Open Customer Metrics Framework (The new open standard for Customer Metrics)
New Metrics, New Opportunities - Measuring what matters
-
Upload
michael-dheur -
Category
Business
-
view
84 -
download
0
Transcript of New Metrics, New Opportunities - Measuring what matters
Measuring what matters: New challenges and new opportunities for Semiconductor companies
Michael D’heur, Founder & Managing Director, shared.value.chainSSIA Supply Chain Management Forum, Singapore, 21. July 2016
Page 1 Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
Hello, my name is Michael D’heur
«16+ years of experience in Management-, Process- and IT-Consulting»
«Helping international clients to improve global value chains (products & supply chains)»
«Thought Leader, Author and Researcher on Global Value Chains»
«14 different Industries, 25+ international projects around the globe»
«Operating Model Architect»
Page 2 Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
@SharedxValue
#ssiascmforum#scm, #metrics#svcm
Today’s paradigm: GDP growth is good by definition. ..
In the current economic paradigm, growth is good ‘by definition’....
Page 3 Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
GrowthGDP in China, Japan and South Korea continues to grow 6-8% p.a
More disposable incomeGrowing middle class in Asia (2030: ~3,2 bn people)
Tech savvyLeading in the use of digital technologies
Attractive marketAttractive for global companies, both from customer as well as production perspective
...and the growth story continues in Asia
Page 4 Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
ConsolidationNew customers
Digitalisation Legislation
Page 5 Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
To capture growth most companies have linear business models
Business Model
Operating Model
Capability Model
Society
Environment
Society
Environment
“RESOURCES” “PROFIT” “CUSTOMERS”
TAKE MAKE DISPOSE
Page 6 Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
Volatility in the Market
Global Value Chains
Ecological Crisis (Storms, Draughts, ...)
Profit versus Purpose?
Constrained ResourcesFinancial Crisis(Lehmann, Euro, ...)
Technology
“How do we manage to create value?”
Supply Chain ‘Scandals’ & Trust Issues
What is the right Value Creation Strategy?
Page 7 Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
...and we don’t mind the critics
Page 8 Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
Waste
Inequality Overshoot
Social Unrest
Page 9 Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
Pollution
Climate change
The world is changing at a rate at which the systems, structures and cultures built over the past century
can no longer keep up.
Page 10 Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
The outlook is not very promising...
Page 11 Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
Deforestation for Palm Oil
Most global businesses run supply chains that destr oy societal and environmental value, in the pursuit of profit
Tom
Aninda
Siswee
Percy
My defining moment in Borneo, Indonesia (2010)
Page 12 Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
Page 13 Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
I have decided to work to find better ways of doing it...
Page 14 Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
...to help companies deliver the ‘Triple Bottom Lin e’
ECONOMIC
SOCIETALENVIRONMENTAL
Page 15 Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
«SustainableValue Creation
as Foundation ofBusiness!»
Cost Efficient
Competitive
Innovative
Trusted
VersatileCreating
TripleValue
Collaborative
Transparent
„8 TO BE GREAT“
ATTRIBUTES OF SUSTAINABLE BUSINESSES WE HELP TO BUILD CAPABILITIES
We are a mission-driven advisory and implementation firm, that helps companies to achieve sustainably better performance
Companies can achieve better results in an environment of constant change, fast transitions and unplanned disruptions
Companies benefit through application of sustainable practices in their core business, considering economic, ecologic and societal opportunities
We help businesses achieve sustainably better performance
Page 16 Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
A more realistic perspective – SYSTEMIC VIEW
Business Model
Operating Model
Capability Model
Society
Environment
Page 17 Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
2nd tier Suppliers
1st tier Suppliers
1st tier Customers
2nd tier Customers
SOURCE MAKE DELIVER
PLAN
RETURN
Value Creation Strategy(Product, Value Chain, Communication)
Enterprise Architecture(Organisation, Reporting,
Systems)
Stakeholder Collaboration
Sustainable Business Planning
Supplier & Partner Networks
Sustainable Cost Reduction
© shared.value.chain
HR / Talent Development
PhilantrophicEngagement
Financial Controlling
Community Development
Cradle-to-CradleCo-Creation
Sustainable Operations
Sustainable Products
A Companies Strategy Is Manifested in the Value Cha in It is the Biggest Lever for Sustainable Value
Page 18 Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
Hotspots in the Semiconductor Value Chain
Page 19 Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
Smelter FE: Wafer production
BE: Assy & Test, Package
Logistics
EMS / ODM Planning & Fulfilment
ChannelsCustomer UseProduct Disposal / Return
1
3 5 1 5 6
2
1 5 5
1 755 8
4 6 6 7
AB B
B
C C
CD
E E E E
EEE
F F
F
F
F
G
G G
G
GG
H H H
H
H
A
Product Development
Supply Chain
Idea SpecificationProduct Design &Optimization Component Selection Testing Product Launch
1 32 2 3 7 3 7
1
1 5 7
GED
Capital Equipment
Capital Equipment
Capital Equipment
Key MetricsHot Spots
Quickly changing customer preferences : Observe and track quickly changing customer preferences in order to remain a competitor in the market, while increasing output to fulfill rising demand from a growing middle class.
Necessity for Innovation : Continually innovate products in order to create products that are competitive and will generate the highest possible profit.
Scarce Resources : Carefully plan use of limited raw materials, including precious metals, to ensure a stable supply of material and to avoid environmental degradation and sourcing scandals (RoHS &REACH).
Sustainable sourcing : Ensure health and safety of workers, avoidance of controversial sourcing, ...
Energy Consumption, Efficiency and Emissions : Limit and measure use of energy produced from fossil fuels and utilize latest technologies to reduce GHG emissions and their consequent contribution to climate change.
Production of E-waste : Adopt an e-waste collection, recycling, and re-use plan for products at end-of-life to reduce amount of waste going to landfills, while following relevant legislation like the WEEE Directive.
Turnover
Delivery Performance
Inventory Turns
Governance: Sourcing
Human Capital
Emissions
Energy, Waste, Water
F
1
2
3
4
5
6
A
B
C
G
E
D
A
4 4Raw Material Mining
3 4
A GD
How do we get started and measure
performance?
Page 20 Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
There are many ‘most sustainable companies’ – the question is what is said and what is done (and meas ured)
Page 21 Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
Source: svc Research
Industry group leader (Dow Jones Sustainability Index, 2015)
Among the 400 global most sustainable companies (Newsweek Green Ranking, 2015)
Among the 500 most sustainable large companies in the world (Newsweek, 2016)
Among the most sustainable companies (Dow Jones Sustainability Index, 2015)
Among the 500 most sustainable large companies in the world (Corporate Knights, 2015)
Sustainability is an integral partof our history, present and future (Company CSR Report, 2015)
Page 22 Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
Only a few Semiconductor companies clearly report o n material sustainability issues
Measuring performance should consider all dimension sof value creation in the core business?
Page 23 Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
Source: shared.value.chain
SustainableValue
Creation
� Profitability� Forecast Accuracy� Delivery Performance� Total Supply Chain Cost� Working Capital� Product Lifecycle
Management� Intellectual Property
management� ...
� Greenhouse Gas Emissions / Carbon Footprint� Energy Management in Manufacturing� Water & Waste management in manufacturing� ...
� Sustainable Sourcing� Human Capital Development� Employee Health & Safety� Corporate Philanthrophy� Shared Value� Slavery / Human Trafficking� Board independence� Diversity� ...
• Expectations of Shareholders• Expectations of Board Members10,000 Mtr.
• Expectations of Management Teams• Business- and Sustainability Strategy• Business-, Operations-, Capability Model
5,000 Mtr.
• Functional / Business Unit Targets• Operations Strategy• Operations Scorecard
1,000 Mtr.
• Day to day business performance (Yields, Wafer starts, ...)
0 Mtr.
• Continuous Improvement & Benchmarking• Improvement Projects500 Mtr.
Determining what matters, depends how high you fly
100,000Mtr.
• Expectations of Stakeholders (Society, Regulators, Legislators, NGOs, Public Institutions, ...)
Page 24 Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
To make expectations measurable we translate theminto performance standards
Abstraction Level
External “Standards”
Internal “Standards”
100,000 Mtr. SOCIETY• SDG• UNGC• ILO
• Code of Ethics
10,000 Mtr. INDUSTRY
• DJSI, SASB, CDP• EICC• Integrated
Reporting
• Code of Conduct
5,000 Mtr. COMPANY• Industry
associations
• 3-5 year Strategy• Balanced scorecard• Materiality approach
1,000 Mtr PROCESS• Quality: ISO, ...• Process: SCOR• Accounting: SASB
• Operational strategy and SC Scorecard
• Budget / Annual Operating Plan
500 Mtr PROJECT• LEAN, SixSigma• Kaizen
• Project metrics
0 Mtr TASK • OEE• Work Control
Procedures
Page 25 Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
Business Model
Operating Model
Capability Model
SUSTAINABLE VALUE SCORECARD
PROCESS STANDARDIndustry best practices and performance
INVESTMENT STANDARD
REPORTING STANDARD
ACCOUNTINGSTANDARDIndustry level
material issues
Measurement should consider different perspectives
Page 26 Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
Economic
Societal
Ecological Efficiency
Governance
Measuring material issues in Semiconductor
Environ-mental
Revenue
Cost
Strategy & Roadmap
Emissions
Shared value
Human capital
Service
BUSINESS MODEL AND INNOVATION
LEADERSHIP AND GOVERNANCE
ENVIRONMENTAL IMPACT OF VALUE CREATION
Greenhouse Gas Emissions & Chemicals
Energy Management in ManufacturingWaste & Water Management in Manufacturing
Managing a global skilled workforceRecruting and developing talent
Employee Health & SafetySustainable sourcingLabour practices & human rigths
Intellectual Property ProtectionProduct Portfolio & Lifecyle ManagementInnovation Management
Product QualityWorking CapitalSupply Chain Cost
Perfect Order FulfilmentDelivery Performance, Flexibility
Community engagementBuilding of strong local clusters
Climate strategy
Page 27 Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
Source: shared.value.chain, APICS SCC, SASB
COGSMarketShare CapEx
Cost of Capital
Source: shared.value.chain (based on SCOR Model, SA SB, DSJI and other metrics)
Current KPI Future KPI / Opportunities
Company Performance
Performance Elements
Drivers: ...Driver:
Market / Competition
Driver: Sustainability /
Legislation
Driver: Digitalisation
Economic
Revenue
Service
Cost
Societal
Governance
Human Capital
Shared Value
Environmental
Strategy / Roadmap
Emissions
Ecological efficiency
Sample Structure of a Sustainable Value Scorecard
Page 28 Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
Example AVNET: Evaluation of performance at Company level (APICS SCOR + Mixed Items)
Page 29 Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
PERFORMANCE
• Economic: – Cost– Assets
• Services: – Reliability– Responsiveness – Risk Mitigation
• Ecologic: – Environmental – Social
Source: AVNET, 2013
Page 30
When building a sustainable value scorecard it is a lso important to consider key industry drivers
Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
Market & Competition
• High volatility, high risk• Low demand visibility• Capital demand• Market consolidation• Massive Chinese
Investment Program• ...
Digitalization
• Internet of Things• Wearables• Omnichannel• Industry 4.0 - Man-
Machine Integration• ...
Sustainability
• Sustainable Development Goals
• COP21 – Climate Action Plan / Carbon Regulation
• Circular Economy• Global workforce &
migration• Customer concerns.
Increased demand across industries drives concerns about resource scarcity, climate change, impact of pollution, environmentla/societal externalities
• ...
Economic
Societal
Ecological Efficiency
Governance
Risks and opportunities for Semiconductor companies
Environ-mental
Revenue
Cost
Strategy & Roadmap
Emissions
Shared value
Human capital
Service
(-) Loss in evaluation, if not managed well(-) Loss in brand reputation(-) Loss in profts, assets, liabilities and cost of capital• ...• ...
Page 31 Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
OPPORTUNITIES
RISKS
(+) Brand reputation(+) Increased sales of sustainable products(+) Increased financial valuation(+) Secured license to operate(+) Cost reduction(+) Government incentives to become industry cluster of choice
The right approach to managing and measuring material issues will determine risk & opportunities
Economic, ecological and societal value
Economic value
Ecological value
Societalvalue
Revenue growth
Reduced costs
Reduced use of primary materials
Improved societal value of the product
Reduced impact of products on the environment
Reduced negative social impact of value creation
• Reduced working capital• Fewer fixed assets• Improved use of capital• Reliable supplier base
• Sustainable innovation• Improved brand image• Premium prices via segmented
customer offerings
• New business models for solving social problems
• Improved localisation and income opportunities
• Avoidance of child labour• Alleviation of poverty
• Substitution and simplification of materials
• Reduced environmental impact and costs
• Closed material cycles• Internalisation of environmental
costs• Habitat regeneration• Preservation of biodiversity
Source: Sustainable Value Chain Management (D’heur et al., Springer, 2015)
Thriving for sustainable value creation, is deliver ing several economic, ecologic and societal benefits
Page 32 Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
Clean TechHuman CapitalSourcing Water Stress
Page 33 Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
Source: MSCI, 2016Source: MSCI, 2016
Source: MSCI, 2016 Source: MSCI, 2016Investment research takes a close look at the risks and opportunities
for Semiconductor companies
Middle management is the catalyst to translate theambition of sustainable value creation into reality
Page 34 Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
3 major reasons for failure 3 ways of making it work
Connect sustainable value expectations to corporate strategy
Link expected outcomes to incentives and metrics
See it as a journey, with interim milestones
No clear link to corporate strategy
Death by middle management
Premature declare of vistory
Thank you! Please join the conversation
Page 35 Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
Adams-Lehmann-Straße 56 80797 MünchenTel. +49 89 461 331 868Mobil +49 170 768 58 [email protected]
http://bit.ly/1G1vpcm
We help companies to achieve sustainably better performance
Diplom-KaufmannMichael D‘heurFounder & Managing Director
Springer Gabler; Deutsch; Published Oktober2013. More Information:http://bit.ly/1fTcrWg
Springer International; Englisch; Published April 2015.More Information: http://bit.ly/1fTcrWg
http://linkd.in/1NtS3ch
http://on.fb.me/1xsHxzO
http://bit.ly/1HePpFy
Join the Conversation
www.sharedvaluechain.com
@SharedxValue
Media Partners & Publications
Thank you! Please join the conversation
Page 36 Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
8 Steps to get started towards sustainable value cr eation
Page 37 Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
Get buy-in from managementDetermine the importance of sustainable valuecreation, based on your company, industry,culture and ambition.See the opportunities!
Assess value creation approachAssess the current impact of your company'svalue creation approach. Review risks andopportunities of sustainable value metrics foryour company.
Determine the material issuesConsider multi-stakeholder inputs tounderstand what matters. Determine what canbe influenced by your company.
Set ambitious targets
Set ambitious, but realistic targets. Tie metrics toincentives and the performance managementsystem. This will make it standard practice.
1
2
3
4
Agree measurement standardWhat and how you measure, will drive behaviour.Process, data collection, weightings and a good mixof quantitative and qualitative metrics are key.
Build a blended scorecardReview where the industry is converging onmetrics.Start with the metrics you have and append new metrics step by step
Always demonstrate the valueUnderstand the hard and soft benefits of using asustainable value scorecard. Make othersunderstand the tangible and intangible value as well
Communicate progress, build trust!Engage in peer reviews and benchmarking.Communicate achievements consciously internallyand externally. At all times: no greenwashing!
5
6
7
8
Main metrics Other metrics
Intellectual property protection; % revenuefrom products with sustainability attributes; % of portfolio with circular product designs, ...
Perfect order fulfilment, On time delivery against request, On time delivery to commit, Order fulfilment cycle time / lead time, SC flexibility up/down, ..
Line item on time in full, Supply continuity (line down), Material liability, excess, obsolete, scrap, Value at risk
Inventory turns / Working capital, Asset turns, Total SC management cost, Cash-to-cash cycle time, ...
Cost of goods sold, Purchase Price Variance, SG&A expenses, Return on assets, Return on working capital, ...
Employee Health & Safety, % of 3TG conflict free materials, ...
% of materials with critical materials, Legal/Regulatory fines related to EHS issues, ...
Recruting/managing global skilled workforce, ...
% of foreign nationals, diversity, locations, ...
% of revenue with products that solve societal challenges, ...
% of products with declarable susbstances
Greenhouse Gas Emissions, ... Global Scope 1 emissions, Total PFC emissions
In production: Energy/Water(Waste managementAt system level: Processor energy efficiency
Total energy consumed, % grid electricity; % renewable electricity, Water withdrawn, water recycled, % in regions with high water stressAmount of hazardous waste, recycled waste, % going to landfillPage 38 Measuring what matters | SSIA SCM FORUM 2016 | 21 July 2016
Economic
Societal
Ecological Efficiency
Governance
Environ-mental
Revenue
Cost
Strategy & Roadmap
Emissions
Shared value
Human capital
Service