Tuesday 14th Jul 2020 - Logistics & Supply Chain

Competitive leadership vs exposed reputation

The Operating and Financial Review (OFR) is now a legal requirement for all UK quoted companies. For the first time, organisations are required to report on non-financial elements of performance.

Directors must provide both current and future strategies to be adopted by the business. The aim is to help investors assess the potential for these strategies to succeed. The OFR identifies trends and factors relevant to the investors’ assessment of the current and future performance of the business.

For logistics companies, the OFR means huge changes. Historically, logistics has been tactical, accommodating urgent changes. However, under OFR, management teams will have to plan what they intend to do, report on how well they did, assess the impact of planning on results and propose how they plan to act in the future.

For companies active across Europe, further issues such as local business development and cultural trends will also have to be considered.

The key performance indicators (KPIs) used to make these evaluations are crucial. If companies get them wrong, their OFR could seriously damage their reputation.

However, the advantages for early movers could be considerable. Logistics firms brave enough to pioneer KPI disclosure could effectively tell their competition how to measure effectiveness. On a European scale, this could be a huge advantage.

Research shows that 85 per cent of executive teams spend less than one hour per month discussing strategy and that only five per cent of the workforce understand strategy.

So, how can logistics businesses fuse strategy and performance, then continually assess operational progress toward strategic objectives? There are eleven steps:

  1. Make strategy drive all management processes – Senior managers determine high level goals to be achieved and the strategy to achieve them. Operational managers define the activities and an estimate of the resources that will be required. Budgets are assigned to those activity plans.
  2. Think about answers to questions on direction – Address the question: ‘What happens if things do not turn out as planned?’
  3. Ensure the operational plan covers present and future issues – Plans must address maintaining current operations, improving operational efficiency, and new initiatives.
  4. Focus – Do not plan in excessive detail.
  5. Link plans to actions – Work activities into a cause and effect hierarchy.
  6. Measure – Objectives and strategies have measures of success, activities have measures of implementation.
  7. Assign responsibilities – Make specific people responsible for activities. Give them control of the resources to ensure delivery.
  8. Record and monitor assumptions – Monitor business assumptions tied to the targets set for corporate objectives. If assumptions change, reconsider the targets.
  9. Clearly communicate the plans.
  10. Develop multiple budget scenarios.
  11. Make the process continuous – Planning is driven by events rather than dates.

Michael Coveney is with Geac.

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