MGMT 565 Guest Lecture Summary
Ashitha Annamalai
On the 29th of September, 2015, we had Marc Hochman, the VP of the Procurement team from A.T. Kearney present a guest lecture on Building the Brand for Procurement. He gave us a brief talk about the future of Supply Chain Management by 2020. The topic that interested me the most from his talk was about ROSMA - Return of Supply Management Assets.
Marc mentioned that A.T. Kearney has come us with this ROSMA framework which is going to be a revolutionary performance measurement standard enabling procurement by quantifying its financial contributions. He narrated how they came up with the framework. He said,” Working with the CPOs and CFOs from leading multinational companies, A.T. Kearney identified 7 drivers required for procurement leaders to measure procurement performance continuously and, using accepted financial frameworks, created the ROSMA framework.”
When you look at how procurement functions in the business world, it is easy to see why so many companies take advantage of it. I believe that a sound procurement operation can help merely any business improve its product, save money and be more competitive. Basically when it is done right, procurement can be really really good. But in the business world, the word - GOOD is pretty ambiguous. I mean, how does a company know how good its procurement operations actually is? Or how much of value it is adding to its business? They say GOOD isn’t a kind of language that executives especially CFOs typically speak.
When CFOs communicate with each other they speak in measurements. Think about it… during all those quarterly analyst calls you hear all kinds of stuff about cash flow estimates, earnings per share, return on ...
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...ur performance in a quantifiable term. I believe that with this specific concrete measurement for procurement, companies can streamline ROI, benchmark their performance and communicate in a language that C level peers can understand. And when you look deeper into their overarching solution you really get more than just a simple calculation. They say by organizing the important elements of an operation you’ll be able to set and track annual goals, giving your executives a better visibility of what needs to be accomplished and what their level of engagement should be and how they can add value. It also gives the ability to compare performance with other companies and industries. I feel, ultimately with A.T. Kearney’s PPM solution and ROSMA it is never been easier to manage, track and most importantly measure procurement operation ever before. Hats off to their efforts!
Smith & Brown currently use Budgets and review meetings to measure performance and short-term financial targets to drive performance. Budgets use conventional performance measures which are focused on financial aspects where it seeks to explain the financial consequences of actions and decisions through the use of variance analysis, but it can not identify the causes or the source of bad financial performance. However, non-financial information has proven to address this problem, and has been incorporated in the balanced scorecard to help businesses measure its performance more effectively by providing management with information about what could be causing inefficiency in the production cycle and what could be the source of bad performance
WISNER, J.D., TAN, K. and LEONG, G.K., 2009. Principles of supply chain management : a balanced approach / Joel D. Wisner, Keah-Choon Tan, G. Keong Leong. Mason, OH : South-Western Cengage Learning, 2009; 2nd ed. pp 111-113,262
The intention of the BSC was to include other indicators that contribute towards strategic success into the organizations performance management system. Kaplan and Norton saw the over reliance of financial indicators as too simplistic a view of organization performance.
In the 1960s through the 1970s, companies realized strong engineering, design, and manufacturing functions were strong market strategy keys to create and capture customer loyalty. As the demand for new products rose in the 1980s, these market requirements were to increase their flexibility and responsiveness to adapt existing products and processes or to develop new ones in order to meet customer needs. As manufacturing improved in the 1990s, managers began noticing material and service inputs involving suppliers and their major impact on an organization’s ability to meet customer needs. As a result of these changes, organizations now find that it difficult to manage their own organizations. First, they must be involved in the management of their network of all upstream firms that provide directly or indirectly, as well as the network of downstream firms, which are responsible for delivery and market service of the product to the end customer. In order to succeed, managers have to realize that they cannot do it alone and they must work together on a daily basis with the whole organizations in their supply chains. Because supply chain management involves all functions within an organization, managers need to know what a supply chain is, why it is important, and the impact of supply chain management on the success and profitability of their organization. Today, Wal-Mart topped the list of the America’s biggest companies on the Fortune 500 list, “with sales of almost $345 billion — more than a quarter of a trillion dollars” (Forbs). Wal-Mart’s supply chain management is becoming recognized as a core competitive strategy.
Melnyk, S., Stewart, D., & Swink, M. (2004). Metrics and performance measurement in operations management; Dealing with the metrics maze. Journal of Operations Mangement, Retrieved 2 May 2011. http://mldc.whs.mil/download/documents/Readings/metrics%20maze.pdf
The system was augmented with Management by Objectives (MBO) and Operational Performance Measurement Systems
Procurement is a subject that has a wide variety of branch. Many areas need the knowledge of procurement in order to practice effectively or attain their maximum profit levels. Procurement helps in determining when and how one should conduct certain transactions in the business. Procurement principle s help to guide healthy relationship with other subjects and avoid many business mistakes that have a high probability of happening. Some of the main principles that procurements deal with include; f value for money, ethics, competition, transparency, and accountability. This principles help procurement to be effective thus help in making important decisions in organizations.
The expression Supply Chain Management was initially instituted by Keith Oliver. The idea of ‘Supply Chain’ in administration was of great significance , in the mid 20th century , particulary with the formation of assembly line.
‘Supply chain management integrates supply and demand management within and across companies. It encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, thir- party service providers, and customers’. (Web: Council for Supply Chain Management Pr...
(1999).Advanced supply chain management: How to build a sustained competitive advantage. San Francisco, CA: Barrett-Koehler Publishers, Inc.
The business environment is increasingly becoming competitive and challenging. In the recent past, manufacturers have found themselves facing the threat of dwindling profit margins due to unfortunate global events such as the 2007 global financial crisis and the on going Europe economic crisis. The need to improve operation efficiency so as to ensure current and future investment yield the highest rate of return has therefore become extremely important. Manufacturers are now actively engaged in, managing their costs, Research and Development, adopting best procurement strategies, among other Actions. While such actions might eventually lead to positive results, additional business value can be achieved through proper management of the supply chain (Waymer, Ivanaj & Mussa 2009; Krivda 2004).
Hard dollar benefits are those areas in which SAP helps the company save money in some manner. This may be from running more efficiently or more effectively, which often times allows a company to run more cheaply. These benefits can often be seen in operations throughout the company. They shine through in inventory management, asset management, purchasing, and many other places within the business. “Hard benefit descriptions always begin with an action verb, have a noun in the middle that can be dollarized, and end with a data point. (Doane, pg. 104)” Hard benefits do not come simply by implementing SAP. They come based on the design implemented, and this design is in place to bring back an expected result and benefit. This expectation comes from having the understanding of what SAP has the ability to deliver to a particular business. This knowledge is what is used to discover what benefits SAP can offer on each individual basis.
Coyle, J., Langley, C., Gibson, B., Novack, R. and Bardi, E. (2008).Supply Chain Management: A Logistics Perspective. 8th ed. Cengage Learning, p.366.
When implementing a new performance management system in an organization there are both advantages and disadvantages that need to be taken into consideration by the design team. However, one of the best ways to know if a performance management system is effective is by implementing the system within the organization and then continuously monitor and reevaluate if the system is still relevant to the organizational
My job at TCS has exposed to the various nuances of Supply Chain Management and therefore, I feel I can add value to my profession through a pursuit of this course.