A White Paper
by Alan Eisman
Alan Eisman serves as the National Director of Performance Management Solutions at Information Builders. Prior to this position Alan ran Information Builders’ NY Metro Region and advised many clients on a wide range of business intelligence applications designed to improve operational performance.Alan has over 20 years of senior management experience in enterprise software including ERP, business intelligence, CRM, and enterprise integration. Prior to Information Builders, Alan held director and vice president positions with JD Edwards, System Software Associates, and Information Management Associates. He received his initial training in information systems with IBM. Alan is a frequentspeaker on topics like operational performance management and translating strategy into execution. Alan is also certified in the American Production and Inventory Control Society. (APICS)
Table of Contents
Executive Summary Competing Objectives Managing Risk The Case for Sharing Information – Collaboration and Trust Aligning Objectives Across Strategies and Perspectives OperationalPerformance Management Fostering a High Performance Collaborative Value Chain A Framework for Operational Performance Management Supply Chain Performance Scenario The Agile Supply Chain The Bottom Line – Performance Improvement and Cost Savings
Historically when a firm (typically a manufacturer or distributor) referred to itssupply chain it primarily considered business processes directly within its control. Yes customers and vendors mattered, but these factors could be better controlled since relatively fixed production schedules were the norm, products were less commoditized, and local proximity mattered. Past initiatives to improve supply chain performance primarily focused on cost reduction, efficiency, and qualitythrough total quality management (TQM), just in time (JIT), and six sigma initiatives. To be competitive today emphasis needs to be placed on maximizing not only cost reduction, but on greater agility, innovation, and partnerships. According to Harvard Business School Professor Michael Porter any activity in a firm’s value chain that does not provide real competitive advantage is a candidate foroutsourcing to a partner that can provide a cost or value advantage.1 With this trend towards outsourcing more functions, the supply chain extends well beyond the internal functions of an organization. While this presents opportunities for competitive advantage and business agility it also presents a greater need for communication, information sharing, trust, and shared goals between supply chainpartners. Figure 1 illustrates the virtual supply chain’s potential for optimal performance.
Broadly defined, the term supply chain has come to mean value chain. Today supply chains exist in every type of business and represent all processes related to creating and providing value to stakeholders. For manufacturers, distributors, and retailers, a supply chain is the core businessfor other types of organizations: healthcare, financial services, state and local government etc. – when we think of the supply chain as the value chain the same principals apply.
1 Martin, Christopher. “Logistics and Supply Chain Management,” Pearson Education Limited, Third Edition 2005.
Each year business executives emphasize strategy and lay out broad goalsand initiatives to support corporate objectives. These lofty proclamations are put forth in annual reports, on corporate Web sites, and in company newsletters and posters that are hung in every corridor and by each watercooler. Dr. David Norton, who along with Dr. Robert Kaplan pioneered the balanced scorecard approach to translating strategy into operational execution, was recently quoted as...