David Caruso Keynote Address

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


The art of winning an unfair game

May 22-24, 2007


The Impact of Supply Chain Applications 2000

May 22-24, 2007


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


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


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


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


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


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


The Difference Between Leaders and Laggards is Significant

May 22-24, 2007


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


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


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


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


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


Closing thoughts…

Every business decision results in an IT decision…

How central to your success is your Information Technology?

May 22-24, 2007


Thank YouThank YDavid CarusoPrincipalDavid Caruso & Associates, Inc.

Contact Information:[email protected]

ou

David Caruso Keynote Address

Economy & Finance

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