A Generic Framework of Performance Measurement in Networked Enterprises

Transcription

1 A Generic Framework of Performance Measurement in Networked Enterprises October 8, 2009 Duk-Hyun Kim (Sejong Cyber U.), Cheolhan Kim (Daejon U.) 1

2 Contents 1. Introduction ; background, motivation, objectives, related work 2. NEPM: a Generic Framework for PM 1) ; features, KPIs 2), CAERs 3), strategy map 3. A Case Study ; characteristics of the NE, results of NEPM application 4. Conclusion ; summary, further research 1) PM refers to Performance measurement in this paper. 2) KPI : Key Performance Indicator 3) CAER: Cause-and-Effect Relationship 2

3 Terms & Concept Networked Enterprise (NE) An aggregation of private companies that work together for common goals, i.e., a kind of CNO Hub-and-spoke, supply chain, and peer-to-peer (P2P) types (Katzy & Loeh, 2003) vertical-, horizontal-, and ad-hoc integration type Performance Measurement (PM) A systematic approach using methods and tools to plan, measure, monitor, assess, reward, control the performance of processes and organizations (Graser et al., 2005) Could make an organization be more productive, goaloriented, strategy-focused, and continuously improving 3

4 Motivation of the Research Few Research Results on PM in NE * only in ECOLEAD Project PM of Virtual Organizations (Graser; Westfahl, 2005) Value Systems of VBE (Galeano & Romero, 2006) Needs a Comprehensive Framework for PM in NE * considering heterogeneity, dynamism, and complexity A balanced framework for different interests in many stakeholders and participants A generic but extensible framework for different forms of integration or collaboration Needs to Link PM and Strategic Management Rapid diffusion of NEs, but relatively few success stories 4

5 Goal & Approach Purpose of This Paper To suggest a PM Framework for NE, called NEPM It is based on the BSC approach and adopts some ideas from EFQM, and Supply Chain Event Management (SCEM) Approach Literature survey of PM frameworks in SCM & NE, KPIs, and causal relationships Development of a PM framework that includes generic KPIs and cause-and-effect relationships among them Application to some Korean NEs to investigate the usefulness of NEPM 5

6 PM Frameworks (1) SCOR (Supply-Chain Operations Reference model) By SCC (Supply Chain Council), v.9 in process groups: Plan, Source, Make, Deliver, and Return 13 KPIs at strategic level and more than 200 KPIs at operational level are defined The EFQM s s Excellence Model By the European Foundation of Quality Management in categories of QM 5 enablers & 4 results variables ; leadership, policy & strategy, processes, people, partnership & resources; customer/ people/ society/ key-performance 6

7 PM Frameworks (2) The BSC (Balanced Scorecard) Approach By Kaplan and Norton since categories of KPIs (learning & growth, internal process, customer, finance) Keep balance between financial & non-financial, in-process & outcomes, internal & external, long-term & short-term VOPM Developed in ECOLEAD in 2005 for VO 3 categories of KPIs, i.e., financial (capital, cost, revenue, profit), process (output, time, quantity), collaboration (reliability, flexibility, commitment), except customer, learning & growth of the original BSC 7

8 KPIs & Strategy Map of BSC Financial Perspective Productivity Strategy Improve Cost Structure Increase Asset Utilization Long-Term Shareholder Value Expand Revenue Opportunities Growth Strategy Enhance Customer Value Customer Perspective Price Customer Value Proposition Quality Availability Selection Functionality Product / Service Attributes Service Partnership Relationship Brand Image Internal Perspective Operational Management Processes Supply Production Distribution Risk Management Customer Management Processes Selection Acquisition Retention Growth Innovation Processes Opportunity ID R&D Portfolio Design/Develop Launch Regulatory and Social Processes Environment Safety and Health Employment Community Learning and Growth Perspective Culture Human Capital Information Capital Organization Capital Leadership Alignment Teamwork (Source) Kaplan R. S. & Norton D. P., Strategy Maps: Converting intangible assets into tangible outcomes, Harvard Business School Press: Boston, 2004, pp.3-pp.28. pp.28. 8

9 Basic Features of NEPM Rationale A PM framework helps create and design NEs, implement management/information systems, and share understanding of risk and benefit with all stakeholders. A generic framework could be generalized or specialized by adding or removing semantics PM in NE should guarantee balance between different forces for all stakeholders of NE. In all types of NE, KPIs of collaboration among members are essential for NEPM. Constructs of NEPM 28 generic KPIs in 4 categories of original BSC Generic Strategy Map with cause-and-effect relationships 9

10 Derivation of KPIs Adopt from Gunasekaran s s (2001, 2004) Suggested 40+ KPIs as an integration of conventional works Classified the KPIs in strategic, tactical, and operation levels; and financial and non-financial KPIs Adopt from Bhagwat and Sharma s s (2007) Selected 28 KPIs of Gunasekaran s and mapped into four categories of BSC Integration and Extension Integration of the two PM frameworks for a supply chain Extend them to PM for NE, e.g., Buyer-supplier relationship Partner collaboration, Leadership is inserted in learning & growth instead of a KPI 10

11 Resultant KPIs in NEPM Category Finance (FI) :9 KPIs Customer (CU): 6 KPIs Internal Process (IP): 6 KPIs Learning & Growth (LG): 6 KPIs KPIs Procurement cost, Production cost, Transportation cost, Marketing/sales cost, Customer services cost, Return on investment (ROI), Total inventory cost, Total cash flow amount, Information carrying cost Partner collaboration, Product quality, Delivery reliability, Delivery lead time, Customer response, Information service Network cycle time, Accuracy of forecasting, Product development cycle time, Cash-to-cash cycle time, Total inventory amount, Flexibility of service systems, Capacity utilization Leadership, Policy & strategy, Human resources, Other resources (asset, finance, information), Sourcing capability, Delivery capability 11

12 Basis of CAERs (example) Among Enablers Results Basis category KPI learning & growth internal process customer leadership, policy & strategy, resources internal process customer finance management results KPI leadership financial results (thru systems element) KPI KPI KPI sourcing capability (in LG) network cycle time & total inventory (in IP) partner collaboration & delivery speed (in CU) network cycle time & develop. cycle time & total inventory (in IP) partner collaboration (in CU) transportation cost (in FI) from BSC from EFQM By Wilson and Collier hypothesis in this research hypothesis in this research hypothesis in this research 12

13 A Generic Strategy Map 13

14 Case Study: Approach Characteristics of NEs 10 Korean consortiums constructed since 2006 Some belong to vertical type, e.g., automotive, shipbuilding and some belong to horizontal type, e.g., textile, electronics They tried to innovate collaboration among partners using RFID or internet portal, partly sponsored by the government. Application of NEPM We analyzed KPIs of each NE based on performance data in the final report they submitted in 2007 or Most of them have KPIs but have no clear strategy of collaboration when they started. K-consortium is one that shows relatively high performance. 14

15 Case Study: Strategy Map of K 15

16 Case Study: Strategy Map of S FI Procurement Cost Inventory Cost, total Production Cost Total Cash Flow Amount Sales Cost Return on Investment Transport. Cost Information Carry Cost Customer Service Cost CU Partners Collaboration Delivery Reliability Service Quality Delivery Speed Query Time Information Service Level IP Network Cycle time Forecasting Accuracy Develop. Cycle time Cash-tocash time Total Inventory Service Flexibility Capacity Utilization LG Sourcing capability Human resources Policy & Strategy Leadership Other resources Delivery capability 16

17 Case Study: Strategy Map of H FI Procurement Cost Inventory Cost, total Production Cost Total Cash Flow Amount Sales Cost Return on Investment Transport Cost Information Carry Cost Customer Service Cost CU Partners Collaboration Delivery Reliability Service Quality Delivery Speed Query Time Information Service Level IP Network cycle time Forecasting Accuracy Develop. Cycle time Cash-tocash time Total Inventory Service Flexibility Capacity Utilization LG Sourcing capability Human resources Policy & Strategy Leadership Other resources Delivery capability 17

18 Case Study: Findings Research Issues Relevance or relative importance of KPIs in each category Relative importance of CAERs to a KPI, i.e., which enabler variable really affects to result variables? Selection of actual metrics for each KPI in each NE type Similarities and differences between different types of NEs, e.g., horizontal, vertical, and ad-hoc types; sourcing, manufacture, and distribution types Practical Issues To make an NE successful, KPIs of NE s need to be defined by and shared with all NE participants; and PM should be linked with strategic management. 18

19 Conclusion Summary NEPM is suggested on the basis of BSC and EFQM 28 generic KPIs suggested in 4 categories of BSC generic Cause-and-Effects relationships (CAERs) NEPM is applied to 10 Korean NEs; and some findings are obtained for research and practice of PM in NE, e.g., the Strategy Map can be used for linking PM & SM Further Research Issues Empirical and theoretical research on the soundness and completeness of KPIs and CAERs Application of NEPMs to various NE types in Korea 19