Reduce Risk in Your Supply Chain with Supply Chain Performance Management

William Newman is the author of the forthcoming title “Understanding SAP BusinessObjects Enterprise Performance Management (EPM)” due to be released by SAP Press (www.sap-press) in June, 2010.  This article appears as an abstract from that book focusing on supply chain effectiveness methods and approaches.

As a result of the financial crisis, operations managers around the world have faced reexamining their operating models and the value chain members that participate in their business to achieve even higher levels of cost and time efficiency. This reexamination is difficult on many fronts, calling to question old trading partner relationships and the habits that come with those relationships over many years, combined with an overall decrease in risk appetite.

Conventional management suggests reexamination built on the current business model, to discover ways of making the business become more efficient. In the post-crisis world, however, yesterday’s business model may not suit the forward direction of the organization. A fundamental discussion around effectiveness versus efficiency is in order based on new realities. First, effectiveness calls to question whether an enterprise is doing the right things to move it forward against its strategic direction and execute its mission.  With the advent of information systems in the late 20th century, it became increasingly easy to be mired in the data of enterprise operations to jump to the issue of efficiency, or rather doing the right things, right (and inadvertently introducing risk into the operations of the enterprise).

Unfortunately, for executives and management teams, it makes absolutely no difference if a company is efficient in its poor operations. In fact, it can have catastrophic results in simply executing a bad process more quickly or focusing improvements on areas where there may exist little or no relevance leading to a financial return. Important upside could exist for particular initiatives, such as perceived value in technology improvements, in one area of the value chain but to a lesser degree in others. Looking at broad, holistic improvements in the overall supply chain to drive effectiveness gains must address these disparate points of view across participating supply chain members.

Aligning a fragmented supply chain such as this can produce profound financial gains and eliminate unwarranted risks.  Internal to the organization, supply chain optimization considers not just one particular element of the SCOR® model, but the holistic gains to the organization across all key processes from source through delivery Efficiency gains in the make stage of operations (e.g., new fabrication technologies desired to increase the value content of a new product) may yield efficiency losses in the source stage of the operation where a supplier is not readily available to deliver such new tooling. External increases in the sourcing of materials to overseas operations may have a downstream negative impact on delivery time of the final product to customers. The post-crisis world demands a broader and more transparent view of effectiveness, rather than isolated pockets of operational efficiencies.

SAP provides SAP BusinessObjects Supply Chain Performance Management to address these opportunities. I’ll introduce you to this product so you can also benefit from full-visibility operational effectiveness across your organization. I’ll use an example of an operations manager of a semiconductor company to show you the ways you can improve the performance of your supply chain.

To read the entire article, please visit the SAP Insider GRC Expert website here.

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