situation 
is added in many cases to the trend of continuous rising of costs and prices, with 
effects such as:  
  increased customer expectations with respect to products, services and 
their delivery times;  
  increased competition for workers in countries with low labor costs;  
  continuously  increasing  volume  of  investments  in  order  to  become 
more responsible for environmental and safety standards.  
Therefore, maintaining operational performance  implies the  existence  of 
several possibilities for rationalization. 
  
1  Reactive planning of the production flows and  cost reduction 
 
To use these rationalization opportunities, the enterprise uses several types 
of plans, which formalize the strategy and its different objectives. This plan sets 
out the markets where the company wants to place the products that it wishes to 
develop, depending on customer demands. The business plan defines the various 
families of products, investment in human and material resources on long term, 
while the manufacturing program organizes short-term priorities.  
Various levels of forecast (short, medium or long), and also of decision 
(enterprise management, staff and operators) must be chained in a coherent manner 
and must adapt to the variations in demand.  
 
2  Optimization of industrial assets  
 
Industrial  activity  consists  in  rhythmic  cycles  that  can  not  be  entirely 
controlled. Thus, there are three main cycles:  
  the trade cycle (or period desired by the customer);  
  the production cycle (or period of product development);  
  the financial cycle.  
These cycles are not synchronized, and, for the company, it is important to 
minimize the gaps between them. Synchronizing the cycles is variable, depending 
on the sector in which the enterprise operates. If the trade cycle is shorter than the 
production cycle, production must begin before getting orders and receipts, which 
greatly hampers the financing of the activities. [5] 
 
 Review of International Comparative Management                              Special Number 1/2011  21 
In this case, there may be the following ways to solve the problem:  
  reducing  costs  by  using  management  systems  of  manufacturing 
processes and of the materials consumption;  
  increasing efficiencies of the production equipment and limitating of 
cases of non-quality.  
a) Action on various categories of expenditures. This leverage is about 
reducing  direct  and  indirect  production  costs  by  reducing  material  and  time 
consumption,  respectively  through  process  automation,  optimization  of 
transportation costs and increasing staff skills. 
b)  The  action  on  the  production  equipment.  Strong  interdependence 
between the period of production, customer needs and the production equipment 
requires enterprises to increase the flexibility and capacity of machines because the 
delivery periods and product demand are imposed by the client. Using the indicator 
“Utilization degree of working time of the production equipment”, together with 
setting the targets for improvement, allows solving problems of rhythm, frequency 
and  duration  of  the  loading  equipment  or  reduces  the  number  of  unexpected 
failures.  
Technical  and  technological  progress  must  be  accompanied  by 
organizational innovations (autonomous work teams, information technology) or 
social  innovations  (new  time  management  schemes)  in  order  to  continuously 
improve the enterprise‟ productivity.  
 
3  Organizing activity based on supply chain [3]  
 
Currently,  the  company  requires  departments  to  better  coordinate  their 
activities  and  services  to  achieve  customer  satisfaction.  In  this  context,  new 
concepts arise, such as:  
  the global logistics responsibility of the enterprise;  
  the optimization of organizing activities with reduced fixed expenses 
and acquisition costs, in order to achieve a competitive cost level;  
  management by activities or by processes; 
  strategic alliances;  
  electronic commerce.  
All  these  concepts  have  in  common  a  basic  concern  to  find  new 
optimization solutions, offered mainly by informatics systems. Integrating internal 
and external logistics of the company aims to cut costs and reduce delivery periods 
to customers; management processes that create value for enterprise allow the link 
between company‟s activities and customers‟ expectations.  
 
4  Control of production systems in order to ensure quality,  
cost and delivery periods  
 
In order to achieve a certain volume of products or services, the activities 
must  consume  resources.  Economic  performance  of  these  activities  can  be 
estimated by using three  elements:  quality, cost and delivery period. Often, the 
performance measurement system is supplemented by safety indicators (number           Special Number 1/2011                         Review of International Comparative Management  22 
and  severity  of  work  accidents,  incidents  due  to  consumption  of  products  or 
services etc.) and environmental impact (percentage of gaseous emissions, waste 
production  etc.).  Further,  we  present  some  of  the  mostly  used  indicators  for 
measuring the performance of production systems.  
a) Indicators of the production process. In order to assess the quality of 
activities, delivery times are often considered as key indicators for measuring their 
performance. Customers are very sensitive to the compliance periods and timely 
delivery of services. Periods of delivery are considered to be measured from the 
moment  of  ordering  until  delivery  and  execution  of  product  or  service.  In  this 
perspective,  reducing  cycles  is  a  major  objective  of  the  production  process. 
Another important indicator of the process is an indicator for measuring the flow‟s 
fluidity, which can be called “tension indicator of flow”, denoted by TIF. Thus, 
TIF = processing time / production time, and therefore it is always lower than 1 or 
equal  to  1.  Processing  time  is  the  period  when  the  product  is  manufactured  or 
assembled. In industry, this indicator is generally less than 5% of production time. 
If  the  production  is  continuous,  the  production  time  of  a  product  is  equal  to 
processing  time,  and  then  TIF  =  1.  Production  time  includes  processing  time, 
inspection time, the transfer time between jobs and waiting times. The theory upon 
which the indicator TIF is based, starts from the idea that times dedicated to other 
activities than those of processing (inspection, remediation of defective products, 
transfer between jobs and expectations) are times that do not add value to products. 
In addition, if the indicator is close to 1, the company improves its responsiveness 
to customer requests and create value. [2] 
b)  Indicators  of  after-sales  service  processes.  Companies  wanting  to 
achieve performance in after-sales service activities can measure them by applying 
to  these  processes  indicators  of  reactivity,  quality  and  cost,  as  well  as  for 
production processes. This cycle, which begins with the call of customer and ends 
with the solution to his problem, can serve to measure the rapidity of the process of 
after-sales service. Billing and recovery process is part of after-sales service, and, 
in this case, reducing the period between the end of the process and regulating of 
the balance is a measurement indicator of performance of the processes. This is the 
case for companies that sell complex computer and electronic equipment, which 
know that their failure products are costly and strongly affect relationships with 
customers.  
 
5  A multidimensional view of performance: Balanced Score Cards  
 
BSC  is  a  tool  for  strategic  control  and  performance  management, 
developed in the years „90 by Kaplan and Norton based on a study of performance 
measurement. [6] Thus, the BSC offers a multidimensional view of performance, 
defining the four perspectives of its analysis. The main objective of the BSC is to 
emphasize the creation of last value added, and the assessment of determinants of 
new value added.  Review of International Comparative Management                              Special Number 1/2011  23 
Financial perspective takes into account the long-term objectives of the 
enterprise,  and  includes  classical  financial  indicators;  the  novelty  is  given  by 
companies‟  desire  to  adapt  financial  indicators  to  customers‟  reality  (new 
customers,  target  customers,  unprofitable  customers,  etc.)  and  to  the  creation 
process of products and services. This strategy takes into account the following 
financial targets: growth and diversification of business turnover, reducing of costs 
and improving labor productivity, better utilization of assets and investments. 
Customer  perspective  regards  to  client  specific  indicators  such  as 
satisfaction  or percentage  of complaints. Given that products and services  have 
increasingly  more  features,  competitiveness  of  companies  depends  on  the 
competitiveness of processes that support them. 
Process  perspective  refers  to  all  internal  processes,  and  in  particular  to 
innovation, manufacturing and after-sales service. In terms of innovation process, 
one will first seek to identify new needs of potential clients. Performance of the 
research and development process must be sought not only in operational terms of 
activities,  but  in  terms  of  their  profitability.  For  performance  management  of 
production  processes,  one  will  use  the  classic  indicators  of  quality,  cost  and 
responsiveness,  to  which  specific  indicators  of  supply  activity  can  be  added 
(criteria of choice of suppliers, processing orders and receiving operations) or the 
effectiveness  of  production  cycles  (efficiency  during  processing).  After-sales 
services can have a significant impact on added value perceived by customer and 
can  be  controlled  with  indicators  of  cost,  quality  and  customer  response  time  
to call. 
Innovation and learning perspective refers to indicators that express the 
newly created value for customers by the number of innovations, the exploitation 
of specific skills, the development of learning organizational process and all those 
medium and long term actions that increase business performance. Currently, the 
BSC is used successfully in renowned multinationals to measure their performance.  
 
6  Leadership, knowledge management and operational performance
1 
 
It is clear that effective knowledge management has become a crucial issue 
for  businesses  [11],  the  main  base  for  creating  and  sustaining  organizations‟ 
competitiveness  and  their  core  competence  capabilities.  According  to  modern 
approaches, knowledge management is considered a key driver of organization‟s 
competitiveness, as it deals with different resources that can aid decision makers in 
many ways [7].  
All the aspects of operational results are strongly correlated to knowledge 
management. 
Also,  leadership  is  clearly  related  to  organizations‟  competitiveness, 
including operational results. 
                                                        
1 This work was supported by CNCSIS –UEFISCSU, project number PNII – IDEI code 1867/2008, 
contract no. 899/2009           Special Number 1/2011                         Review of International Comparative Management  24 
The strategic leader is able to exert this strategic thinking on long term, 
despite of the numberless uncertainties that are associated to the today‟s business 
environment [9]. 
Amidon and Macnamara have identified seven domains to be analyzed – 
the  so-called  “7  C‟s”  of  leadership:  (a)  context,  (b)  competence,  (c)  culture,  
(d) communities, (e) conversations and common language, (f) communications and 
(g)  coaching.  [1].  Collins  identified  Executive  Leader  who  “builds  enduring 
greatness” [4].  
Conflict solving for a leader supposes development of his abilities in the 
following  fields:  diagnosis  of  the  situation,  planning  for  conflict  solving,  plan 
implementation, plan evaluation [10]. 
   
References  
 
1.  Amidon,  D.;  Macnamara,  D.  (2001).  “7  C‟s  of  Knowledge  Leading: 
Innovating  our  Future”.  http://www.entovation.com/whatsnew/leadership-
7cs.htm. 
2.  Badea, F. (2004). Indicatori de măsurare a performanţei, paper presented at 
the Management Department Symposium.  
3.  Baglin, G. (2007). Management industriel et logistique, Paris: Economica. 
4.  Collins, J. (2001). Good to Great: Why Some Companies Make the Leap … 
and Others Don’t. New York: Harper Collins. 
5.  Giard, V. (2003). Gestion de la production, Paris: Economica. 
6.  Kaplan R., Norton D. (1992).“The balanced bcorecard measures that drives 
performances”, Harvard Business Review¸ February 1992. 
7.  Keen,  P.W.  (1991).  Every  manager’s  guide  to  information  technology, 
Boston: Harvard Business School Press. 
8.  Nakla M. (2009). L'essential industriel du management, Paris: Dunod.  
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Approaches on the Operational Performance of Production Systems

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Approaches on the Operational Performance of Production Systems

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