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May 22-24, 2007
Washington Dulles HiltonThe Business Transformation Conference
David CarusoPrincipalDavid Caruso & Associates, Inc.
Targeting Business Process Performance:
Unlocking Your Company’s Profit Potential
WelcomeWelcome
to Transformation and Innovation 2007 The Business Transformation Conference
May 22-24, 2007
Washington Dulles HiltonThe Business Transformation Conference
The art of winning an unfair game
May 22-24, 2007
Washington Dulles HiltonThe Business Transformation Conference
The Impact of Supply Chain Applications 2000
May 22-24, 2007
Washington Dulles HiltonThe Business Transformation Conference
There Are Financial Correlations…
Source: AMR Benchmark Analytix
•Right Process Right Process •Right TechnologyRight Technology•Right MetricsRight Metrics
0
50
100
150
200
250
300
350
Strong Weak
Perfect Order InventoryCash-to-Cash SCM Costs
Demand Driven leaders have:
15% less inventory
17% stronger order fulfillment
35% shorter cash-to-cash cycle times
Which translates to:
60% better profit margins
65% better EPS
2-3X the ROA
May 22-24, 2007
Washington Dulles HiltonThe Business Transformation Conference
IT Forensics: Typical Findings
IT budget is skewed toward business as usual– IT budget is within industry norms but…
– The risk: limited future productivity investments
IT projects don't deliver the bang they should– Project management is not focused on business value creation
– Corporate-wide initiatives aren’t uniformly adopted
Strategic planning processes must be revisited and improved
May 22-24, 2007
Washington Dulles HiltonThe Business Transformation Conference
ERP Benefits Realization Study - 2005
Key Success Factors:– Common corporate vision– Process Improvement Group– Programmatic Financial Analysis
Size, Scale, complexity, 9%
Other, 11%
Resources/People, 7%
Agreeing on common processes
11% Executive Buy-in/
Adoption/Change Management, 12%
Technical Issues, 13%
Cost-Business Case-ROI not understood,
38%
May 22-24, 2007
Washington Dulles HiltonThe Business Transformation Conference
The CIO’s Conundrum
Stage 1Data
Visibility &Control
Stage 2Operating
Effectiveness
Stage 3Market
Position
Stage 4Strategic
Moves
IT ValueCreation Stra
tegic Value of IT
Value of Cost Savings Metrics
May 22-24, 2007
Washington Dulles HiltonThe Business Transformation Conference
Supplier Quality
Supplier On-Time
Purch Costs
Dir Mtl Costs
RM Inv
Cost Detail
Production Sched
Variance
Plant Utilization
WIP + FG Inventory
Order Cycle Time
Perfect Order Detail
AP ARInventory
Total
Cash-to-Cash
Perfect Order
SCM Cost
Demand Forecast
Key to Profitability
Assess
Diagnose
Correct
Operational Applications &Performance Visibility
May 22-24, 2007
Washington Dulles HiltonThe Business Transformation Conference
Perpetuating Business as Usual…IT Budget Breakdown - Mfg Industry Average
Capital Expenditures
33%
Operating Costs67%
2005 IT Budget Breakdown - ASD
Capital Expenditures
18%
Operating Costs82%
•Business strategic direction•Funding strategies•Long range IT& Tech plans
•Local customers•Immediate needs & pains•Maintenance inertia
Today’s world:
Typical
May 22-24, 2007
Washington Dulles HiltonThe Business Transformation Conference
The Difference Between Leaders and Laggards is Significant
May 22-24, 2007
Washington Dulles HiltonThe Business Transformation Conference
The Money is in the Business Process…
“…just implementing I.T. Systems without the supporting business processes is a waste of money”
Supply Chain Management Review May/June 2005.David Simchi-Levi (MIT)Claus Heinrich (Univ of Mannheim)
May 22-24, 2007
Washington Dulles HiltonThe Business Transformation Conference
IT Operating Expense Reduction: Tops out
A Little Perspective: The Sources of Business Value
One company’s Business Improvement Benefits:
•2.3 % SG&A reduction: $23M = 5.6% vs 5.4% Net
•COGS: a 2% reduction = $150M in ongoing cost reductions at current revenue levels
•Inventory =Increasing turns from 6.9 to 8 would free up $138M
•Using these rates for 2007 with a 5% revenue increase yields a $450M improvement over 2005
May 22-24, 2007
Washington Dulles HiltonThe Business Transformation Conference
Who’s Driving the Bus? …Influence and Control in IT Projects
IT’s Ability to Control
Bu
sin
ess’
s A
bili
ty to
Co
ntr
ol
High
Low
HighLow
1) Schedule & Budget
2) SystemAdoption
3) ImprovedProcess KPIs
4) ActualFinancialReturns
Measure for Accountability
Measure for Credibility
“Definition of Victory”
May 22-24, 2007
Washington Dulles HiltonThe Business Transformation Conference
Understanding Capability and Maturity is Essential
Creating Business ValueCreating Business Value
ProcessProcessMaturityMaturity
InformationInformationMaturityMaturity
KPI & KPDKPI & KPDMeasurementMeasurement
Best Practices:Best Practices:•Global operations Global operations
•Demand visibilityDemand visibility
•Innovation managementInnovation management
•Customer insightCustomer insight
•New product introductionNew product introduction
•Service deliveryService delivery
Quality &Quality &
Availability of DataAvailability of Data
May 22-24, 2007
Washington Dulles HiltonThe Business Transformation Conference
From the Leaders: Milestones to Performance
OrchestrateOrchestrate
CollaborateCollaborate
AnticipateAnticipate
ReactReact
Understand demand: Sources, quality, variability
Global visibility
Reduce complexity
Value chain levelPerformance metrics
Call to action
Organize for success:Strategic planning
PMO
May 22-24, 2007
Washington Dulles HiltonThe Business Transformation Conference
Closing thoughts…
Every business decision results in an IT decision…
How central to your success is your Information Technology?
May 22-24, 2007
Washington Dulles HiltonThe Business Transformation Conference
Thank YouThank YDavid CarusoPrincipalDavid Caruso & Associates, Inc.
Contact Information:781-545-6660dc@davidcarusoassociates.com
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