Supply Chain Management and Business Performance

The VASC Model
 
 
Wiley-ISTE (Verlag)
  • erschienen am 29. Juni 2017
  • |
  • 278 Seiten
 
E-Book | ePUB mit Adobe-DRM | Systemvoraussetzungen
978-1-119-42741-4 (ISBN)
 
Against this current trend of low growth and high uncertainty, business directors must work with their shareholders to set strategic objectives and define business models.
The great number of possible strategies makes this type of management very complex, and the actual deployment of strategic choices is often limited by a lack of overall coherence within the organization.
This problem calls for an appropriate and renewed response. In strategic management today, a closer, permanent dialogue is needed between operational and financial performance.
Based on a supply chain approach, the Value Added Supply Chain (VASC) model focuses on driving operational performance, but aims to achieve a greater and more dynamic integration between these two dimensions of the company's value creation.
1. Auflage
  • Englisch
  • London
  • |
  • USA
John Wiley & Sons
  • 2,77 MB
978-1-119-42741-4 (9781119427414)
weitere Ausgaben werden ermittelt
Contents
Acknowledgments ix
Foreword xi
Introduction xv
Chapter 1. Managing Performance: Objectives and Managers' Needs 1
1.1. Towards greater organizational agility 2
1.1.1. Some basic trends and their impacts on businesses 3
1.1.2. The evolution of business models: some examples from different sectors. 10
1.1.3. Divergences, but above all, major trends in performance management 38
1.2. Needs and objectives of the CEO and the Board 45
1.2.1. The objectives of the CEO and the Board 46
1.2.2. Needs in terms of information quality and responsiveness 55
1.3. Financial directors' needs and objectives 58
1.3.1. The involvement of a Chief Financial Officer (CFO) in the strategic process: from business model to business plan 60
1.3.2. Optimizing the business' finance structure 66
1.3.3. New objectives in financial strategies 70
1.4. Supply chain management and operations management 81
1.4.1. Supply chain management: definition and positioning 81
1.4.2. Objectives that require a transverse approach 88
1.5. Conclusion 97
Chapter 2. Management Techniques and Tools 99
2.1. Tools for managers 100
2.1.1. Tools for measuring the creation of value 100
2.1.2. Tools for managing the value chain or the strategy deployment chain 105
2.2. Tools at the disposal of CFOs 116
2.2.1. The difficult reconciliation of time horizons 117
2.2.2. The importance of management control as
a support for financial steering 127
2.3. The supply chain manager's tools 142
2.3.1. Repository of good practices 142
2.3.2. Organizational models adapted to transversal management 150
2.3.3. Tools for operational steering and their connection with financial steering 158
2.3.4. New tools for more financial objectives 166
2.4. Conclusion 174
Chapter 3. New Ways to Steer Supply Chain Performance 177
3.1. Supply chain management through improvement of operational performance 184
3.1.1. Performance steering and the value creation process 184
3.1.2. Value tree (modeling financial equations) 187
3.1.3. The link between business indicators and financial strategy 191
3.1.4. Supply chain business model 198
3.1.5. From business model to steering supply chain value creation 200
3.2. Impacts of operational performance on financial management 202
3.2.1. The interrelations between changes in cost structure and EBITDA 204
3.2.2. The interrelations between changes in depreciation periods and cash flow 208
3.2.3. The interrelations between changes in stock levels and WCR 210
3.2.4. The cohesion of financing the supply chain business 211
3.3. Organization of the VASC model 213
3.3.1. A representation of the organization in terms of supply chain 214
3.3.2. An approach to steering the VASC model 220
3.4. Conclusion 225
Conclusion 229
Bibliography 235
Index 245

Introduction


The world is changing. It changes every day. This phenomenon is not new, but what is new is the speed, size and diversity of the changes that we have been experiencing for some years. These changes are as economic, political, social or environmental as they are technological and, of course, impact businesses and their strategic choices.

The financial crisis in 2008, the most significant experienced in recent times, has profoundly upset the global economic situation. Without going back to its origins, the behaviors and financial mechanisms that triggered this crisis, we must remember that without the intervention of many nation states to avoid defaulting on bank payments and then, of whole sectors of the economy such as the entire car-manufacturing sector, major crises would have occurred. Beyond the emblematic collapse of Lehman Brothers, industrial groups, including real flagships in their sectors, such as General Motors or Peugeot SA, only owe their survival to the intervention of public powers through input into their capital. The consequence of this forced interventionism has been the considerable increase in public deficits, condemned by ratings agencies, leading to strict budgetary policies almost everywhere in the world, with notable examples such as Greece, Portugal, Spain or Ireland to take only European cases. Between debt refinancing strategies on the markets to lessen cost, and austerity, which consists of reducing public expenditure, and this despite accommodative measures from central banks such as the American Federal Reserve or the European Central Bank, governments find themselves limited in the actions they can take to stimulate economic growth, which is the weakest it has been for some years, and which accompanies very high unemployment. These difficulties in relaunching economic growth, and in giving a little more visibility to economic actors, have already made some think of the pertinence of a "new deal" in the form of a voluntarist relaunching policy on the part of nation states, which first makes it necessary (and this is not the least of the obstacles to such a solution) to cancel a substantial number of public debts already incurred by the central banks.

Is it the relative economic weakness of the Western States that has led to a number of military withdrawals (Afghanistan, Iraq), or more global geopolitical disagreements that have led to complex situations (Syria, Lybia etc.)? Regardless, the economic consequences of the terrorism that has fed on these situations can not be disregarded, beyond the profound societal impact when we know that these are the worst terrorist attacks in history on French soil (Paris in November 2015 and Nice on July 14th 2016). These tragic events weigh in turn on the economy, first of course affecting the tourism industry and also generating a general climate that is not propitious to consumption within the population. Although we do not develop this aspect, which has no place in a book on management, the resolutions taken by the Chairman of the Joint Chiefs of Staff before the Defense Commission of the National Assembly on October 15th 2015, a month before the attacks in Paris, are worth mentioning as they are relevant for managers. Beyond a dramatic, prophetic discourse on the increasing and approaching threats, General Pierre de Villiers points out "the ever more flagrant contradiction between short term management and the need to subscribe to long term action". The instantaneity and permanence of information often leads political directors to immediate responses which, regarding the long term, may lead them to make errors. "By reacting to a circumstance under the influence of emotion, we run the risk of a knee-jerk reaction and micromanagement, which can trigger responses inappropriate to real issues and our strategic objectives". These resolutions undoubtedly echo the concerns of business directors and will find their rightful place in the aims of this book.

In this context of weak growth and increased uncertainty across the markets, business leaders should both implement strategic objectives and define business models to achieve them along with shareholders. This traditional strategy management is today made more complex by the diversity of possible choices and by the number of strategic maneuvers needed to remain competitive in a hyper-competitive context. This last point then poses the question, central in this book, of strategic alignment, i.e. the capacity to ensure that strategic decisions are implemented correctly at operational level while benefitting from the local expertise of middle managers. We will return to this point in the remainder of this introduction to explain, first, the main, current questions relating to business strategies and thus illustrate the diversity of possible choices.

By using the distinction established by Kim and Mauborgne [KIM 05], in what has become a best-seller in management literature, the question first arises of knowing if it is better to increase one's competitive position in the red ocean or, on the contrary as favored by the authors, develop a blue ocean strategy. The first means direct competition with one's competitors and therefore permanent control of organizational efficiency (costs, delays, services, etc.) in order to maintain a competitive position making it possible to generate margins and create value for the shareholder. The second, the blue ocean strategy, consists, on the contrary, of suggesting innovative business models based on creating value for the client at the lowest possible cost for the business, which permits greater profitability still through the absence of, or at least weakness of, the intensity of competition. Without returning to the examples given by the authors, which have moreover given rise to criticisms of the intentionality of this strategy in opposition to a later characterization, the emergence of new markets linked to the environment, the digital revolution or digitalization have these characteristics and moreover often reflect hopes of economic growth on the part of political leaders.

Environmental questions have a growing place in the fears of citizens' as well as governments engaged in the fight against global warming and its consequences, counted in billions of dollars. Business initiatives meant to favor alternative energies, in opposition to polluting fossil fuels, are therefore demanded today, reflecting hope of "green growth" in the economy. Solar, geothermal, wind, and tidal, as well as electrical energies in the field of propulsion (electric or hybrid) are paths sometimes explored by businesses in diversification strategies. However, in the context of the current economic downturn, the low price of traditional energies, the first of which is petrol, does not favor a change in energy and therefore does not favor the profitability of these business models for the moment. In the same way, businesses that have launched into the costly venture of shale oil, without here touching on the environmental consequences of hydraulic fracking, have not succeeded in making their investments profitable and are certainly now in great difficulty. It is, finally, all the businesses linked to the oil industry which are in difficulty and by extension those who have launched themselves into renewable energies. This situation is transitory but substantial financial resources are needed to weather it and so, as we will see below, it requires access to funding.

Like markets linked to sustainable development and the environment, the digital revolution and digitalization of the economy are also currently the root of profound disruption in businesses' business models. In fact, taking examples from the most emblematic businesses, if GAFAM (Google, Apple, Facebook, Amazon, Microsoft) are characterized by the creation of new services, TUNA (Tesla, Uber, Netflix, Airbnb) act more in the transformation of the traditional models by challenging the established offers. What is commonly called the uberization of the economy corresponds to a deep transformation of the value offered to consumers with a tendency to highlight usage value and, above all, to disintermediation within value chains. If, at their creation, these startups do not require much capital, their rapid development enables them to raise funds on the basis of the value of their future profitability. These unicorns (almost 200 in the world), depending on the term used, are characterized by values greater than a billion dollars such as Uber (62 billion dollars), Airbnb (25 billion dollars), according to the ranking in Fortune magazine, or the French BlaBlaCar. However, the question arises more and more of the disconnection between the financial value of these often unlisted businesses, whose introduction on the stock market is therefore often synonymous with low value, and their real economic performances. In an interview published in February 2016 in the Financial Times, Bill Gates called for greater selectivity in funding choices and announced a drop in global value (today estimated at more than 600 billion dollars) of these unicorns in the next 2 years.

Whether the ocean starts off blue or, even more so if it is red, these examples are witness to an increased complexity in markets that have become very turbulent and uncertain. Business directors should therefore, in this context, simultaneously establish a strategic vision linked to their business model and ensure its effective implementation, and also guarantee the agility of their organization to gage of a more long-term performance. These two elements are vital to businesses' performance and it makes sense, from this introduction, to broadly...

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