Analyze your value chain

Many organizations are analyzing their value chain to help unlock value to enhance business results and stakeholder benefits. Value chains address business processes for planning, design, production, marketing and delivery of enterprise products and services. Improving these processes and choosing the right technologies to implement can help you optimize your value chain performance and increase your productivity and profitability. At the same time, a volatile economy puts more pressure on information technology (IT) investments to demonstrate quick, predictable return on investment (ROI) and clearly improve business efficiencies and productivity. The challenge is determining the right mix of initiatives that quickly and effectively deliver the results your customers and shareholders expect.

Strategic approach, operational results

The Risk and Opportunity Assessment is part of a comprehensive methodology developed by IBM Business Consulting Services for aligning operational transformations with business strategy. This methodology begins with a Case for Change, which provides a client with compelling quantitative and qualitative evidence of value chain problems. The goal of the Case for Change is to motivate clients to take appropriate action to address key supply chain issues affecting their financial and operating performance.

Once the Case for Change has identified high-level value chain issues, the Risk and Opportunity Assessment is used to provide detailed financial and qualitative analysis to pinpoint appropriate solutions. By utilizing the Value Chain Model, the Assessment helps clients understand the relationship between operational drivers and financial performance. This in turn provides a rigorous basis for selecting effective solution opportunities. The Assessment uses scenario analysis to determine the impact of proposed solutions, compare different options, and assess their likely effectiveness within the context of the client's particular business and operating environment.

The Risk and Opportunity Assessment provides a framework to help prioritize and analyze the impact of specific value chain investment initiatives. The opportunity assessment follows a three-step process. The first step is data collection. During this stage of the engagement, the consulting team works with the client to define data requirements, develop a data collection plan, and launch a data collection effort. They also review background information, document assumptions and sources, and monitor and validate the data collection process.

The second step of the engagement is modeling and analysis. This stage comprises the building and validation of the baseline model data set, definition and validation of financial and operational drivers, and development of what-if scenarios used for evaluating proposed solution opportunities. Once the baseline model and scenarios have been created, the consulting team performs what-if analyses to determine the business impact of each proposed solution.

The final step of the engagement is to develop a set of findings and recommendations. During this stage, the team performs a high-level cost-benefits analysis, selects and prioritizes solutions, and develops an action plan for transformation. They also reach consensus with the client on next steps, and develop a timetable for follow-on activities.

Overall, the assessment can provide:

• An objective view of the opportunities, issues and potential risks with the current value chain and its capabilities
• A quantification of the business results that can be attained through value chain initiatives
• A resource estimation and economic justification for the investment required to realize a value chain transformation
• A prioritized, time-phased value chain implementation roadmap and high-level architecture