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Factual Approach To Decision Making

The document discusses key performance indicators (KPIs) for measuring the sustainable supply chain performance of crude palm oil (CPO) companies in Indonesia using a lean and green supply chain management approach. It identifies 28 KPIs, including 15 related to lean supply chain goals like reducing costs and 13 for green goals like minimizing environmental impact. The KPIs are grouped into the four perspectives of the balanced scorecard: financial, customer, internal business processes, and learning and growth. The highest priority KPIs are a company's total revenue and total operating costs. The study aims to help CPO companies implement these KPIs to integrate sustainability into their business operations.

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137 views

Factual Approach To Decision Making

The document discusses key performance indicators (KPIs) for measuring the sustainable supply chain performance of crude palm oil (CPO) companies in Indonesia using a lean and green supply chain management approach. It identifies 28 KPIs, including 15 related to lean supply chain goals like reducing costs and 13 for green goals like minimizing environmental impact. The KPIs are grouped into the four perspectives of the balanced scorecard: financial, customer, internal business processes, and learning and growth. The highest priority KPIs are a company's total revenue and total operating costs. The study aims to help CPO companies implement these KPIs to integrate sustainability into their business operations.

Uploaded by

Jack
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Factual approach to decision making is ensuring that data and information are

accurate and reliable. The basis for factual approach to decision making is the
performance-based management system. The efficiency imbued in the organization
after the implementation of prior principles will allow decisions made with clarity.
Effective decisions are based on the analysis of data and information.

Applying the principle of Factual Approach to Decision is ensuing that data and
information are sufficiently in accurate and reliable. Second is making data accessible to
those who need it. Also analyzing data and info using valid analysis method. Lastly
when making decisions and taking action based on previous experience and institution.
For the implication’s facts are obtained from observations performed by qualified people
using qualified means of master measurements such as the integrity of the information
must be known. The benefits of factual approach to decision making are as follows.
First is Policy and Strategy Formulation, whereas creating and achieving more
competitive business plan through the integration of continual improvement with
strategic and business planning. For goal and target setting, it is essential to set realistic
and challenging improvement goals and providing the resources to achieve them.
Whereas, involving operation management, involving people in the organization in the
continual improvement of the process. Last is for human resource management, we’re
providing all people the organization with the tools opportunities and encouragement to
improve products processes and system.

KPI is short for Key Performance Indicators. A set of quantifiable measures that a
company or industry uses to gauge or compare performance in terms of meeting their
strategic and operational goals. These varies between companies and industries
depending on priorities or performance criteria which is also referred to as Key Success
Indicators. The objectives of KPI improves personal understanding of KPIs and
improves personnel awareness of maintenance performance. KPIs are directly linked to
the overall goals of the company. It is a measurement that defines and tracks specific
goals and objectives. Any organizational strategies require monitoring improvement and
evaluation. KPI is used for performance effectiveness or the actual reflection of the
process efficiency in delivering the outcome. The effect of the change can be monitored
and detect potential problems. It can drive improvement and act as a tool to improve the
process

The Balance Scorecard focuses on factors that create long term value.
Traditional financial reports look reflect only the past spending incurred and revenues
earned. The scorecard identifies the factors that create long term economic value in an
organization such as Customer Focus, Business Process and Organizational learning
and growth. The scorecard is used to implement business strategies It identifies four
key performance measure. First is financial perspective, this perspective view
organizational financial performance and the use of financial resources. Second is
Customer Perspective, this perspective views organizational performance from the
customer’s point of view or other key stakeholder that the organization is designed to
serve. Third is Internal Business perspective, views organizational performance through
the lenses of the quality and the efficiency related to the product. Lastly is Learning and
Growth perspective, views organizational performance through the lenses of human
capital in infrastructure, technology, culture and other capacities that are key to
breakthrough performance.

Case Study on Indonesia’s Palm Oil Industry

The concepts of supply chain management are necessary activities selection


raising the added value, fulfilling the customer needs and delivering the products to the
customers as end-users. One of today's developing issues is the environmental
concern. This issue has caused the consumers of various industry, including the Crude
Palm Oil (CPO's) industry, requires company to produce and distributes the
environmentally friendly products throughout its various stages of their production and
marketing. The trading of certified CPO and kernel over 2018 has gone up. This is an
indicator increasing awareness of the consumers on the environmentally friendly issue.
Some policies could constrain the export of CPO from Indonesia, such as since 2008,
the European Union market have made requirements that any CPO products exported
to the region should possess a sustainable certificate. In other words, the European
Union have applied many requirements related to environmental issues, such as the
requirement for planting at a certain depth, not planting in infiltration basin areas, and
not planting with immolating the forests and animals within.

Various environmental issues related to environmental management has


required the companies to manage their supply chains to be in line with the concept of
Value Supply Chain and being sustainable towards the economic, social and
environmental factors. Several issues related to environmental management has
required the companies to manage their supply chains to be in line with the concept of
Green Supply Chain Management (GSCM). This concept is based on the perspective of
how to reduce waste and the impact on the environment caused by the supply chain
activities of the industrial companies. In addition, a concept that should be considered
for supply chain performance is the Lean Supply Chain Management (LSCM). This
concept aims to stream-lined the supply chain costs and reducing overall supply chain
process time to increase the effectiveness towards a sustainable system. The focus of
LSCM is on optimizing the processes of all supply chains, seeking simplification,
reducing waste and reducing activities that do not provide added value.

One of the important activities to achieve a sustainable palm oil company is by


improving the sustainable supply chain management, especially being in line with the
lean and green SCM concepts. The lean concept aims to reduce costs and to increase
the effectiveness of the supply chain. While the green concept tries to ensure that the
ongoing process keeps bringing good effect on the environment. In designing the
performance measurement of the sustainable supply chain through the lean & green
supply chain management approach, this study includes a formulation for Key
Performance Indicators (KPI) and grouping of the lean and green indicators which are
integrated with the balanced scorecard (BSC) perspectives. It obtained 28 KPIs which
consists of 15 lean supply chain KPIs and 13 green supply chain KPIs. Based on overall
weighting, the highest priority KPI is the company's total revenue and total operating
costs, followed by the total cost of the supply chain. The weights of three KPIs are
0.103, 0.078 and 0.072 respectively.

This study has generated a set of KPIs for measuring the performance of the
supply chain of the CPO with the LGSCM approach in the sustainability model. There
are 28 KPIs which were the result of the LGSCM formulation, consists of 15 Lean
supply chain KPIs and 13 Green supply chain KPIs. This KPI is an important indicator to
measure the fulfilment of the needs of all stakeholders involved in the CPO supply
chain. The indicator is based on the aspects of cost reduction and environmental
impact. Grouping the KPIs into four BSC perspectives have resulting 5 KPIs for the
financial perspective, KPIs for the customer perspective, 13 KPIs for the internal
business process perspective and 6 KPIs for the learning and growth perspective. The
highest weighting KPI's is for the financial perspective as the company's total revenue
(FL1) with a weight of 0.103. Thus, CPO companies are expected to be able to
implement these acquired KPIs and be integrated in their business processes. The sub
indicators determination for each KPI needs to be developed, especially for determining
the scale of good, bad or moderate or using a performance scale.

Sources:

Khair, F., Wijaya, D., Yulianto, H., & Soebandrija, K. (n.d.). Designing the
performance measurement for sustainable supply chain of the crude palm oil
companies using lean & green supply chain management LGSCM
approach Case Study: Indonesia's palm oil company. IOP Conference Series:
Earth and Environmental Science, 426.

Word Count:

Summary: 532 words

Case Study: 689 words

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