Your market share is moving down, you aren’t able to penetrate into new markets as per the plan and expectations; your bottom lines are not improving even with improving revenues. People across the company are putting their effort in bring back the company on track and at par with the expectations. The efforts could be in the form of new initiative to improve the market share, more marketing effort focused on penetrating the market, or driving cost control measure to improve the bottom-line. But, are will trying to treat the symptoms rather than the disease.
Companies across the global are realizing the important role their supply chain can play in improving their revenues, reducing their cost as well as shielding them from unexpected events that could have turned the business topsy-turvy. Realizing the importance of supply chain is by no doubt a big step in turning around the financial performance of the company. But, it’s not the last and only step. Once every individual in the company understand the importance of supply chain performance in the financial performance of the company, it is very important to understand the relationship between each process and how it ultimately contributes to better financial performance or how a lacunae in its supply chain process is going to have an adverse impact on the same.
For enabling improved visibility into the relationship between supply chain performance and financial performance, the company has to develop a strategy map. A strategy map will help the executives to pictorially represent the relationship between operational, strategic and financial processes and metrics. An effective tool that can be used for developing a comprehensive and forward looking strategy map is root-cause analysis. A well executed root-cause analysis will help in understanding the factors that influence each factor and thus acts as the basis for a robust strategy map. A well executed root-cause analysis will enable the company to solve the existing problems by eliminating the real cause rather than treating the symptom and fighting it out every time it resurfaces. The company can thus eliminate all problems that have surfaced within its business and within its control. This helps the organization to reduce a lot of firefighting. Now the organization can focus on issues that arise due to issues external to the company and beyond its control.
Use of root-cause analysis does help in identification of real cause and eliminating them, but it cannot guarantee that the same problem will never resurface because of factors beyond control. The strategy map developed from a well executed root-cause analysis when combined with a robust analytical solution creates a unique solution that can enable continuous monitoring of organizational processes and performance and ensure on time treatment of the actual disease. SAP BusinessObjects Supply Chain Performance Management when enabled using a well designed strategy map can provide a unique solution that can help the organizations to focus on critical supply chain performance issues on a real-time and continuous basis. The solution enables the executives to take corrective actions instantaneously without engaging in extensive analysis every time with its drill down and root-cause analysis functionalities. Further, the executives can easily fine tune SAP BusinessObjects Supply Chain Management solution based on new findings or changing business conditions and thus ensure timeliness and accuracy of diagnosis and enable effective remedial action.
With the development and execution of the strategy map utilizing root-cause analysis the company is able to eliminate the recurrence of any identified problems and SAP BusinessObjects Supply Chain Performance Management enabled with this strategy map will ensure the timely identification of the root-cause in a new crisis, thus enable companies to grow in the expected or desired manner.
Let me take you through an example using the solution so as to explain the importance of identifying the root cause and establishing the relationship between the problem, symptoms, causes and root cause as well as the how SAP BusinessObjects Supply Chain Performance Management Solution enables quick analysis of relevant information.
Mike Richards the Vice President Fulfillment is responsible for ensuring reliability in Mac Thomson & Co., a multinational Consumer Durables company. His primary objective is to ensure delivery of the rights goods in the right quantity at the requested time.
In order to track the performance of his Key Performance Indicators, he opens his scorecard. He has two perspectives: 1) Customer Service and 2) Financial.
Richards observes that the objectives attached to both the perspectives are not performing well. Even though the score card indicates the cost factor to be in a more critical situation, Richards decides to focus on reliability first as it is his primary objective. He selects the perspective Customer Service for understanding the reason for its low performance.
The objective – Improve Fulfillment Reliability is measured using the Key Performance Indicator – Perfect Order Fulfillment Line Item Binary wrt Requested. The normal reaction to such a situation will be to put pressure on the distribution system to improve its performance so as to improve the delivery reliability. Richard is not going to pick up his phone or write a mail to the Distribution Head. Rather, he uses the drilldown functionality built into the solution. He finds that Perfect Order Fulfillment Line Item Binary wrt Requested is dragged down Order Delivered in Full Line Item Binary wrt. Requested, which in turn is pulled down by Delivery Quantity Accuracy Line Item wrt. Requested.
What could be the reason for delivery quantity inaccuracy? Of course, it’s a distribution problem. The distribution team is not ensuring the requested quantity is being delivered. Could it be a problem with packing, or is it some pilferage during distribution. Let’s see what’s Richard is going to do.
Richard decides to see what is really affecting delivery quantity accuracy rather than going on hunch and feel. He uses the impact analysis functionality, wherein he looks at the various factors that would be affecting delivery quantity accuracy.
The solution identifies three factors that can impact delivery quantity accuracy: 1) Forecast Accuracy, 2) Distribution Schedule Achievement and 3) Production Schedule Achievement. Richard is able to understand the real cause which in here is production schedule achievement which is in red. Looking at the graph Richard is able to see that the production schedule achievement is consistently below target.
Finally, Richard decides to call up the Production Head rather than the Distribution Head to improve the delivery reliability. Richard was able to take the right decision based on an established framework utilizing near real-time information without going by hunches or by gut feel. Richard was able to attack the real problem rather than putting efforts on treating the symptoms.
Note:An important thing to remember when implementing SAP BusinessObjects Supply Chain Performance Management is that it’s not just implementing a few Key Performance Indicators selected in random based on available data or user preference. It’s identifying and implementing the right set of Key Performance Indicators based on the strategy map that will enable the executives to sense the symptoms and recognize the disease and apply the right medication or vaccination as and when required.