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Optimising a value-based performance indicator in mid-term sales and operations planning

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  • G J Hahn

    (Katholische Universität Eichstätt-Ingolstadt)

  • H Kuhn

    (Katholische Universität Eichstätt-Ingolstadt)

Abstract

Economic Value Added (EVA®) and corresponding value driver trees are prevalent frameworks of value-based management to measure and analyse shareholder value creation. However, they are explanatory models from an operations research perspective and do not provide decision support for performance optimisation. In this paper, we develop a comprehensive value-based decision framework for mid-term sales and operations planning (S&OP) in the supply chain implementing EVA as the objective function. The pivotal element of our framework is a decision-oriented extension of EVA-based value driver trees bridging the gap to the decision variables of S&OP as the operational performance levers. We utilise a numerical example to highlight the significant improvement potential due to the value-based optimisation approach. Working capital management emerges as the major mid- to short-term value driver in the supply chain.

Suggested Citation

  • G J Hahn & H Kuhn, 2011. "Optimising a value-based performance indicator in mid-term sales and operations planning," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 62(3), pages 515-525, March.
    • Handle: RePEc:pal:jorsoc:v:62:y:2011:i:3:d:10.1057_jors.2010.96
    DOI: 10.1057/jors.2010.96
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    References listed on IDEAS

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    1. Feng, Yan & D'Amours, Sophie & Beauregard, Robert, 2008. "The value of sales and operations planning in oriented strand board industry with make-to-order manufacturing system: Cross functional integration under deterministic demand and spot market recourse," International Journal of Production Economics, Elsevier, vol. 115(1), pages 189-209, September.
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    Cited by:

    1. Obermaier, Robert, 2012. "German inventory to sales ratios 1971–2005—An empirical analysis of business practice," International Journal of Production Economics, Elsevier, vol. 135(2), pages 964-976.
    2. Polo, Andrés & Peña, Numar & Muñoz, Dairo & Cañón, Adrián & Escobar, John Willmer, 2019. "Robust design of a closed-loop supply chain under uncertainty conditions integrating financial criteria," Omega, Elsevier, vol. 88(C), pages 110-132.
    3. Hahn, G.J. & Kuhn, H., 2012. "Simultaneous investment, operations, and financial planning in supply chains: A value-based optimization approach," International Journal of Production Economics, Elsevier, vol. 140(2), pages 559-569.
    4. Tuomikangas, Nina & Kaipia, Riikka, 2014. "A coordination framework for sales and operations planning (S&OP): Synthesis from the literature," International Journal of Production Economics, Elsevier, vol. 154(C), pages 243-262.

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