Delay accounting information is a vital input for identifying productivity issues within a supply chain. Information is captured on planning and scheduling functions, as well as asset reliability functions. Managers can measure how well different functions are performing in terms of both equipment/process downtime and planned/unplanned downtime.
Many companies though fail to realise the full benefit of this capability. This can occur for a number of reasons, including that they:
- don’t understand the need to have an integrated delay accounting capability across their organisation and supply chain, which can address the complexities in accounting for handover points in the supply chain
- fail to understand the importance of delay accounting information in the supply chain design, planning and scheduling process, which results in simulations and schedules which are unachievable by operations
- don’t appreciate that delay accounting information has a role to play at all levels of the organisation, from identifying and quantifying improvement opportunities to measuring operational performance.
The solution to these problems is an enterprise approach to delay accounting. Information is integrated both horizontally and vertically throughout the organisation. This article discusses the issues and provides an enterprise approach to delay accounting, outlining the benefits that can be provided to an organisation.
The failure of supply chain segments to work together in an efficient cohesive manner will result in delays to the movement of goods through the supply chain, leading to further downstream issues.
Delay accounting systems historically have been setup by business units to measure and help manage the reliability of the plant and equipment within that business unit.
For example, in a bulk commodity mineral resources company, they will often have a delay accounting system to track the plant and equipment at their mines. Another system tracks their performance at the port and maybe another system tracks the performance of the transportation network (rail, road, etc). Each of the systems is set up to manage and monitor the different equipment and processes the business unit is responsible for.
Supply chain cohesion
The separate systems approach is common to many businesses that manage a supply chain and occurs because the departments within the organisation often continue to operate as silos. Information is rarely shared and business processes fail to encourage collaboration and cohesion across the supply chain.
The failure of each of these supply chain segments to work together in an efficient cohesive manner results in delays to the movement of goods through the supply chain. The result: further downstream issues that may arise from the late arrival at the destination, the delivery of the incorrect product requirements, and so on.
Another related problem is the inaccurate recording of delay information due to a lack of visibility of problems across the supply chain. The handover points across the supply chain are a particular concern. Inaccurate recording of delay information can lead to a number of issues within the organisation, affecting the organisation in the following ways:
- It can cause people to focus on issues that may not exist, or may not have the severity that the organisation believes.
- The incorrect identification of projects and initiatives to improve performance within the organisation based on inaccurate data.
- Mistrust of the delay information affecting the decision making within the organisation.
- A reliance on secondary systems to provide similar information — resulting in different people within the organisation having differing view of the impact of delays.
Organisations invest a lot of time in developing long term plans, schedules and operating philosophies, driven by extensive simulations and modelling of their supply chains. Given the investment undertaken as a result of these simulations, and the focus on schedule adherence, it is surprising that many organisations regularly fail to meet their schedule.
Some rail freight operators resort to a ‘Run When Ready’ mentality to their rail networks. A number of problems that lead organisations to use this type of scheduling philosophy:
- Inaccurate modelling
- Over optimistic scheduling
- A failure to ensure plant and equipment are available when required
- An inability to accurately understand and account for day-of-operation impacts to the active schedule.
Delay accounting information is regularly used in reviewing maintenance strategies and as a means of identifying opportunities for process improvement initiatives. But the importance of delay information throughout the organisation is far deeper than just that.
Companies often focus on production and performance figures; information that only shows half the picture when it comes to how well the organisation is performing.
What’s missing are the problems and issues being encountered within the organisation that can affect performance. That is the information that a delay accounting system provides.
The issues discussed above result in a supply chain that doesn’t achieve its true potential, holding back the organisation. This happens both in terms of increased costs and lost opportunity driven by inefficient supply chain operations, with the following potential knock on effects.
- It can lead to the creation of additional capacity across the supply chain to allow for the inefficient operation of the supply chain.
- The delays can lead to bottlenecks forming across the supply chain. This can then lead to increased storage requirements and increased costs, or a need to reduce the operating capacity of the supply chain to clear the bottle necks.
- The inefficiencies can also affect the ability to accurately plan and perform maintenance activities, further reducing efficiency of the supply chain.
- It can require additional staffing levels to manage the additional workload created.
- Additional costs can be incurred through decision making based on inaccurate or incomplete delay information.
To realise the true potential of their supply chains, organisations need to rethink how they approach their delay accounting. The enterprise approach to delay accounting is aimed at ensuring the use of delay accounting information is aligned within the organisation both horizontally and vertically — helping to maximise the benefit of delay information and assisting in achieving organisational outcomes.
Accurate delay accounting is the first step in addressing some of these issues. To be able to solve a problem, you first need to be able to accurately quantify the problem and its impact.
Integrating the different delay accounting systems allows the delays within a business unit to be linked to delays caused by another. For example, a shipping delay accounting system should allow the operators to assign the cause of shipping delays to the appropriate Port delays and with more than just a generic classification as is often done. This allows for more accurate delay reporting, but also allows a better understanding of the impact of a delay across the supply chain by allowing the consequence of that delay to be measured.
Automation of standard delay events and operational alarms can also be used to manage the operator workload, whilst at the same time improving accuracy of the delay information.
Integrating the delay accounting systems also requires better cooperation between the different business units.
The move to Centralised Operating Centres by some mining organisations brings the different operators across the supply chain into the same location and provides an environment where collaboration between the supply chain segments is more easily fostered. This improved collaboration allows the operators to accurately record the correct root cause of the delays and identify where delays have occurred as a consequence of other delays across the organisation.
Organisations, though, need to be careful that improved collaboration across the operations areas is not done to the determent of the close working relationship needed between the operations, maintenance and reliability functions.
Many different business units are involved in developing operational strategies and models, short to medium term plans, implementing schedules and managing the day-to-day operational plans. Once there is an accurate picture of delays that are occurring across the supply chain, then this information needs to be used by the different supply chain segments when developing their plans and baselines.
A consistent set of delay classifications baselined across the planning horizon is the first step to developing an achievable schedule. If the modelling and simulations don’t accurately reflect the operating environment, implementing these models or reviewing the real world outcomes is difficult.
Once the baseline has been established, there also needs be a review process across the different segments that is used to verify the validity of the operating philosophy, plans, targets and schedules against the actual performance achieved.
In the same way that production information can be summarised for management reporting, so too can delay information. You can use high-level reporting metrics such as Delay Count, Delay Duration, Major Delay Causes, Major Delay Equipment, etc.
As well as reporting performance within the organisation, the KPI’s that can be derived from the delay accounting system — such as Availability, Utilisation, Overall Equipment Effectiveness — are also key to developing and presenting the business case for projects within an organisation.
The KPI’s derived from the delay accounting systems provide a baseline against which the organisation’s performance can be measured, as well as a way for measuring the benefit derived when implementing projects across the organisation. This information, recorded by the different supply chain segments, also needs to be made available through the corporate management reporting systems and integrated with other performance information within corporate dashboards, etc.
By integrating the reporting information, the organisation is able to ensure that the overall picture of its performance is being reported consistently to the wider audience.
Benefits of the Enterprise Approach
Enterprise delay accounting has the ability to directly impact the costs incurred across the organisation, with benefits realised in a number of different ways.
The benefits derived from this enterprise approach start with more accurate delay information. This gives confidence in the decisions made based on this information and ensures the right decisions are made with the right information. Hence, an organisation is able to develop more accurate schedules, resulting in more throughput throughout the supply chain without the costs associated with new infrastructure or equipment.
The enterprise approach also provides a better baseline for evaluating projects and initiatives within the organisation. This ensures the organisation is able to focus on the improvements that provide the best return on investment and align with the overall organisational strategy.
The enterprise approach encourages better collaboration between the different operational centres across the organisation. But it still places an emphasis on the need to involve maintenance planners and reliability engineers as well.
The organisation is able to better manage the operation of the supply chain, with efficient management of bottlenecks and constraints, through to improved maintenance planning.
Improved collaboration ensures the availability and utilisation of equipment across the supply chain is maximised without an increase in associated costs.
The inclusion of summary delay information into management reporting and executive dashboards is aimed at ensuring there is a consistent approach to the use of delay accounting information across the organisation. It also acknowledges the importance this information gives in providing a full picture of the operational performance of the organisation.
Delay accounting systems are a key source of performance information in most organisations. Many organisations though fail to realise the full benefits available from the delay information captured across the organisation. This leads them to make decisions on investment strategies, operating philosophies and day-to-day operations with either incomplete or inaccurate information, reducing the likelihood of the organisation achieving its goals.
To address these issues, an organisation should adopt an enterprise approach to delay accounting by ensuring there is close integration between the different supply chain segments when managing delays and their impact on operations.
Additionally, a consistent approach to the integration of delay information when modelling, planning and scheduling will ensure an accurate baseline for operational scheduling.
Finally, the inclusion of delay information into management performance reporting ensures the complete picture of asset and organisational performance is presented throughout the organisation.
Implementing these initiatives will lead to better collaboration and information sharing across the organisation, allowing the organisation to achieve its goals both operationally and strategically without impacting the cost of operations.