Balanced Scorecard Design and Implementation SAP - JRM

1. Balanced Scorecard Design and Implementation (SAP)
December 18, 2008
Jay R Modi

2. Table of Contents
Executive Summary.....................................................................................................................................5
The final report is written like a ‘blog’ with the purpose of making sure that reader gets more interest
with every page. The report consists of the whole process of how we have learned to design and
implement the scorecard by using different tools or guides. It begins with explaining the evolution of the
Morning Nourishment Cereal Company’s Balanced Scorecard and the detailed explanation of all the
steps used from first assignment to the last assignment. This part also explains the difference in the way
we did the similar assignment but after a period of time and with extra experience. It also focuses
attention on the final design of assigned perspective. ...............................................................................5
The second part of report is performance evaluation of financial perspective which includes explaining
the rise and fall in the various measures used to support the financial objective. In order to make this
more interactive graphs from balanced scorecard are used with all the actual figures derived during the
live simulation. The next part is related to the actions our company would like to take in coming quarter
based on the results available i.e. recommendation and conclusions. Although the recommendations are
given for all the measures in performance evaluation of the financial perspective but the overall
recommendations is included in this part. The report also includes the brief explanation of lessons
learned from the project and the way it helped me individually. This was one of the parts which I liked
the most to write.........................................................................................................................................5
Evolution of Scorecard and final design for Financial Perspective...............................................................6
Phase I: Learning the basic concepts.......................................................................................................6
Step 1: Calculating Ratio Analysis........................................................................................................6
Step 2: Assessment of Ratios...............................................................................................................6
Phase II: Actual Start-up of Company......................................................................................................6
Step 3: Vision statement and Objectives.............................................................................................6
Step 4: SWOT Analysis and Porter’s Five Forces..................................................................................6
Step 5: Framing of Strategy and Product mix.......................................................................................7
Step 6: Alignment of Product decision with Strategies........................................................................7
Phase III: Designing of Scorecard Components........................................................................................7
Step 7: Defining the Perspectives, Strategies, Objectives and Measures.............................................7
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3. Step 8: Releasing the Query and Creating Measures...........................................................................7
Step 9: Designing of InfoCube..............................................................................................................7
Step 10: Creating Measure Catalog......................................................................................................8
Phase IV: Scorecard Implementation Process..........................................................................................8
Phase V: Loading data to InfoCube..........................................................................................................8
Step 11: Creating Data Source.............................................................................................................8
Step 12: Creating Transformation........................................................................................................9
Step 13: Creating Data Transfer Process..............................................................................................9
Step 14: Creating a Query....................................................................................................................9
Step 15: Loading data in Measures......................................................................................................9
MNC Company’s Performance Evaluation based on Financial Perspective.................................................9
Returns on Investment..........................................................................................................................11
Current Ratio.........................................................................................................................................12
Quick Ratio............................................................................................................................................13
Debt-Equity Ratio...................................................................................................................................14
Debt Ratio..............................................................................................................................................15
Revenue Growth Ratio...........................................................................................................................16
Recommendation: For our company the best recommendation to improve revenue growth ratio is by
reducing the fluctuation in number of products offered as adding or dropping any product in between
the year leads to affect the sales and margin........................................................................................16
Returns on Assets (ROA)........................................................................................................................17
Asset Turnover.......................................................................................................................................18
Conclusions and Recommendations for coming Quarter..........................................................................19
Individual Lessons Learned from the Project.............................................................................................20
Implementation Process of Balanced Scorecard........................................................................................22
Step #1: Strategy set-up in Strategy Management Design.....................................................................22
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4. Step #2: Creating of perspective in Strategy Management Design........................................................22
Step #3: Creating of Objectives in Strategy Management Design .........................................................22
Step #4: Creating of Measures in Measure Catalog...............................................................................24
Step #6: Naming the Scorecard and assigning it to the hierarchy..........................................................25
Step #7: Assigning and Setting the value fields to scorecard ................................................................25
Step #8: Assigning and setting the strategies to scorecard....................................................................25
Step #9: Assigning and setting strategies to perspective.......................................................................26
Step #10: Assigning and setting objectives to perspectives...................................................................26
Step #11: Assigning and setting measures to objectives.......................................................................26
Step #12: Setting-up the owner tab, status tab, value field tab, formula tab and graphics tab for
measures...............................................................................................................................................26
Displaying the Scorecard ERP448 09......................................................................................................28
Displaying Overview Screen for Scorecard ERP448 09...........................................................................28
The above screen is the overview screen for Scorecard ERP448 09 where we can only see the details
of financial perspective because scorecard ERP448 09 is assigned to financial perspective. The
selected date / period is 09/2008 and breakdown is Objective / Measure. In order to get the better
view we can also select the tab for analysis, cause-effect chain, drilldown and scorecard comparison
which facilitates different functions......................................................................................................29
Displaying the Analysis screen...............................................................................................................29
Final Design of BSC....................................................................................................................................29
Step #1: Creating Data Source...............................................................................................................29
Step #2: Creating Transformation..........................................................................................................30
Step #3: DTP Confirmation.....................................................................................................................31
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5. Executive Summary
The final report is written like a ‘blog’ with the purpose of making sure that reader gets more
interest with every page. The report consists of the whole process of how we have learned to
design and implement the scorecard by using different tools or guides. It begins with explaining
the evolution of the Morning Nourishment Cereal Company’s Balanced Scorecard and the
detailed explanation of all the steps used from first assignment to the last assignment. This part
also explains the difference in the way we did the similar assignment but after a period of time
and with extra experience. It also focuses attention on the final design of assigned perspective.
The second part of report is performance evaluation of financial perspective which includes
explaining the rise and fall in the various measures used to support the financial objective. In
order to make this more interactive graphs from balanced scorecard are used with all the actual
figures derived during the live simulation. The next part is related to the actions our company
would like to take in coming quarter based on the results available i.e. recommendation and
conclusions. Although the recommendations are given for all the measures in performance
evaluation of the financial perspective but the overall recommendations is included in this part.
The report also includes the brief explanation of lessons learned from the project and the way it
helped me individually. This was one of the parts which I liked the most to write.
The final part of the report is appendix where the steps used in evolution of scorecard design
are explained with the help of screen shots. It includes the design and implementation process
of balance scorecard. The peer evaluation is also attached at the end where brief explanation of
team members’ work is given with individual scores.
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6. Evolution of Scorecard and final design for Financial Perspective
Designing and implementing the scorecard is not everyone’s cup of tea as it requires you to complete
different phases from time to time. In general most of the company takes 6-9 months to design and
implement a Balanced Scorecard but I managed to complete my scorecard in less than four months with
other tasks on hand. I would like to discuss all the phases which I followed from the beginning till end to
design and implement the scorecard.
Phase I: Learning the basic concepts
Step 1: Calculating Ratio Analysis
It was just the beginning of the semester when we were given our first assignment of the course. I was
excited as the assignment was related to one of my favorite subjects accounting, we’re asked to
calculate the ratio analysis from the financial statements of company Z01D. Although I was aware about
most of the concepts of calculating ratios, but still to refresh the memory it was a good assignment.
Step 2: Assessment of Ratios
This was our first team assignment where we were asked to correct the calculation based on the
mistakes made in assignment one and than make comments on the result of this ratios. To make
everything easy, I made graphs of all the ratios and sent it to the team with every member assigned with
their respective ratios.
Another task involved in this assignment was to determine the corporate and business strategies used
by the company Z01D based on their financial statement. This gave us a good idea on how to determine
different types of strategies. At this point we’re clue less that we are going to create our own BSC where
we’ll need to use this strategies and ratios.
Phase II: Actual Start-up of Company
Step 3: Vision statement and Objectives
This was in our assignment #3 where we’re supposed to create our own cereal company. In the
beginning it looked similar to what I’ve learnt in one of my course in the past (BUS426). It started with
determining the vision statement and objectives of the company. My team was smart enough to come
out with company name and logo at this early stage.
Step 4: SWOT Analysis and Porter’s Five Forces
In this step we’re asked to make a SWOT analysis of our company. Although it is difficult to make a
SWOT analysis without any data but we use the case study as our base for framing this. The next was
Porter’s Five Forces; similarly we used the case study as a reference to design this.
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7. Step 5: Framing of Strategy and Product mix
This time we’re framing the corporate and business strategies of our company as a part of assignment
#3. It was quite easy as we had experience in doing this previously and even we had slides as our
reference. This step also included proposing product mix based on the number of products we want to
produce for the live simulation, setting of price, deciding advertising budget and BOM.
Step 6: Alignment of Product decision with Strategies
This was the final step of this phase where we have aligned the product decisions with strategies based
on creating by considering our competitors possible actions, our target customers expected
behaviors, and our current financial situations. The criteria used for this includes; product mix,
product quantity and quality, pricing and marketing investment.
Phase III: Designing of Scorecard Components
Step 7: Defining the Perspectives, Strategies, Objectives and Measures
At this point we’re learning on how to frame a scorecard and strategy map. In take home exam #1, I was
supposed to create a scorecard of my company and design a strategy map. This was the first time I was
doing something like this so it took several hours to complete. To make this test easy some of the
reference papers were used from the reading section which consists of articles by Nortan and Kaplan.
Step 8: Releasing the Query and Creating Measures
This was the first step when we started creating the scorecard in SAP system. It was all easy with the
help of the slides given to follow the steps. We’re also concerned to learn creating a query by using BW
7.0 and releasing the query to make it usable for BSC.
In order to finalize the company’s scorecard, assignment #4 was given where all the team members
were asked to review the scorecard submitted during the take home test and submit only one scorecard
and strategy map.
Step 9: Designing of InfoCube
In assignment #5, we’re asked to design the InfoCube based on the selected perspective. I was working
on Financial Perspective while other team members were concerned with their assigned perspective.
The reason for creating an InfoCube is to load a flat file in Data Source later on. As I have learnt this in
one of my other course, so it was an easy task for me.
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8. Step 10: Creating Measure Catalog
For my financial perspective, I was supposed to create a measure catalog in SAP system by using the
measures which was designed in step 7. This did not take much time and I managed to create 10
measures supporting the objectives of financial perspective in less than half hour of time.
Phase IV: Scorecard Implementation Process
This was one of my favorite phases where I implemented my scorecard from paper to SAP system. It was
in take home exam #2 when I implemented the BSC by following an implementation process.
• Strategy set-up in Strategy Management Design
• Creating of perspective in Strategy Management Design
• Creating of Objectives in Strategy Management Design
• Creating of Measures in Measure Catalog
• Scorecard Design in Strategy Management Design
• Naming the Scorecard and assigning it to the hierarchy
• Assigning and Setting the value fields to scorecard
• Assigning and setting the strategies to scorecard
• Assigning and setting strategies to perspective
• Assigning and setting objectives to perspectives
• Assigning and setting measures to objectives
• Setting-up the owner tab, status tab, value field tab, formula tab and graphics tab for measures
Phase V: Loading data to InfoCube
Step 11: Creating Data Source
This step involves creating the data source where different tabs will be updates. In extraction tab direct
access will be allowed and a CSV file will be loaded, in proposal tab we can see the data load example, in
the fields tabs we’ve to update the data type based on the fields we use and in preview tab we can see
the actual data loaded. For whole of this process it is necessary that the file to be loaded should in the
desktop and in the format which is accepted by the system.
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9. Step 12: Creating Transformation
After creating the data source, the next step is to create a transformation where data will be
transformed from the loaded file to the InfoObjects of InfoCube. The transformation is mapped by drag
and drop of the fields from the left to right and when this process gets over, it will be activated.
Step 13: Creating Data Transfer Process
In order to successfully transfer the data from loaded file to InfoCube, DTP will be used where extraction
mode will be selected as full and file will be loaded from desktop, it will be than executed. All the green
lights suggest successful transformation of data. To check whether data is transferred or not, InfoCube
will be used.
Step 14: Creating a Query
After completing the DTP, a query should be created by using Business Analyzer where all the key
figures will be placed in row while calendar quarter in columns. Before saving the query it is necessary to
provide the external access to the query which can be done by using the properties tab. The InfoCube to
be used for the query should be the same InfoCube where data was loaded while creating
transformation and DTP. Once the report is ready, this step can be said as completed successfully.
Step 15: Loading data in Measures
In this step, a query created in the previous step will be used to load the InfoCube data in the measures
to be used for financial perspective. This can be done by using ‘measures and benchmark’ screen. In
order to successfully display the data, system may require you to change the settings in BSC design
screen; it may require changing the date and re-assigning the measures to objectives. Once this step is
completed, the BSC is ready to be used with all the value fields fully loaded.
MNC Company’s Performance Evaluation based on Financial Perspective
The performance of Morning Nourishment Cereal Company can be accessed based on the company’s
ability to accomplish the objectives of different perspectives representing company’s business and
corporate strategies. In order to understand financial performance of the company, Jay Modi,
Company’s CFO has done the complete evaluation of company’s financial perspective from quarter Q2
to Q6.
The business strategies used to explain evaluate the financial performance includes; ‘Improve Financial
Performance’ and ‘Business Agility’
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10. Net Margin
Overall Objective (Q2-Q6): Our Company has selected this measure to support the objective ‘Increase
Profitability’. The main objective of our company for net margin was to make sure that we achieve 30%
for all the quarters.
Overall Outcome (Q2-Q6): Based on our objective, we managed to maintain the net margin of over 30%
in most of the quarters. The system has generated the status as ‘good’ with an average score as 78.40
from Q2-Q6
Overall Assessment (Q2-Q6): In the Q1, the sales process was not controlled by our team but still we
managed to achieve the net margin of 39.70%, so we thought that selecting net margin as a measure to
achieve our objective of increasing profitability will be a wise decision. But in Q2, we failed to
accomplish that objective. Although we had a net margin of 6.3% but it fall down drastically. Our
management team was determined to give their best in Q3 and we had a net margin of 54.90% (a
growth of 769.36% as compared to Q2). We’re aware about the fact that it is very difficult to maintain
the margin of over 50% for all the quarter so we decided that as far as our company achieves 30% of net
margin in any quarter, it will be considered as best performance. For Q4, Q5 and Q6 we achieved net
margin of 37.80%, 43% and 29.30% respectively. The reason for net margin below 30% in Q6 is because
our company went out of stock in day 53rd of Q6
Recommendation: To achieve higher net margin, it is recommended to offer unique products in terms of
those products which are not offered by the competitors and than charge the highest market price by
following, ‘skim the cream’ pricing strategy.
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11. Returns on Investment
Overall Objective (Q2-Q6): This was another measure used to support the objective ‘Increased
Profitability’. Our main focus was to check that we achieve at least 10% ROI for all the quarters as lower
than that would lead to lower investment in advertising for the coming quarters.
Overall Outcome (Q2-Q6): The overall outcome for ROI is not satisfactory as except Q3 and Q5 we failed
to achieve our objective of 10% ROI which lead to status as ‘Medium’ and an average score of 52 from
Q2-Q6
Overall Assessment (Q2-Q6): When we achieved 6.68% of ROI in Q1 without any control over pricing
and advertising during the quarter, we believed that if we give some extra effort it will be easy to
generate a growth from quarter to quarter. But in reality that doesn’t happened. For Q2; we had ROI as
only 1.44% which was due a mistake by our operational team to enter the correct BOM. We were
suppose to produce Original muesli but ended up producing Nuts muesli and we sold 2, 50,000 boxes at
euro 1.50 each which was below cost. In Q3, we managed to achieve 10.83% but again in Q4 the result
was in vein as we secured only 6.15% because our company dropped one of the products Strawberry
muesli. This rise and fall result continued from Q1 to Q6 due to one or the other reason. Still our
company is looking for some strategy which can fetch us the ROI of over 10% for all the quarter.
Recommendation: To achieve the stabilized ROI or to reduce the fluctuations in this ratio, it necessary
that a company should invest only in those products that it thinks will be available throughout the year.
In short, dropping or introducing a new product in between the quarter affects the ROI severely.
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12. Current Ratio
Overall Objective (Q2-Q6): In order to measure the objective ‘Improve Liquidity’ our company used
Current Ratio. We always strived to make our current ratio as 1:1 but we could achieve this only in last
quarter.
Overall Outcome (Q2-Q6): The overall outcome of current ratio is satisfactory because in most of the
quarters we managed to match the plan ratio with the target one. We achieved our goal of making
current ratio 1:1 only in Q6 when it was 1.01:1. The system has generated the status as ‘very good’ with
its average score as 83.8 from Q2-Q6
Overall Assessment (Q2-Q6): Our Company’s performance in terms of current ratio was not good for
Q2, Q3 and Q4 because we always strived to reach the desired current ratio of 1:1 but we could not
reach that target. The main reason was due to a bank loan of € 14 million from Waizen bank which was
considered as current liability. Although we regularly paid the bank loan at the end of every quarter but
the amount was too large and it took us more than 4 quarters to repay half of the loan. On the other
hand, if we look at current asset, cash amount and bills receivable kept increasing quarter to quarter
which helped us to reach the company’s best current ratio in Q5 which was 0.91 as against the planned
ratio of 0.80; even in the final quarter we’re lucky to reach 1.01:1 as we paid our bills to good extent.
Recommendation: The best way to improve this ratio is by generating more of cash amount and regular
payment of outstanding bills. If this ratio fluctuated, it is difficult to stabilize it for next couple of
quarters.
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13. Quick Ratio
Overall Objective (Q2-Q6): Another measure used to support the objective ‘Improved Liquidity’ was
quick ratio which gives more accurate result than current ratio in terms of measuring liquidity as it
doesn’t consider stock or inventory. Our aim was to see that we reach the ideal quick ratio of 1:1 by the
end of final quarter as due to heavy loan it was difficult to achieve that very early.
Overall Outcome (Q2-Q6): The final outcome was at the end of Q6 was impressive. Although the status
generated by system was ‘Good’ with average score of 69.20 from Q2 to Q6, we’re satisfied to achieve
our goal.
Overall Assessment (Q2-Q6): When we compare the current ratio with quick ratio for all the quarters,
there is not much difference as never had very high inventory in any quarter. Our management team
knew that higher the inventory, higher will be the difference between both the liquidity ratios, so we
successfully managed to reduce a big gap between the two. For most of the quarter we had good score
because our actual ratio was close to what we have planned at the beginning of each quarter. The ratio
kept growing from quarter to quarter and finally the most satisfactory result was in quarter Q6 when we
achieved this ratio slightly over one.
Recommendation: Quick ratio helps to answer the question that if all the sales disappear in next
quarter, than will my company is able to pay its obligations. So it is recommended to focus high on
generating more of current assets to achieve an ideal quick ratio.
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14. Debt-Equity Ratio
Overall Objective (Q2-Q6): This ratio was short-listed by our company to measure the effectiveness for
one of our objectives, ‘Enhance Solvency’. From the beginning our main objective for this ratio was to
make this below 100% as early as we can.
Overall Outcome (Q2-Q6): The overall outcome was really impressive as after every quarter we’re
getting close to achieve our objective and we achieved that in Q5 when ratio was below 100
percentages. The system has generated the status as ‘very good’ with an average score of 83.80 from
Q2-Q6
Overall Assessment (Q2-Q6): From Q2-Q4 our ratio was over one which means most of our assets were
financed with debt which was not a good sign, so we regularly kept paying to vendors for the materials
we purchased and saw our ratio falling continuously. In the Q5 and Q6 we had our ratio below 100%
which means most of our assets were financed through equity which is really a good sign for the
company. Another good thing was that our management team always planned this ratio in such a way
that we can achieve it easily, as result we had a score close to 100 for last three quarters.
Recommendation: It is always recommended to secure funding through equity than through debt as
higher the equity higher will be the company’s debt-equity ratio and vice versa.
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15. Debt Ratio
Overall Objective (Q2-Q6): Another measure used to support the objective, ‘Enhance Solvency’ is debt
ratio. Our objective for this ratio since Q2 was to bring it below 50% which was quiet difficult because of
higher debt.
Overall Outcome (Q2-Q6): Like debt-equity ratio, even the outcomes for this ratio was also excellent as
we achieved our objective in quarter fifth itself. The result generated by system was ‘very good’ with an
average score of 80.20 from Q2-Q6
Overall Assessment (Q2-Q6): Our Company was smart enough to understand that lower the percentage
of this ratio, the less leverage a company is using and stronger its equity position and higher the ratio,
the more risk that company is considered to have taken. In the Q1, we started with 74% which kept
decreasing continuously with increase in assets in terms of bills receivables and cash amount. In Q5,
we’re happy to achieve our target of bringing this ratio below 50%; for Q6, it was 45% which was further
reduced and our dependency on leverage was reduced.
Recommendation: The only recommendation for our company relating to this ratio is to continue to
increase the amount of total assets as it will lead to fall in debt ratio. This can also be done by issuing
more shares and paying the debt out of the cash generated.
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16. Revenue Growth Ratio
Overall Objective (Q2-Q6): This ratio was used to measure the objective, ‘Improve Revenue Growth’.
Our basic objective for this measure was to make sure that this ratio remains positive throughout all the
quarters as other ratios are completely dependent on company’s sales volume.
Overall Outcome (Q2-Q6): The overall result of this ratio was not very good as the result varied from
quarter to quarter. The status generated by the system was ‘Medium’ with an average score of 52 from
Q2-Q6
Overall Assessment (Q2-Q6): The performance of this ratio was very fluctuating throughout the year as
it was over 51% in Q2 than it went down to 2.17% in Q3 because of system downtime at day 32 of
quarter. In Q4 it further went low to -9.05% as we dropped on of our product, again in Q5 we’re lucky to
achieve a growth of over 57% but everything went in vein as for Q6 the performance was again horrible
to -47.36%, this time it was due to the reason that we could not produce our product because of
capacity constraints and we also went out of stock on day 53rd of the quarter.
Recommendation: For our company the best recommendation to improve revenue growth ratio is by
reducing the fluctuation in number of products offered as adding or dropping any product in between
the year leads to affect the sales and margin.
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17. Returns on Assets (ROA)
Overall Objective (Q2-Q6): One of our objective was ‘Better Asset Utilization’ and to support this
objective, we have measure Returns on Asset. Our aim for this measure was to continuously grow this
ratio from one quarter to another.
Overall Outcome (Q2-Q6): The overall performance was tremendous as we always had growth for this
ratio. The system has generated the status of ‘very good’ with an average score of 97 from Q2-Q6
Overall Assessment (Q2-Q6): All the companies had the same amount of assets at the beginning of the
year but than it depend upon the company to generate earnings from the invested capital on these
assets. Our company took advantage by reducing the market leverage. Since Q2 we saw growth and it
kept growing quarter after quarter. It was 6.75% in Q2, than it went up to 16.08% in Q4 and than in Q6
the result was doubled to over 33%. When we compare the actual values with planned values, the
actual values always out performed and because of that we had a score of 100 for the last four quarters.
Recommendation: To further increase the ROA it is recommended that our company should fully utilize
the capacity of plant and machinery as higher the asset utilization rate, higher will be the returns from
these assets and vice versa.
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18. Asset Turnover
Overall Objective (Q2-Q6): Another measure used to support the objective, ‘Better Asset Utilization’
was asset turnover ratio. Our aim for this measure was to keep this ratio as moderate which means
neither too high nor too low as extremeness in this case may create more risk.
Overall Outcome (Q2-Q6): The overall outcome for this ratio was satisfactory as it kept fluctuating
throughout the year. The system has generated the status of ‘good’ with an average score of 71.4 from
Q2-Q6
Overall Assessment (Q2-Q6): Generally it has been seen that companies with low profit margins tend to
have high asset turnover and those with high profit margins have low asset turnover as it indicates the
pricing strategy of the company. Although the pricing strategy of our company was aggressive and we
always set the price above market but it did not helped as this ratio kept fluctuating for all the quarters.
The reason was improper planning by management team in terms of determining this ratio well in
advance. In Q2 we started with 0.17 than went as high as 0.24 in Q5 and than again came down to 0.12
in Q6, the main reason for such a low ratio in Q6 was because of charging a mark-up of over 170% to
maintain the inventory.
Recommendation: For our company we would like to lower this ratio because higher the profit margin,
lower will be the asset turnover. We always enjoyed the market leadership by charging the higher price
and we will continue to follow the same strategy which will help us to monitor this ratio.
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19. Conclusions and Recommendations for coming Quarter
Stability in product offerings: Morning Nourishment Cereal Company was successful to win all the
quarters throughout the year but it always faced problems with fluctuations in the number of products
it offered. Initially we started by offering four products i.e. Strawberry (.500 kg), Nuts (1 kg and .500kg),
and Raisin (.500 kg) in quarter 1 and than continued till Q3; but than in Q4, we dropped strawberry
(.500kg) because the material price was rising and it was generating very less margin but our company
policy was to continue with only those products which can fetch as high as 150% of margin at any given
time so we did not had any other option. It was in Q6 when again we failed to produce our main product
Nuts (1 kg) because of capacity constraints and the result was low revenue and margin with tough
competition with ‘Muesli Express’. Therefore it is always recommended that a company should neither
add nor drop any product in between the year as these decisions can confuse the customer and widely
affect the company’s financial condition.
Better Understanding of Inventory Management: Many companies think that higher inventory is always
a wrong decision but that is myth if you will ask me. I totally understand that it is always risky to keep
high inventory as a company can suffer a loss if the material price falls down in next quarter but it is
always recommended to monitor the market news. In my company we ended up with double the
product cost in Q6 when we compared with competitors cost and ultimately they managed to eat higher
margin. From Q2 to Q5 the inventory price was continuously falling and the management team my
company assumed that even in Q6 the price will further fall so why to stock the materials, but our bad
luck that the material price rose like a demon and we’re left with no other option than to pay the price.
Always maintain low Debts: When the simulation / quarter is in progress, it is difficult to remember
that whenever we make purchase order, we have to make payment to vendor and similarly whenever
we make profit, we have to pay the bank loan. This was another policy our company always followed as
higher debt leads to affect various ratios including current ratio, debt ratio and debt-equity ratio.
Another problem is low credit rating which further leads to payment of high interest amount to bank. So
it is always recommended that regular payment of bank loan and vendor dues is the key to improve
credit rating and other ratios.
Business Strategy should revolve around advertising and pricing strategy: It is necessary that a
company should focus design its operational strategies which focuses on Advertising and Pricing
strategy. Apart from the physical product this two are closely related to the customers as price is what
customers pay for the product and advertising is what company does to influence customer for paying a
specified price. In most of the simulations I found that not all the company believes in advertising their
product and consider it as expense but in reality advertising is an ‘investment’. From my experience, I
can say that if you will advertise, its 100% that you will be able to fetch double the amount invested in
less than a month, so it is always recommended that from the Q1 itself, a company should advertise
aggressively and set the aggressive price.’ You know that first impression is best impression’
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20. Individual Lessons Learned from the Project
Team Management: This project gave me an opportunity to manage 7 team members which was really
a good experience. Although I was not explicitly known as a leader but most of the team members of
management and operational teams were aware that I’m the most active person and is capable of
taking quick and correct decisions.
Team Productivity: Team productivity to me means the percentage of team members working
efficiently and effectively in a team. As usual, it is not possible that everyone in your team gives their
100% and same was the case with my team with couple of team members. But I learnt that in order to
get anything out of this people, the only way is to assign them what they are capable of and what they
can accomplish within the time frame which additional task can be assigned to other members who are
willing to give their 100%
Issues Management: As far as my experience, a team cannot be said a cooperative unless there are ‘NO’
issues. Every team faces several issues and we’re one such team where we had little confrontation when
one of the team members failed to accomplish his assigned task. With all my experience, I was ready to
tackle this problem where I threatened that guy of getting low in team evaluation and on the other hand
I kept helping him by motivating that guy by saying, ‘’don’t worry mate, if you don’t know what to do,
just follow what I say and you will be fine’ and this always worked.
Risk Management: In my team most of the members were good at completing the assigned task but
were not many were good at taking quick decisions. For example; when one of our product was not
selling well in Q3, I decided that we’ll discontinue that product from next quarter and that was a risky
decision as our competitors were offering an average of 5 products and we’re left with only 3 products
with two of them in different sizes (Nuts 1 kg and 500 gm)
Planning in Advance: Planning is the base for achieving the objective and getting at the top; I was aware
about this and never started any of my without planning. For example; before any simulation starts, I
make sure that we are following ‘make to stock’ policy and prices are set as indicated by management
team.
Although everything went on well but one decision which I took still makes me un-happy and it was due
to bad planning. It was in Q5 when the prices of all the materials were the lowest of the year and we did
not recognized that and than in Q6 the material price rose like ‘Eiffel Tower’ due to which we ended up
setting our price double than our competitors who stocked high quantity of materials in Q5. If with
better planning we would have stocked some of the materials in Q5 itself than the result might have
been different.
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21. Change Management: Although we did not had any major changes throughout the project but we’re
ready for any change. For example; we saw that one of the operational team member of Uber Grains
was not available when the company needed his help, so I thought even the same situation can happen
with any other team also. To overcome this I discussed with Ms. Lin Zhu that if anything like that
happens with our company than she was willing to move to operational team for additional help.
BSC Design and Implementation: This was one of the best experiences I had during the project. Learning
to design BSC and implementing it is an achievement in itself. I even helped other colleagues in the class
on how to design and implement BSC. For example; I received calls at 1:00 am from colleagues and I was
happy to answer them.
Training: In order to train others it is necessary that you should know that concept at first place. I was
happy to train my operational team members on how to use WebEx Wimba software for virtual
meeting. Even we did not used this most of the times but training someone of what you know is a good
experience.
Never Give-up Policy: It was in Q6 when the stock price of my company was the lowest when compared
with competitors. One of the team member of competitors asked me, ‘’Jai why are you looking very
angry? Is it because of low sales of your company or because we are selling well than your company?’’ I
calmly said that although we are not the top company at this time but wait for the result and you will
see no difference in result as we have at the end of every quarter. I was right because as usual our
company was the market leader.
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22. Appendix:
Implementation Process of Balanced Scorecard
BSC implementation depends not only on selecting measures that are relevant, manageable, and
important but also on how leadership, supervisors, and employees gain knowledge about the status of
the BSC metrics. The implementation of Balanced Scorecard takes place in different phases.
Step #1: Strategy set-up in Strategy Management Design
In order to make rational decision about
organizational activities and not least set target for Strategy Definition
those activities, an enterprise should develop a
clear idea about what the organization is trying to
achieve. Therefore creation on strategic
destination statement helps to find out what the
organization is likely to look like at a certain point
of time.
Step #2: Creating of perspective in Strategy Management Design
The financial perspective contains those Perspective Definition
objectives relating to the most important
activities in terms of how the organization wish
customers, suppliers, employees, government,
stakeholders and general public to perceive the
company and how it will ultimately translate
into financial results and economic value.
Step #3: Creating of Objectives in Strategy Management Design
Once the strategic destination has been established the next
step is for the same group to agree on the most important
strategic objectives (outcomes) required for the destination to
be achieved. The best way to do this is to focus on the actions
directly within the scope of the team building the balanced
scorecard.
The screen shot displays all the objectives that are placed
under financial perspective. Most of the objectives support the
‘enhance financial performance’ strategy while objective
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23. better asset utilization focuses on ‘better operational efficiency’ strategy. Objectives can be created in
strategy design under strategy management design.
Process to create an Objective
Technical Name
Definition
The above screen shot is an example of creating an objective. It displays technical name, medium and
long text and definition of the objective Increase Profitability. In the similar way, all the other objectives;
improve liquidity, enhance solvency, improve revenue growth and better asset utilization are created
with their respective technical name and definition.
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24. Step #4: Creating of Measures in Measure Catalog
Our company has followed an elaborate process for identifying and describing measures selected to
inform management about the organizations progress towards achievement of its goals
The screen shot displays all the measures which are created to support the objectives under financial
perspective. All the measures are created in measure group ERP448 Team1 Financial Perspective under
measure catalog ‘ERP448 Fall 2008 Project Workplace’
The screen shot is an example of creating measures in
measure catalog. It displays technical name, description,
formula and definition of the selected measure. The above
screen displays the details for measure Current Ratio. In the
same way the details for other measures like quick ratio, ROI,
ROA, asset turnover, debt ratio, debt-equity ratio, revenue
growth ratio and net margin ratio is available in measure
group ERP448 Team1 Financial Perspective under measure
catalog ‘ERP448 Fall 2008 Project Workplace’
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25. Step #5: Scorecard Design in Strategy Management Design
While designing the scorecard the system ask for
technical name, long text, short text and user
name. The screen at the right displays the owner of
scorecard is ERP448 09
Step #6: Naming the Scorecard and assigning it to the hierarchy
After the scorecard is created it is necessary that it should be named to the right person so that it will be
easy to identify the owner of that scorecard. For Financial perspective, the scorecard is named as
E448_09_PR. It is also necessary that the scorecard is assigned to the correct hierarchy so scorecard
named as E448_09_PR is assigned to hierarchy ERP448 Team 1 Project Workspace.
Step #7: Assigning and Setting the value fields to scorecard
Setting the Value fields is very important part of scorecard as it
lets the user know that on what basis or criteria the result is
displayed. It also helps to know that the result is good or bad
and measures to be taken if there’s a deviation. Some common Selected value fields
value fields used are actual value which will be the values of
current quarter, plan values which will be planned to be
achieved based on actual value, score which is determined by
the system, trend which tells about the deviation in result by
comparing the actual and plan value, assessment which is
determined by the system and target value is the average value
of industry as a whole. The screen on the right side is used to
select the required value field from among the available options.
Step #8: Assigning and setting the strategies to scorecard
The next step is to assign the strategies to scorecard. To do this,
we have to select our defined strategy from the available list. The
easiest way to find the strategy is by its technical name. After
selecting the strategy it is necessary to define the start date for
that strategy. It is always recommended that all the strategies,
perspective, objectives and measures must have a same start date
so score will work very easily. In the screen at the right side, we
can see how the start date can be entered and move further to
next step by clicking on continue.
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26. Step #9: Assigning and setting strategies to perspective
Like most of the companies, Morning Nourishment
Cereal Company also uses the four perspectives to
measure the overall performance of the company. In the
right side we can see the procedure of how the
perspectives are assigned to respective strategy. Once
the perspective is assigned to the strategy, it can be
activated by assigning the objectives to it.
Step #10: Assigning and setting objectives to perspectives
Setting and assigning of objectives is an easy task as at the
time of creating these objectives the system will ask for
assigning objectives to respective perspective. Therefore, as
we can see in the above screen, if we right click on in the Available Objectives
financial perspective, it will populate only objectives
belonging to that perspective.
Step #11: Assigning and setting measures to objectives
Assigning and setting of measures is the final step to complete the scorecard design. The process is little
difficult as compared to the process of assigning objectives. It includes selecting your measure from
among the various measures. The best way to do this is by finding the measure with technical name.
After the measures are assigned they need to be activated which can be done by defining its
characteristics.
Step #12: Setting-up the owner tab, status tab, value field tab, formula tab and graphics tab
for measures.
After setting the measures, the next step consists of defining
the characteristics of measures. It includes defining of owner Displaying Graphics tab
which is ERP448 09, its status which will be system generated,
value field which will be actual and plan value based on
quarter, graphic which will be time series and value
comparison graphics. In the right side we can see that graphics
are assigned for measure Net Margin. In the same way all the
other details will be inputted. If all these characteristics are
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27. not updated than measures will be shown as red color i.e. not activated, therefore, it is necessary to
update all the details.
The screen at the right displays the value field for
measure Net Margin which is selected as actual and Displaying Value fields tab
plan value based on quarter. We can change the
period based on our requirement and even the
values can be selected from a list.
However, at Morning Nourishment Cereal
Company, while implementing the process of
balanced scorecard a set of well-defined criteria
was taken into consideration which is discussed below.
A clear sense of direction: The Balanced Scorecard is an efficient tool for clearly defining long-term
strategic goals in the form of corporate and business strategies that can be translated on the form of
short-term activities.
A profound understanding of business model: Identifying strategic objectives within the financial
perspective of the scorecard and linking them in an expression of cause-and-effect relationships forces
management team to apply system thinking and develop a holistic strategy covering all the financial
aspects of the business.
An ability to focus and prioritize: Focusing on a clearly defined corporate and business strategy will help
our company to reduce the risk of loosing the sight of what they are trying to achieve.
Organizational agility: Our Company is also focused to regularly check the balanced scorecard that
whether it is doing what was actually planned and if there are any deviations, an immediate action will
be taken to correct the same by replacing or modifying the measure.
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28. Displaying the Scorecard ERP448 09
The above screen is the complete scorecard for ERP448 09; it displays all the three strategies, four
perspectives below each strategy, objectives under financial perspective and measures under each of
the objectives. The objectives highlighted in green are delegated to strategy ‘improve financial
performance’ while objective in blue is delegated to strategy ‘better asset utilization’. As the complete
scorecard has green color which represents that there’s no error or warnings and scorecard is activated
and ready to use.
Displaying Overview Screen for Scorecard ERP448 09
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29. The above screen is the overview screen for Scorecard ERP448 09 where we can only see the details of
financial perspective because scorecard ERP448 09 is assigned to financial perspective. The selected
date / period is 09/2008 and breakdown is Objective / Measure. In order to get the better view we can
also select the tab for analysis, cause-effect chain, drilldown and scorecard comparison which facilitates
different functions.
Displaying the Analysis screen
The above screen shows that there are two strategies
i.e. improve financial performance and maximize Value Fields
operational efficiency where the financial perspective
is used. The screen displays only the information
relating to financial perspective i.e. only objectives
and measures for financial perspective. As the actual
and plan value does not have any data source, it
shows BW key figure does not exist. When the data
source will be assigned, all the value fields will be used
to review the financial performance. The scorecard is
flexible enough to display details based on Cause-
Effect chain, to drilldown the information and to be
compared with other scorecard. All these functions
are useful once the value fields are active.
Final Design of BSC
Step #1: Creating Data Source
General information tab
The general information tab requires
entering the short, medium and long
description for the data source. It also
provides the additional information like,
name of the person who last changed the
data source, and the time when these
changes are made.
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30. Extraction tab
This is the tab from where actual data will be loaded
to the SAP system. In the option ‘Name of the File’
the system allows you to browse the file from
desktop. The data format will be selected as CSV
because the flat file to be loaded is also in the similar
format, and finally in data separator, the sign will be
changed to ‘,’ as it will better support the CSV flat
file.
Preview tab
In this tab we can see the actual
data loaded but it will be in the
format which we have selected in
‘Extraction Tab’. All the headings
will be in columns with detailed
content or information in rows.
We can also select the number
field type in field screen based on
which it will be displayed, it also facilitates the user to change the number of decimal points we are
looking at and it can also be changed in fields tab.
Step #2: Creating Transformation
This process gives a ‘feel good’ feeling to
the user because it’s like playing a video
game where we have to carry something
from the left end to its home at the right
end. Similarly, in transformation also we
require to connect the nodes from left
side which is a ‘Data Source’ to the similar
InfoObjects in the right side which is
‘InfoCube’. The main purpose is to
transform the loaded data in data source
to InfoCube.
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31. Step #3: DTP Confirmation
This step is like a final ball of baseball
game which requires the player to hit a
home run, if he gets, its his luck and if
can’t better try in next game. Similarly,
this step required the user that he should
get all the green buttons which means NO
error or even no warnings, if he gets the
entire green button than it means data is
successfully loaded in the InfoCube.
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32. References:
• Articles by David P. Norton and Robert S. Kaplan –
o What is strategy?
o Balanced Scorecard,
o Transforming the BSC from performance measurement to strategic management,
o Putting scorecard to work,
o Having trouble with scorecard?
o Can bad things happen to good scorecards?
o EVA and Strategy
• Slides by Dr. Lea –
o Measure Builder
o BSC Development
o SEM Configuration
o BW Queries Part I and Part II
• WeSpy Consulting reports
o Financial Statements (Q2-Q6)
o Sales report, market report, material and prices report (Q2-Q6)
• Slides by Mayur Raicar – Loading a flat file to InfoCube
• Slides by Dr. Yu – Creating a InfoCube (ERP345)
• http://images.google.com/images?hl=en&q=strategy+map&btnG=Search+Images&gbv=2
• http://en.wikipedia.org/wiki/Balanced_scorecard
• http://www.investopedia.com/university/ratios/
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33. Peer Evaluation Form
Ravi
CRITERIA Jay Modi Lin Zhu Marty Kofsky
Kothari
Assignment tasks carried out by each Compiling of Completion Completion
Completion of
member (what does each member the final of assigned of assigned
assigned task
do to complete this assignment). report task task
Quality of contribution to group
24 25 23 20
effort (0 % – 25 %)
Willingness to carry fair share of the
25 25 15 15
group effort (0 % – 15 %)
Willingness to cooperate with others
15 25 15 15
(0 % – 15 %)
Quantity of contribution to group
15 15 15 10
effort (0 % – 15 %)
Dependability (0 % – 15 %) 15 15 13 12
Attending all team meetings on time
15 15 15 13
(0 % – 15 %)
Total Score (100 %) 99 100 96 85
Lin Zhu: She is one of the best person to work with. She possesses technical as well as
accounting skills which always helped the team.
Marty Kofsky: Always completes the assigned task on time and can also give good ideas.
Ravi Kothari: He has shown a good interest and involvement for the final assignment. He can
be the best team member if continues to work with the same zeal for all the team assignment.
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