AAOM Handbook

[OFFICIAL]

CHAPTER 2: BUSINESS STRUCTURE PERFORMANCE MODEL APPLICATION

2.1 Setting Business Expectations Business Unit executives set expectations for Operations in the Business Structure. These business expectations should be cascaded to operations with required confidence levels to achieve 80% confidence level at Business Unit level. This identifies that the target confidence level for an operation may be different from that of the Business Unit, depending on its contribution to the Business Unit result. The General Manager or LoW4 equivalent will then set performance targets and optimal strategies to achieve these business expectations at the required confidence levels for production at the required cost efficiency. Material risks and opportunities i.e. scenarios to meeting the Performance Targets must be clearly modelled over the 5-year business plan., This provides understanding of scenarios that will meet business expectations over that period. The 5 years to be scheduled and modelled in the OMS, starts as a set of selected scenarios from the BSP model. The Business Structure hierarchy is defined by creating layered Value Driver Tress and Value Stream diagrams that represent the flow of valuable material or information that occurs between or within the levels of the Business Structure at different levels of business complexity i.e. Company, Business Unit, Operation, Process, Productive Unit. The nodes and buffers define key accountability points and the complexity defines the LoW. Where relationships are dependent between levels and independent across a level Value a Driver Tree (VDT) is to be used as shown in Figure 1. The requirement is to start at the outcome node i.e. purpose measure at the appropriate level of business complexity such as operating profit then drilling down according to theory drivers and measures. Business Unit expectation as shown in Figure 2 is to be cascade down to assets are the required confidence level.

Figure 1 – Business Unit Value Driver Tree

Operational Planning: Building a Business Structure Performance Model Page 31 of 39