The local implementation of a global Balanced Scorecard. Performance measurement in Akzo Nobel Marine & Protective

Abstract

<b>Background</b><br> There is increased pressure on the supply chain to drive improvements to
support overall business performance. Previously, the overall supply chain
performance has lacked the right set of performance measures and has not
been monitored, with fragmented improvement projects as the result.<br>
<br>
To address this, a supply chain Balanced Scorecard has been devised for global
use. Implementation of the top level measures will take place during 2009.
The measures thereafter will be cascaded throughout the organisation.<br>
<br>
<b>Purpose and focus</b><br> The study aimed at contributing to the ongoing Balanced Scorecard initiative
by examining the present situation in the light of recent research within
business process management and performance measurement systems. The
focus will be on the production process.<br>
<br>
<b>Research objectives</b><br> The project had three objectives:<br>
O1. Validate the suggested supply chain Balanced Scorecard with respect to
the strategy of the business unit.<br>
O2. Suggest a KPI structure for a process oriented performance measurement
system that links operational activities to the high level end‐to‐end
process as well as the organisation’s top level measures.<br>
O3. Determine and explore the driving forces and barriers for implementing a
process oriented performance measurement system.<br>
<br>
<b>Method</b><br> The study was based on a case study of Akzo Nobel Marine & Protective
Coating’s European supply chain for Marine products. Direct observations and
interviews were the main data gathering methods. The interview series
spanned all organisational levels, all in‐process departments and the supply
chain entities downstream of the factory.<br>
<br>
<b>Conclusions</b><br> <i>The supply chain Balanced Scorecard</i><br>
The proposed measures can all be related to the company strategy. However,
two strategic performance aspects that are not covered have been identified.
These are ‘New product development’ and ‘Responsiveness’. Although the
Balanced Scorecard is rather weak in measuring the internal environment and
the employee perspective, the initiative has the potential to fulfil its intended role. That there is no business unit Balanced Scorecard is a source of concern.<br>
<br>
A process orientation could increase the benefits by avoiding sub‐optimisation
and encouraging a customer focus. Today, there is little understanding of the
importance of customer satisfaction as an external measure. A customer
satisfaction measure/survey should therefore be instated, perhaps on a rolling
basis. Measuring On Time In Full (OTIF) is an important complement. The OTIF
improvement potential is big and the measure sees strong support despite
having been underrated historically.<br>
<br>
<i>A key performance indicator (KPI) structure for the production process</i><br>
Any balanced set of measures should capture four vital performance areas:
Internal processes, external processes, internal environment and external
environment.<br>
<br>
A process based cascading structure with three levels is recommended. The
production process exemplifies the lowest KPI level. The suggested KPIs cover
process inputs and outputs (physical and informational), activity linkage and
factors that influence the top level measures of the supply chain Balanced
Scorecard. Time measures are important to link activities and promote process
thinking. Moreover, it is desirable to step away from the filling line focus to
finding measures for the entire process.<br>
<br>
OTIF and customer satisfaction are important outcome measures. New
product introduction, batch despatch and improvement activities are other
suggested new measurement areas. It is recommended to discard cost per
litre in favour of product cost breakdowns, overhead costs and batch costs.<br>
<br>
<i>Driving forces and barriers</i><br>
Many strong driving forces relate to the initiative’s potential business benefits.
Instating a well‐functioning OTIF reporting is also likely to gain support for the
initiative. Another powerful driver is employee involvement which is why the
recommended cascading approach is very participative. Focusing on training
with the help of skill matrices could further leverage this driver. The key
barriers are lack of trust, no existing process owner and the restriction of the
initiative to Operations. The latter is of particular concern since top
management backing is a strong driving force.<br>
<br>
The suggested measurement cascading approach challenges the assumption
that cascading is synonymous with breaking down the measures and suggests
that the measures instead should be created by in‐process workers based on
visions and guidance from management and the central Business
Improvement team.

• author: Åxman, Nina
• supervisor: Dag Näslund
• organization: Engineering Logistics
• course: MTT820
• year: 2009
• type: M1 - University Diploma
• subject: Technology and Engineering
• keywords: supply chain., implementation, Balanced Scorecard, performance measurement system, process orientation, performance measurement, performance measures, measurement cascading, production process, process management
• language: English
• additional info: ISRN LUTMDN/TMTP--5684--SE
• id: 1481994
• date added to LUP: 2009-09-29 15:15:25
• date last changed: 2010-01-25 09:45:59