Are we managing operational expenses effectively?
Executive Management must manage current expenses as a core part of overall profitability. This performance management approach requires cross-functional cooperation among Sales, Product Development, Customer Service, Operations, HR, Finance, and IT.
Integrated decision areas can provide the Operational Expense Management information you need for these three performance measures.
Supply chain cost index
Decision areas from across departments bring supply chain information to the fore.
This index highlights the balancing act between input and output for management. The unpredictable is the norm. No sooner have purchase orders gone out for next month's requirements than you see changes in expectations.
Seeing the whole supply chain and information from different decision areas is essential for Executive Management understanding the various tolerances and risks.
Purchasing and procurement: Ensuring timely and cost-effective input of resources for better performance
Distribution and logistics: Achieving efficient distribution and delivery for better performance
Inventory management: Understanding the balance between holding cash and delivering on customer service requirements for better performance
On-time delivery: What is driving delivery performance?
Information, complaints and claims: What is driving responsiveness?
Sales plan variance: What drives the sales plan and performance?
Operations cost index
View decision areas from across departments to understand operational cost information.
Executive Management uses operational cost to monitor the operation’s backbone and the related cost implications of inefficiencies and bottlenecks.
Managing the unforeseen by using fact-based indicators makes you ready for the unexpected. Companies that manage these situations as they occur gain a significant advantage.
Production and capacity: Generating timely output in the face of uncertain demand, complicated processes, and variances in input for better performance
Cost and quality management: Balancing the need to reduce costs with the equal requirement to delivery quality output for better performance
Product development milestones: How do we manage priorities and timings, and monitor risks as they change during the development process?
Operational plan variance: How do we best support, coordinate, and manage the delivery of meaningful plans?
Information, complaints, and claims: What is driving responsiveness?
Project/SDLC management: Are projects on time, on budget, on target?
IT vendor management: Are you managing vendor service levels and costs for better performance?
Overhead cost index
Draw on decision areas from across departments to see overhead cost information.
Monitoring support functions with the overhead cost index ensures the balance between cost and value makes sense.
If this area underperforms, you can analyze the organization and staffing decision areas to look at headcounts, or the income statement to review more detailed functional costs.
Management analyzes ratios to understand the cost changes and the relative importance of various support functions or departments.
Income statement: How did the business team score; where was performance strong or weak?
Organization and staffing: What job functions, positions, roles, and capabilities are required to drive the business performance?
Cost and quality management: Balancing the need to reduce costs with the equal requirement to delivery quality output for better performance
Operational plan variance: How do we best support, coordinate, and manage the delivery of meaningful plans?
Benefits: How do we manage costs and incentives for better performance?
