Tracking Product Profitability A Case Study on Challenges and Opportunities in Performance Management

Abstract

Background:The
case
company
Atlas
Copco
has
a
decentralized
organisation
where
the
product
responsibility
has
been
delegated
to
the
Product
Line
Manager
located
at
the
production
facility.
To
manage
the
product
portfolio
and
make
strategic
and
tactical
business
decisions
related
to
the
products,
information
about
product
performance
and
profitability
is
a
key
input.
Today,
the
Product
Line
Manager
has
inadequate
knowledge
and
insight
in
the
product
profitability
of
the
products
in
their
portfolio.
The
product
profitability
is
estimated
from
data
with
somewhat
insufficient
quality
and
reliability,
with
the
help
of
tacit
knowledge
and
experience.
As
a
consequence,
the
Product
Line
Manager
is
occasionally
forced
to
make
decisions
without
complete
supporting
profitability
data.
6
Research
questions:
1.
What
are
the
existing
business
processes
for
tracking
profitability
at
the
case
company?
2.
Why
is
tracking
product
profitability
difficult?
3.
What
are
the
risks
of
not
tracking
product
profitability?
4.
How
can
the
business
process
for
tracking
product
profitability
at
the
case
company
be
improved?
Methodology:
This
thesis
is
a
qualitative
case
study
with
a
deductive
research
approach.
Empirical
data
has
been
collected
through
in-­‐depth
interviews
with
a
theoretical
frame-­‐
work
as
a
base.
The
empirical
data
was
matched
against
the
theoretical
framework
in
an
analysis
model,
aiming
to
answer
the
research
questions.
Conclusions:
Tracking
of
product
profitability
is
difficult
for
several
reasons.
The
key-­‐findings
of
this
study
are
that
tracking
of
product
profitability
is
difficult
because:
-­‐ complex
product
offering
creates
big
data,
-­‐ complex
organisational
structure
complicates
information
sharing,
-­‐ management
accounting
lacks
guidelines
and
support,
-­‐ individual
business
units
tend
to
focus
on
self-­‐
interested
goals
rather
than
on
company
goals,
-­‐ implemented
IT-­‐systems
are
not
aligned
with
business
needs.
7
Not
tracking
product
profitability
involves
many
risks
for
a
company.
Without
product
profitability
measures:
-­‐ product
portfolio
optimization
is
not
possible,
-­‐ the
quality
of
tactical
business
decisions
decreases,
-­‐ motivation
can
be
negatively
affected.
With
a
theoretical
framework
as
a
base,
the
following
factors
form
the
best
practice
when
tracking
product
profitability.
The
business
process
and
system
should
be:
-­‐ systematic
and
efficient,
-­‐ providing
information
with
an
adequate
level
of
detail,
-­‐ including
the
entire
value-­‐chain,
-­‐ easy-­‐to-­‐use,
-­‐ reliable.
Based
on
these
best
practises,
following
recommend-­‐
ations
are
suggested
to
the
case
company:
-­‐ keep
up
the
work
with
reducing
product
complexity,
-­‐ create
a
new
BI-­‐solution
with
corresponding
business
process,
-­‐ implement
a
new
job
position
as
“Product
Controller”,
improve
communication
between
responsibility
centres.

• author: Olsson, Josefine and Persson Hollsten, Mikela
• supervisor: Peter Berling
• organization: Production Management
• course: MIO920
• year: 2014
• type: M1 - University Diploma
• subject: Technology and Engineering
• keywords: Product Profitability, Decision-­‐Making, Tracking Profitability, Information-­‐Sharing, Responsibility Centres, Data Value Chain, Performance Management, Product Management, Business Intelligence, Motivation, Feedback.
• other publication id: 14/5498
• language: English
• id: 4519511
• date added to LUP: 2014-06-26 13:44:55
• date last changed: 2014-06-26 13:44:55