Mjf Marc Wouters

Designing a performance measurement system: A case study

Performance measurement (PM) by means of local performance indicators (PIs) is developing into performance management at a company-wide scale. But how should PIs at various levels in the organization be incorporated into one system that can help managers, working at levels that range from operational to strategic? How do we convince potential users and obtain their support when starting to develop such a system? How can we aggregate PIs? How do we present results? This paper addresses these and related questions. It is based on a case study carried out at the European Operations department of Nike, a company producing and selling sportswear worldwide. The study resulted in a prototype system that basically is a balanced scorecard tailored to the needs of the company. The empirical findings differ in some ways from the literature on developing performance measurement systems (PMSs) in Operations. Discussing these differences provides new theoretical and practical insights. They relate to the role of parallel initiatives for PM, the role of standardized metrics, the continuous improvement of PMSs, and the normalization and aggregation of measures. Our findings suggest that developing PMSs should to a large extent be understood as a co-ordination effort rather than a design effort. The lessons learned cannot have universal validity, but may be helpful in similar kinds of initiatives.

Measuring the bullwhip effect in the supply chain

Increased demand variability in supply chains (the bullwhip effect) has been discussed in the literature. The practical measurement of this effect, however, entails some problems that have not received much attention in the literature and that have to do with the aggregation of data, incompleteness of data, the isolation of demand data for defined supply chains that are part of a greater supply web. This paper discusses these conceptual measurement problems and discusses experiences in dealing with some of these problems in an industrial project. Also presents empirical results of measurements of the bullwhip effect in two supply chains.

Cooperation between multiple news-vendors with transshipments

We study a situation with n retailers, each of them facing a news-vendor problem, i.e., selling to customers over a finite period of time (product with a short life cycle, such as fashion). Groups of retailers might improve their expected joint profit by coordinating their orders, followed by transshipments after demand realization is known. We analyze these situations by defining a cooperative game, called a general news-vendor game, for such a situation with n retailers. We concentrate on whether it makes sense to cooperate by studying properties of general news-vendor games. Our main result states that general news-vendor games have non-empty cores.

The use of advance demand information in a project-based supply chain

In a project environment, a manufacturer is confronted with two types of demand: regular demand from many small orders and very irregular, lumpy demand from infrequent, large orders. Manufacturers who build to stock must carry large safety stocks to meet the lumpy demand. As part of the project engineering process, however, project engineers and implementers (e.g. installers) typically have developed information about material requirements well in advance of placement of orders. We analyze the inventory reduction that could be achieved if the installer were to communicate advance demand information (ADI) to the manufacturer. We look at it in particular when the bid is placed. We focus on the following characteristics of available ADI in project environments: First, ADI information is uncertain, because decisions on installer and manufacturer selection have not yet been finalized. Second, information is detailed, available at the item level. We show that ADI is particularly valuable when potential demand for large projects is irregular and when proposals for potential projects have a high probability of leading to orders.

Multi-echelon multi-company inventory planning with limited information exchange

Supply chain planning concepts from multi-echelon inventory theory are generally based on some form of centralised planning of supply chains. Those multi-echelon models that do consider decentralised planning, assume complete information and/or a specific single objective function. This paper investigates how multi-echelon inventory theory can accommodate a setting with decentralised decision makers (a supplier and a number of retail groups) without complete information. We present a coordination procedure that does not require the retail groups to exchange demand information, but does allow using opportunities for demand pooling between them. We illustrate our ideas by way of a quantitative analysis of a two-echelon divergent supply chain, with both cooperative and non cooperative retail groups. We conclude that coordination across a supply chain with decentralised control and limited centralised information is feasible by using available algorithms with satisfactory service level and cost performance.

Supporting Management Decisions with Ex ante Accounting Information

This paper is about the relationship between management decisions and accounting information. Management decisions have consequences in different functional areas, departments, and different companies along the value chain. Accounting information regarding decisions aims to translate as many as possible of the diverse consequences of a decision alternative into a single financial unit of measure. This makes such information both powerful and weak: various sources of information are integrated to allow trade-offs, but operational richness gets lost in the translation. The research is based on case studies and identifies situations in which managers find accounting information useful to support decision-making: (1) when they must make a significant, new or rarely taken decision, (2) when they must take new considerations into account, and (3) when operational knowledge is distributed across various people from different parts of the organization.

Defining an information structure to analyse resource spending changes of Operations Management decisions

In this paper, we discuss the support of Operations Management decisions with Management Accounting information. We describe two such decisions: setting the MPS and Order Acceptance. We discuss how these decisions can be supported by financial information. We present a model for calculating the financial impact ofa MPS. If different MPS scenarios are feasible, the impact of each can be calculated as a basis for comparison and decision-making. However, it is not straightforward to calculate the financial impact of a MPS. There are problems, e.g. the absence of sales prices and material values, because of the criteria used for selecting products and components for the MPS. These problems are discussed and a model to resolve these problems is demonstrated. The model is theoretically interesting because it makes clear some of the differences between Operations Management concepts for planning and decision-making, and such concepts in Management Account ing. We then discuss Order Acceptance in direct relation ...

A generic accounting model to support operations management decisions

Information systems are generally unable to generate information about the financial consequences of operations management decisions. This is because the procedures for determining the relevant accounting information for decision support are not formalised in ways that can be implemented in information systems. This paper describes a formalised procedure, which is based on the following theoretical propositions: (i) cost behaviour is described on the basis of a companys contracts for purchasing and selling resources, and (ii) hierarchical relationships between decisions are recognised, because some decisions have to be made earlier than others. Earlier decisions determine the feasible alternatives for later decisions (e.g. through constraints in available production capacity or components), and the plans that supported the earlier decisions serve as instructions for later decisions. The procedure can be implemented in information systems to provide accounting information in case later decisions deviate from these instruc tions (within the limits of the real-world constraints) because new information becomes available.

The economic evaluation of a joint supply chain innovation

ABSTRACT In this paper we discuss the economic evaluation of a supply chain innovation. We look at a situation in which a single manufacturer and a single distributor consider relocating assets and reengineering processes, in order to reduce total assets and total costs in the supply chain. The selling price between the manufacturer and distributor needs to be adjusted to reflect the new costs and asset levels. We investigate the price adjustment needed to maintain the ROA (Return on Assets) of both companies and to yield a nonnegative NPV (Net Present Value) for both companies. We identify conditions under which ROA and NPV yield the same results, such as the absence of implementation costs. We also demonstrate that the minimum price required by the manufacturer may lie above the maximum price acceptable for the distributor. Then the price range is empty and companies will not be able to find a price adjustment that results in a nonnegative NPV and nondecreasing ROAs for both companies.