The SWOT analysis is an effective approach for looking at your business in a holistic way. In reaching out to identify the strengths and weaknesses, and the opportunities and threats the SWOT analysis provides a measure of balance in the way the company emphasizes its internal and external environments. However, the tools used in developing a complete and precise understanding so that the analysis lends itself to an effective improvement initiative will have to be consistent with the nature of the improvements. Typically, the weaknesses will require that the existing practices are carried out more efficiently. These areas would need to be seen in a process or performance improvement framework. The threats on the other hand, carry more strategic implications and may require a very careful assessment of the competitive or regulatory environment. These will generally involve the firm’s negotiating power with both its suppliers and customers as well as the competition in terms of new products and new technology. In this event, tools like balanced scorecards, strategy maps, risk analysis, and process reengineering are employable.
While the strengths and opportunities may become apparent at some point in time, these seldom present themselves unsolicited. Often, proper accounting procedures, effective feedback loops, and a culture of cost and quality consciousness serve the company’s competitive edge, but in order to exploit the advantages fully continuous improvement, employee motivation, and expanding the customer and product base should be emphasized. Finally, the SWOT analysis has to be essentially seen in the supply chain context to allow the company to leverage all its strategic and operational gains to secure long-term advantages. In this article I would be discussing some of the ideas related to performance improvement and what tools can be employed to manage it productively.
Let us look at the concept of performance improvement in a very fundamental way, paradoxically though much indebted to the wisdom through the ages:
• Not everything that can be counted counts, and not everything that counts can be counted” ─ Albert Einstein
• “If you can’t measure it, you can’t manage it” — Industrial Adage
• “Measure twice, cut once” — Horse sense
The perceived need for performance measurement system as a prerequisite to performance improvement is obvious. At a more formal level, however, such as in a supply chain context, the effectiveness of a performance measurement system becomes more critical than its mere existence or observance. As a minimum, it should be able to ensure the following three conditions:
1. It helps managers understand critical value-added processes.
2. It communicates expectations and promotes correct behaviour.
3. It delivers high levels of targeted results.
On the other hand, the performance measurement system should be able measure each of the following three types of measures:
|Resources||High level of efficiency||Efficient resource management is critical to profitability|
|Output||High level of customer service||Without acceptable output, customers will turn to other supply chains|
|Flexibility||Ability to respond to a changing environment||In an uncertain environment, supply chains must be able to respond to change|
The industry’s current leading-edge performance measurement system is the SCOR Model which serves each and every aspect of an organization’s supply chain. However, in my personal opinion, the SCOR Model is too intensive for the SMEs because they just do not have the time and budgetary resourcefulness to implement it. At the same time, the SCOR Model is too extensive in scope and the SMEs do not have the necessary clout to enforce it on their supply chain partner firms. In the next article, I will discuss a much simpler, but an effective enough, performance improvement approach that can be easily implemented by any SME.