-A paper delivered by Professor Pieter Steyn of Cranefield College (www.cranefield.ac.za) at the Eskom Project Management Forum on 25 March 2008.
Eskom Customer Needs
Eskom customers have risk management programmes that are important for sustainable operations. These risk management programmes involve considering the improbable and measuring the intangible. Sustainable electricity supply is part of customer risk management planning. To do this successfully customers need transparent continuous information on the electricity supply from Eskom. Failure by Eskom to deliver electricity creates a risk for customers and the entire economy. Moreover, it seriously impedes economic growth. To counter this problem Eskom must engage in proper value management and provide on-time information to customers. The question is: how should this be achieved? The answer is that Eskom must deliver executive leadership excellence with respect to behavioural, structural, and operations strategy.
Operations strategy is an important component of business strategy. Operations strategy has four areas of significant importance, these are, design and development initiatives, market analysis, financial planning, and master planning for operations. Master planning in turn has three very important components, i.e. demand management, capacity planning and master scheduling. The master plan provides the organisation with a rigorous instrument for the medium to long term operations plans. It guides the detailed plans, schedules and support activities for the shorter term and leads to customer needs fulfilment.
The importance of operations master planning equals that of financial planning and market analysis. All three flow from the business plan and are mutually supportive. Importantly, maintenance management, procurement and supplier management, amongst others, contribute valuable information towards effective and efficient demand management, capacity planning and master scheduling. Eskom should include major customers and key suppliers in their master planning deliberations. Increasingly the strategic emphasis is on innovation and creativity that bring knowledge management and double loop learning to the fold. Eskom should not operate in isolation, and should rather deliver transparent information to customers. Not just any information, but information that is useful for risk management planning by customers.
Master planning works like a pair of scissors. Demand management and capacity planning is one blade of the scissors, while master scheduling forms the other. However, increasing capacity takes both time and money and should be tackled in great circumspection. One should also focus on time first and money second due to the very long lead times involved in power generation capacity building. Demand management and capacity planning teams operate at the broader level. These activities are also known as resource requirements planning, or RRP. The master scheduling team steers the firm’s capacity towards actual demand items and process improvement activities. For Eskom’s strategic aims both these aspects are extremely important, the first one to deliver a proper service to customers, while the second leads to innovative continuous improvement projects. A major advantage of innovative continuous improvement projects is that it prevents unnecessary capital expenditure and capacity enhancement. Through innovative continuous improvement projects Eskom will remove unnecessary waste from its value chain, leading to higher productivity and the ability to provide the electricity at cheaper rates to customers.
Demand management, capacity planning and master scheduling are all high level planning activities of an organisation. Demand management utilises forecasting and is vital for other areas of the organisation as well. It is at the heart of marketing and sets parameters for all the key financial plans. It does not, and should not, work the other way round, particularly in a utility like Eskom. Capacity planning is the organisation’s ability to accommodate customer consumption needs. It focuses on creating and maintaining customer service resources. It is important to note that maintenance plays a major role in capacity planning. It is impossible to do effective and efficient capacity planning if maintenance of the resources does not form part of it.
Eskom must not make this mistake. Capacity planning obviously includes power generation facilities planning. When capacity is allocated, and resources are assigned, the focus shifts to output. The allocations constitute a schedule which is a commitment to produce electricity and serve customers. The master schedule is the general plan for providing power outputs to customers. The master planning core process that combines demand management, capacity planning and master scheduling is generally referred to as the “Demand management and capacity planning” process, and should operate cross-functionally.
An organisation’s structural strategy delivers important input surrogates of quality performance. It is important that Eskom pays ample attention to this as part of its quality management system. Eskom should operate a shared information strategy where its master planning operates cross-functionally to encourage double loop learning, efficient information flow, and effective knowledge management. The cross- functional process thus created must be programme managed as illustrated in the figure depicting a balanced scorecard-programme management (BSPM) learning organisation value chain schematic. The second figure indicates how it should be arranged from an organogramme point of view.
Care must be taken that cross-functional structures are supported by a good system of authority, responsibility and accountability. Clear policy must be generated by the executive leadership spelling out clearly how the system should operate. The process managers that operate the cross functional processes must focus on the what’s and when’s. This means that they must apply project management principles as you would for matrix projects. Demand management and capacity planning, as also, master scheduling are all normal operations. Now the organisation finds itself in a situation where they are applying project management principles to cross functional normal operations. Since this applies to all cross-functional operations it becomes clear why the modern learning organisation cannot be led or managed successfully without a clear understanding by all, including executive leadership, of project management principles and techniques. This has become a watershed since it means that organisations cannot change from bureaucratic practices without having these skills. This also applies to Eskom.
As is the case with structural strategy, the behavioural strategy also delivers important input surrogates of a quality organisational performance. Of utmost importance is executive leadership behaviour. Eskom’s executive leadership must ensure that an effective and efficient value system is in place. It is also of great importance that they shape their leadership behaviour accordingly. The values, beliefs and guiding principles of the value system shape the organisation’s culture and ethos. The guiding principles must contain the four pillars of TQM philosophy. These are: being customer focused, practising innovative continuous improvement, involving and empowering the human talent, and finally, introducing systems thinking into the organisation.
Through systems thinking Eskom can introduce an effective feedback loop by measuring the output of the cross-functional demand management and capacity planning process on a continuous basis. By following this practice the demand management, capacity planning, and Master scheduling process becomes a conspicuous key performance area (KPA) of the organisation that is continuously appraised and reviewed by the executive leadership, with assistance from the programme manager who forms part of the executive. Since capacity planning also includes maintenance management, the importance of the proposed transformation and change in Eskom becomes even more evident.
Effective and efficient feedback of strategic cross-functional master planning benefits will provide vital capacity information to the Eskom board of directors and executive leadership alike. Customers will then be kept informed in a transparent way, and on a continuous basis, while it assists them with their own risk management planning. This will build solid relationships with all stakeholders, including the politicians. The advice to Eskom is to transform as soon as possible to a programme managed knowledge-based learning organisation structure and culture that includes the effective utilisation of critical success factors in a balanced scorecard.
The above approach is covered in Cranefield’s academic programmes.
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