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07/28/2010
Companies are always mindful of keeping an eye on the opportunities for – and threats to – their business. What are the potential risks involved?
Dr. Boris Reuter: Companies tend to use sales and financial figures to identify market risks and their business-related implications. The problem is that such figures are often flawed due to inconsistencies or missing data, and this can lead to a scenario in which measures are either not taken or taken too late. When faced with difficult situations, firms are then likely to resort to knee-jerk reactions which see them invest heavily in the search for the 'correct' key performance indicators (KPIs) and place an additional burden on the organisation. Reporting cycles are continuously shortened, and 'throw-away' reports are generated. In the worst cases this can lead to errors in decision-making and investment, for example the selection of the wrong project or the sale of a supposedly unprofitable division.
Which path promises success?
Dr. Boris Reuter: The implementation of efficient Supply Chain Performance Management. This approach ensures comprehensive transparency where the actual company situation is concerned, for example details of sales and production volumes, inventory levels, lead times, down times and their influence on one another. It is also necessary to identify the people responsible: Who is managing which process, and according to what rules? It is only once the parameters and drivers involved in this complex network of relationships have been determined that supply chain performance can be systematically improved.
How does it work in practice?
Dr. Boris Reuter: Decisive key values are bundled into clearly defined KPIs and then used to both manage the value chain and provide a goal system for it. This enables companies to identify deviations at an early stage and counteract them using appropriate, targeted measures. One example is the modification of purchasing processes in order to offset production time buffers caused by delays in delivery processes. It is nevertheless a prerequisite for the successful application of this approach that all KPIs are consistently oriented to the supply chain. Sales & marketing, distribution, production and procurement departments therefore need to coordinate their KPIs and, in particular, focus them on shared goals. This enables the prioritisation of competing KPIs – for example low inventories and high service levels – and the definition of inter-relationships.
Which advantages can be achieved?
Dr. Boris Reuter: Supply Chain Performance Management delivers comprehensive transparency on an organisational and technical level. It enables companies to take better decisions, as relevant information is made available to them without additional effort. Implementation requires centralised, clean data inventories which are coordinated across the entire organisation, and this in turn gives companies a pool of reliable data which they can use to make sound decisions on product investment, location-by-location inventory levels and ways in which ability to deliver can be increased. This essentially lays a foundation which enables them to not only react appropriately to market change, but also take advantage of as-yet unused potential in areas such as inventory optimisation, ability to deliver and liquidity.
More information: Dr. Boris Reuter, Partner, J&M Management Consulting, telephone +49 (0) 621 12 47 69 - 0 or via e-mail b.reuter
jnm.com.
Better decisions using Supply Chain Performance Management
Companies are always mindful of keeping an eye on the opportunities for – and threats to – their business. What are the potential risks involved?Dr. Boris Reuter: Companies tend to use sales and financial figures to identify market risks and their business-related implications. The problem is that such figures are often flawed due to inconsistencies or missing data, and this can lead to a scenario in which measures are either not taken or taken too late. When faced with difficult situations, firms are then likely to resort to knee-jerk reactions which see them invest heavily in the search for the 'correct' key performance indicators (KPIs) and place an additional burden on the organisation. Reporting cycles are continuously shortened, and 'throw-away' reports are generated. In the worst cases this can lead to errors in decision-making and investment, for example the selection of the wrong project or the sale of a supposedly unprofitable division.
Which path promises success?
Dr. Boris Reuter: The implementation of efficient Supply Chain Performance Management. This approach ensures comprehensive transparency where the actual company situation is concerned, for example details of sales and production volumes, inventory levels, lead times, down times and their influence on one another. It is also necessary to identify the people responsible: Who is managing which process, and according to what rules? It is only once the parameters and drivers involved in this complex network of relationships have been determined that supply chain performance can be systematically improved.
How does it work in practice?
Dr. Boris Reuter: Decisive key values are bundled into clearly defined KPIs and then used to both manage the value chain and provide a goal system for it. This enables companies to identify deviations at an early stage and counteract them using appropriate, targeted measures. One example is the modification of purchasing processes in order to offset production time buffers caused by delays in delivery processes. It is nevertheless a prerequisite for the successful application of this approach that all KPIs are consistently oriented to the supply chain. Sales & marketing, distribution, production and procurement departments therefore need to coordinate their KPIs and, in particular, focus them on shared goals. This enables the prioritisation of competing KPIs – for example low inventories and high service levels – and the definition of inter-relationships.
Which advantages can be achieved?
Dr. Boris Reuter: Supply Chain Performance Management delivers comprehensive transparency on an organisational and technical level. It enables companies to take better decisions, as relevant information is made available to them without additional effort. Implementation requires centralised, clean data inventories which are coordinated across the entire organisation, and this in turn gives companies a pool of reliable data which they can use to make sound decisions on product investment, location-by-location inventory levels and ways in which ability to deliver can be increased. This essentially lays a foundation which enables them to not only react appropriately to market change, but also take advantage of as-yet unused potential in areas such as inventory optimisation, ability to deliver and liquidity.
More information: Dr. Boris Reuter, Partner, J&M Management Consulting, telephone +49 (0) 621 12 47 69 - 0 or via e-mail b.reuter
jnm.com.