Sustainable Solutions for SCM

Figure 3.11 Value driver tree for supply chain management In Figure 3.11 is shown an example of a supply chain value driver system. On the left hand side, it can be seen that the relations between the elements are mathematically defined. E. g. in this case the value added is the difference between the EBIT and the cost of capital, which itself is defined by the multiplication of the WACC with the operative assets. In that sense, the effects of a change in one of the factors on the right hand side in the KPI can be easily calculated. On the other side for some influencing factors such as delivery capability or complaints, the impact cannot be identified in a deterministic manner. Assumptions have to be made or the effects of previous initiatives have to be tracked. In summary, value driver systems offer a good possibility to calculate the financial impact of supply chain initiatives on a top-level financial KPI. But for certain initiatives on supply chain management or on sustainability, neither the impact can be identified mathematically nor the desired outcome of these initiatives can be estimated. 3.3.4 Balanced scorecards The balanced scorecard as a top down instrument for defining an organisation’s goals and objectives was introduced by Kaplan and Norton [25] with the key notion that a total reliance on financial measures lead organisations to make poor decisions. Instead they suggested that firms must go beyond financial measures as they are lagging indicators and utilise leading indicators of performance to enable strategic feedback and learning. They also argued that the best measures are those that map the organisations strategy. Therefore, they included four key performance measurement areas that are linked to each other: • How do we look to shareholders (financial perspective)? • How do customers see us (customer perspective)? • What must we excel at (internal operations perspective)? • Can we continue to improve and create value (innovation and learning perspective)?

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