Designing decision support systems for value-based management: A survey and an architecture

Value-based Management (VBM) concepts are prevalent in theory and practice since shareholder value creation is commonly considered the paramount business goal. However, VBM mainly applies data-driven concepts to support decision-making, disregarding model-driven approaches. This paper develops a comprehensive approach to designing model-driven DSS for VBM. First, we derive a conceptual architecture for Integrated Business Planning (IBP) as the foundation for a model-driven approach to VBM. Second, we present a unified modeling approach for value-based performance and risk optimization that implements Value Added (xVA) performance metrics and applies robust optimization methods to mitigate risk impact.

[1]  O. Tang,et al.  Identifying risk issues and research advancements in supply chain risk management , 2011 .

[2]  Olivier Roux,et al.  Optimal cash flow and operational planning in a company supply chain , 2008, Int. J. Comput. Integr. Manuf..

[3]  ManMohan S. Sodhi,et al.  LP Modeling for Asset-Liability Management: A Survey of Choices and Simplifications , 2005, Oper. Res..

[4]  Herbert Meyr,et al.  Revenue management and demand fulfillment: matching applications, models, and software , 2007, OR Spectr..

[5]  W. Ness,et al.  A Linear Programming Approach to Financing the Multinational Corporation , 1972 .

[6]  Gautam Mitra,et al.  Robust solutions and risk measures for a supply chain planning problem under uncertainty , 2008, J. Oper. Res. Soc..

[7]  Gerd J. Hahn,et al.  Value-Based Performance and Risk Management in Supply Chains: A Robust Optimization Approach , 2012 .

[8]  Paul van Beek,et al.  Value chain management for commodities: a case study from the chemical industry , 2009, OR Spectr..

[9]  B. Back,et al.  Financial statement planning in the presence of tax constraints , 1995 .

[10]  Heinrich Kuhn,et al.  Simultaneous Investment, Operations, and Financial Planning in Supply Chains: A Value-Based Optimization Approach , 2012 .

[11]  Sibel Güven,et al.  An integrated investment and financial planning model , 1998 .

[12]  John C. Fisk,et al.  An interactive game for production and financial planning , 1980, Comput. Oper. Res..

[13]  Stefan Nickel,et al.  A multi-stage stochastic supply network design problem with financial decisions and risk management , 2012 .

[14]  D. Waters.  Supply Chain Risk Management: Vulnerability and Resilience in Logistics , 2007 .

[15]  Hokey Min,et al.  Supply chain modeling: past, present and future , 2002 .

[16]  Han-Lin Li,et al.  A robust optimization model for stochastic logistic problems , 2000 .

[17]  James R. Bradley,et al.  The Simultaneous Planning of Production, Capacity, and Inventory in Seasonal Demand Environments , 1999, Oper. Res..

[18]  Stewart C. Myers,et al.  A Programming Approach to Corporate Financial Management , 1974 .

[19]  Kenneth R. Baker,et al.  A SIMULTANEOUS PLANNING MODEL FOR PRODUCTION AND WORKING CAPITAL , 1977 .

[20]  Jian Cai,et al.  Improving supply chain performance management: A systematic approach to analyzing iterative KPI accomplishment , 2009, Decis. Support Syst..

[21]  John R. Birge,et al.  Equity valuation, production, and financial planning: A stochastic programming approach , 2004 .

[22]  Miguel J. Bagajewicz,et al.  Integrating Budgeting Models into Scheduling and Planning Models for the Chemical Batch Industry , 2003 .

[23]  Gintaras V. Reklaitis,et al.  Financial and financial engineering considerations in supply chain and product development pipeline management , 2009, Comput. Chem. Eng..

[24]  James C. T. Mao.  Application of Linear Programming to Short-Term Financing Decision , 1968 .

[25]  D. Teichroew,et al.  Optimal Short Term Financing Decision , 1965 .

[26]  John R. Birge,et al.  Introduction to Stochastic Programming , 1997 .

[27]  G. Guillén‐Gosálbez,et al.  Enhancing Corporate Value in the Optimal Design of Chemical Supply Chains , 2007 .

[28]  Armin Scholl,et al.  Robuste Planung und Optimierung: Grundlagen, Konzepte und Methoden; experimentelle Untersuchungen , 2000 .

[29]  Mir Saman Pishvaee,et al.  A robust optimization approach to closed-loop supply chain network design under uncertainty , 2011 .

[30]  A holistic framework for short-term supply chain management integrating production and corporate financial planning , 2007 .

[31]  Ignacio E. Grossmann,et al.  Enterprise‐wide optimization: A new frontier in process systems engineering , 2005 .

[32]  Robert G. Dyson,et al.  Operational research and financial management , 1988 .

[33]  James H. Vander Weide,et al.  A Practical Approach to Short-Run Financial Planning , 1978 .

[34]  Alf Kimms,et al.  Lot sizing and scheduling -- Survey and extensions , 1997 .

[35]  G. Fandel,et al.  A general model for extended strategic supply chain management with emphasis on product life cycles including development and recycling , 2004 .

[36]  Nikolay Tchernev,et al.  A combined financial and physical flows evaluation for logistic process and tactical production planning: Application in a company supply chain , 2008 .

[37]  Robert J. Vanderbei,et al.  Robust Optimization of Large-Scale Systems , 1995, Oper. Res..

[38]  R. H. Parker,et al.  Comparative International Accounting , 1981 .

[39]  Richard H. Bernhard.  Mathematical Programming Models for Capital Budgeting—A Survey, Generalization, and Critique , 1969 .

[40]  Willard T. Carleton.  An Analytical Model for Long-Range Financial Planning , 1970 .

[41]  Lian Qi,et al.  The Effect of Supply Disruptions on Supply Chain Design Decisions , 2010, Transp. Sci..

[42]  Luis Puigjaner,et al.  Towards an integrated framework for supply chain management in the batch chemical process industry , 2008, Comput. Chem. Eng..

[43]  Hartmut Stadtler,et al.  Supply chain management and advanced planning--basics, overview and challenges , 2005, Eur. J. Oper. Res..

[44]  William T. Ziemba,et al.  Short Term Financial Planning under Uncertainty , 1982 .

[45]  José Miguel Laínez,et al.  Capturing dynamics in integrated supply chain management , 2008, Comput. Chem. Eng..

[46]  Miguel J. Bagajewicz,et al.  Financial Risk Management for Investment Planning of New Commodities Considering Plant Location and Budgeting , 2006 .

[47]  James A. Gentry,et al.  State of the Art of Short-Run Financial Management , 1988 .

[48]  Christopher S. Tang,et al.  Modeling Supply Chain Planning Under Demand Uncertainty Using Stochastic Programming: A Survey Motivated by Asset-Liability Management , 2009 .

[49]  Elliot Bendoly,et al.  Enterprise resource planning: Developments and directions for operations management research , 2003, Eur. J. Oper. Res..

[50]  J. Shapiro.  Modeling the Supply Chain , 2000 .

[51]  B. Ritchie,et al.  Supply chain risk management and performance: A guiding framework for future development , 2007 .

[52]  Gintaras V. Reklaitis,et al.  Risk and uncertainty in managing chemical manufacturing supply chains , 2000 .

[53]  S. Young,et al.  EVA and Value-Based Management: A Practical Guide to Implementation , 2000 .

[54]  Y. Ijiri,et al.  A Linear-Programming Model For Budgeting And Financial-Planning , 1963 .

[55]  Vincent S. Lai,et al.  Evaluation of intranets in a distributed environment , 1998, Decis. Support Syst..

[56]  Dennis J. Sweeney,et al.  Study guide to accompany an introduction to management science : quantitative approaches to decision making , 1985 .

[57]  A. Charnes,et al.  APPLICATION OF LINEAR PROGRAMMING TO FINANCIAL BUDGETING AND THE COSTING OF FUNDS , 1959 .

[58]  Heinrich Kuhn,et al.  Optimising a value-based performance indicator in mid-term sales and operations planning , 2011, J. Oper. Res. Soc..

[59]  Clyde W. Holsapple,et al.  ERP plans and decision-support benefits , 2005, Decis. Support Syst..

[60]  W. Damon,et al.  A Simultaneous Decision Model for Production, Marketing and Finance , 1972 .

[61]  Rolf H. Möhring,et al.  Resource-constrained project scheduling: Notation, classification, models, and methods , 1999, Eur. J. Oper. Res..

[62]  Angappa Gunasekaran,et al.  Enterprise Resource Planning (ERP): Past, Present and Future , 2007, Int. J. Enterp. Inf. Syst..

[63]  Hartmut Stadtler,et al.  Supply Chain Management and Advanced Planning , 2000 .

[64]  Gintaras V. Reklaitis,et al.  Enterprise-wide modeling & optimization - An overview of emerging research challenges and opportunities , 2007, Comput. Chem. Eng..

[65]  Charles Møller,et al.  ERP II: a conceptual framework for next-generation enterprise systems? , 2005, J. Enterp. Inf. Manag..

[66]  Alain Martel,et al.  The design of robust value-creating supply chain networks , 2010, Eur. J. Oper. Res..

[67]  Young B. Moon,et al.  Enterprise Resource Planning (ERP): a review of the literature , 2007 .

[68]  Saumen Majumdar,et al.  A model for integrated analysis of generation capacity expansion and financial planning , 1999 .

[69]  Zhi-Long Chen,et al.  The Coordination of Pricing and Scheduling Decisions , 2010, Manuf. Serv. Oper. Manag..

[70]  Yair E. Orgler.  An Unequal-Period Model for Cash Management Decisions , 1969 .

[71]  David P. Morton,et al.  Assessing solution quality in stochastic programs , 2006, Algorithms for Optimization with Incomplete Information.

[72]  Erwin van der Laan,et al.  Quantitative models for reverse logistics: A review , 1997 .

[73]  Mark S. Daskin,et al.  Planning for Disruptions in Supply Chain Networks , 2006 .

[74]  D. Lambert,et al.  SUPPLY CHAIN METRICS. , 2001 .

[75]  Christer Carlsson,et al.  Past, present, and future of decision support technology , 2002, Decis. Support Syst..

[76]  Hyun-Soo Ahn,et al.  Pricing and Manufacturing Decisions When Demand is a Function of Prices in Multiple Periods , 2007, Oper. Res..

[77]  Kai Huang,et al.  The Value of Multistage Stochastic Programming in Capacity Planning Under Uncertainty , 2009, Oper. Res..

[78]  Willy Herroelen,et al.  Project scheduling under uncertainty: Survey and research potentials , 2005, Eur. J. Oper. Res..

[79]  Keith V. Smith,et al.  State of the Art of Working Capital Management , 1973 .

[80]  Christoph A. Schneeweiss,et al.  Distributed Decision Making , 2003 .

[81]  Murat Köksalan,et al.  An integrated production and financial planning model and an application , 1996 .

[82]  Julius Surkis,et al.  Optimal capital structure : A multi-period programming model for use in financial planning , 1983 .

[83]  Y. Narahari,et al.  Production, Manufacturing and Logistics Object oriented modeling and decision support for supply chains , 2004 .

[84]  Zvi Lieber,et al.  An Integrated Model for Accounts Receivable Management , 1975 .

[85]  Gintaras V. Reklaitis,et al.  Optimal design of batch‐storage network with financial transactions and cash flows , 2004 .

[86]  Norman P. Archer,et al.  Project portfolio selection through decision support , 2000, Decis. Support Syst..

[87]  Robert S. Kaplan,et al.  Advanced Management Accounting , 1989 .

[88]  S. D'Amours,et al.  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 , 2008 .

[89]  Ramesh Sharda,et al.  Model-driven decision support systems: Concepts and research directions , 2007, Decis. Support Syst..

[90]  Christopher S. Tang.  Perspectives in supply chain risk management , 2006 .

[91]  Luis Puigjaner,et al.  Empowering financial tradeoff with joint financial and supply chain planning models , 2007, Math. Comput. Model..

[92]  M. Christopher,et al.  Supply Chain Strategy: Its Impact on Shareholder Value , 1999 .

[93]  M. Georgiadis,et al.  Integration of financial statement analysis in the optimal design of supply chain networks under demand uncertainty , 2011 .

[94]  Gautam Mitra,et al.  Stochastic programming and scenario generation within a simulation framework: An information systems perspective , 2007, Decis. Support Syst..

[95]  Fengqi You,et al.  Risk Management for a Global Supply Chain Planning Under Uncertainty : Models and Algorithms , 2009 .

[96]  Luis Puigjaner,et al.  Management of Pricing Policies and Financial Risk as a Key Element for Short Term Scheduling Optimization , 2005 .

[97]  A. Rappaport,et al.  Creating Shareholder Value: A Guide for Managers and Investors , 1986 .

[98]  James E. Hodder.  Technical Note - Financial Market Approaches to Facility Location under Uncertainty , 1984, Oper. Res..

[99]  John R. Birge,et al.  Introduction to Stochastic programming (2nd edition), Springer verlag, New York , 2011 .

[100]  W. Bühler,et al.  Short-term financial planning with uncertain receipts and disbursements , 1978 .

[101]  Karl T. Ulrich,et al.  Special Issue on Design and Development: Product Development Decisions: A Review of the Literature , 2001, Manag. Sci..

[102]  David Walters,et al.  The implications of shareholder value planning and management for logistics decision making , 1999 .

[103]  M. Bagajewicz,et al.  Financial risk management in the planning of refinery operations , 2006 .

[104]  J. Morris McInnes,et al.  Theory, Models and Implementation in Financial Management , 1982 .

[105]  Rakesh Nagi,et al.  Robust supply chain design under uncertain demand in agile manufacturing , 2010, Comput. Oper. Res..

[106]  M. Cemal Dincer,et al.  A multifactor model for international plant location and financing under uncertainty , 1986, Comput. Oper. Res..

[107]  Miguel J. Bagajewicz,et al.  On the role of microeconomics, planning, and finances in product design , 2007 .

[108]  Miguel J. Bagajewicz,et al.  Managing financial risk in planning under uncertainty , 2004 .

[109]  Trevor A. Spedding,et al.  Enterprise resource planning: An integrative review , 2004, Bus. Process. Manag. J..

[110]  Dean M. Hanink.  A Mean-Variance Model of MNF Location Strategy , 1985 .

[111]  William F. Hamilton,et al.  An Optimization Model for Corporate Financial Planning , 1973, Oper. Res..

[112]  G. Gregory,et al.  Cash flow models: A review , 1976 .

[113]  Yue Wu,et al.  Production , Manufacturing and Logistics A robust optimization model for multi-site production planning problem in an uncertain environment , 2007 .