Balanced Scorecard Ing.J.Skorkovský,CSc. and various listed sources Department of Corporate Economy Balanced Scorecard and continuum of value (1st part) •Balanced Scorecard is a step in the continuum describing value • and how the value is created Mission – why we exist Values – what is important to us Vision – what we want to be Strategy – our game plan Strategy map – translate to strategy Balanced scorecard – measure and focus See next show Balanced Scorecard and continuum of value (2nd part) •Balanced Scorecard is a step in the continuum describing value • and how the value is created Target – what WE need to do (plan, project, budget, …) Personal Objectives – what I need to do Strategic Outcomes Satisfied Shareholders Delighted Customers Efficient and Effective Processes Motivated and Prepared Workforce See next slide Budget model in ERP-setup Total budgeted amount =380 Budget model in ERP – (sales of consulting services) Sales line (invoice) 24.1.2019 Sales line (invoice) 31.1.2019 Sales line (invoice)7.2.2019 General ledger entries 400+480+60=940 Budget- Planned-Actual Definition •BS developed by Robert Kaplan and David Norton •BS examines a firm´s performance in four critical areas Finances – how should we look to our shareholders ? Customers – how should we look to our customer ? Processes – at which business processes must we excel ? Learning and Growing – how will we sustain our ability to change and improve ? Resource : Operation Management, Quality and Competitiveness in Global Environment, Russel &Taylor Basic strategy map (two lower BS levels) Resource : Operation Management, Quality and Competitiveness in Global Environment, Russel &Taylor (not the red ones) Human capital Organizational Capital Information Capital Supplier Relationship Lower cost of ownership JIT delivery TQM – High quality supply Production and Services Lower cost of production Continuous improvement (Kaizen) Reduced cycle time (see Little´s law) Shorter production lead times Working capital efficiency (fin. leverage) MRP,MRP_II Advanced Planning and Scheduling Good Resource Planning Perfect way of cost calculation (actual-expected) Application of Theory of Constraints Linear programming- optimization SCM-Supply Chain Management Lower cost of transport Better way of stock replenishment Better delivery performance Risk Management Financial risks Cash flow management Operational risk Technological risk Analytic applications BI, transaction processing applications=ERP, ..) Excellent training of resources Efficient and flexible structures and reporting system, teamwork, culture Basic strategy map (two upper BS levels) Resource : Operation Management, Quality and Competitiveness in Global Environment, Russel &Taylor (not the red ones) Competitive prices Low cost of supply Perfect Quality Deliveries in time Finance Become industry cost leader (Gartner Magic Quadrant Matrix) Maximize use of existing assets Improve cost management Processes – at which business processes must we excel (see previous slide) ? Strategy Increase value of customer account Stars and Milk Caws segments of Boston Matrix Stable product portfolio New resources generation (higher market share ) R&D related to current product portfolio Shareholder value Balanced Scorcard worksheet Resource : Operation Management, Quality and Competitiveness in Global Environment, Russel &Taylor Explanations : FTL-full truck load, LTL- less than truck load , SPC=statistical process control, EDI=electronic data interchange, Cycle time=time/unit=(e.g.7 min/1 customer request) (50+80)/2 Some units (home study- ONLY Czech courses and AOPR ) •Will be presented later in sections such as : –Little´s law (WIP=Throughput *LT –Theory of Constraint… •Takt Time (TT) – rhythm in which we have to produce in order to satisfy customer demand (demand is 240 toaster ovens and we can produce these in 480 minutes ->TT= 480/240=2 •Lead Time (LT) – Number of minutes, hours, or days that must be allowed for the completion of an operation or process, or must elapse before a desired action takes place –see next slide • ERP outputs and BS Report generated from ERP MS Dynamics NAV w Based on KPI estimation in % out analysed company is excellent, but on the other hand, collecting money, credit limit and overdue management is falling behind Resource : Operation Management, Quality and Competitiveness in Global Environment, Russel &Taylor (only radar chart) ERP forms related to customer aging report BS and OM Finances – how should we look to our shareholders ? Customers – how should we look to our customer ? Processes – at which business processes must we excel ? Learning and Growing – how will we sustain our ability to change and improve ? Project management Theory of constraints Production Critical chain Drum –buffer-rope MRP-MRP-II,JIT,APS Linear programming Cutting, blending Total quality management Pareto, ishikawa Product postitioning Little´s law Boston Matrix Gartner QM Workflow CONWIP Logistics EOQ, ABC Decision making Kepner-Tregoe Hurviwtz Business Intelligence Yield management Prospect theory Strategic initiatives (two lower BSC layers have defined way : Goal-Measurement-Intent-Action Program Marketing skill Database of customers They arrived for the first time Unpleasant surprise Sales channel turnover Ratio WIN/LOST Goal Measurement Intent Action program Marketing skills % of skills % customers with correct data In one year 100% In 2 years 80 % Training New SW To keep our existing customers To enlarge market share Ratio WIN/LOST Quantity of problems by50 % - 2 years (decrease) Number of new customers by 100 % - 2 years (increase) Programof targeted marketing Support of image Action sales Provided value Better relationships Sales growth Profit growth Satisfied shareholders Tabulka jako podklad pro konstrukci grafu JSS (FRTàBSC) a eliminaci nepotřebných aktivit (obdoba postupu při zavádějí štíhlé výroby) JSELIT Czech courses only Výsledný graf po aplikaci JSS (transpozice FRT->BSC vrstev) Czech courses only Strategy Map-The Simple Model of Value Creation To achieve our vision, how must our organization learn and improve ? To satisfy our customer, which processes must we excel at ? To achieve our vision, how must we look to our customers? If we succeed, how will we look to our shareholders ? Resource : Strategy Maps, Kaplan and Norton Learning and growth perspective Internal perspective Customer perspective Financial perspective Strategy Strategická mapa (BSC)- velmi zjednodušené schéma Potřeba unikátních zdrojů-znalostí Vyhledávání zdrojů Náklady na zdroje Parametry výběru zdroje IQ kreativita flexibilita míra shody SZ a PZ Zdroj Školení PZ Testy Vyškolený zdroj nízká míra úspěšnosti Dodávka služeb Spokojený zákazník Konkurenční výhoda Vyšší tržní podíl Zisk Spokojení majitelé profil zdroje TOC CONWIP Workflow 19/11 Czech courses only Test 1 •What is the main goal of a company? • A) Obtain the highest profit B) Find solutions that will be in the best interests of stakeholders C) Produce as many products as possible D) A and C E) None of the above B) Test 2 •Which of the following is Operations Management Technology not concerned with? • • A)Product & Service Technology B)Process Technology C) Globalization technology D)Information Technology E)All of the above C) Test 3 •Which of the following would be considered an input when converting inputs into outputs during the transformation process? •A) Land B) Capital C) Raw Materials D) Facilities E) All of the above E) Test 4 •Which of the following is not a key element of supply chain management ? •A)Purchasing B) Suppliers C) Location D) Logistics E) Managers decision E)