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Although it could also be applied at a department level, the EVA concept appears too complex for daily use. In addition, EVA reflects a residual profit quantity (Karrer, 2006, p. 159). However, effectiveness is measured through profitability ratios and with the EVA approach only the numerator in the form of supply management savings could be defined precisely. Therefore, the EVA concept does not appear appropriate for the problem set. The CFRoI model represents an alternative measurement approach.
6). Ð Shareholder-oriented – Due to changing information requirements and needs on capital markets, shareholders demand reliable and easy to understand information (Klingebiel, 2001, p. 395). The new indicator, as the result of the previous discussion and adequate to fulfil the above criteria, is the so-called Return on Spend (RoS): R eturn on Spend Supply Management Savings Supply Management Cost Total Supply Management Spend The RoS puts supply management’s profit in the numerator in relation to its total turnover volume in the denominator.
Figure 10: Measurement cube for the classification of financial performance measures – Status quo. Figure 10 illustrates the status quo in contrast to the target: Current measures dispose of efficiency as well as effectiveness measures. This, however, could have been demonstrated within two dimensions, since all presented measures are past oriented and do not sufficiently support decision-making processes. Thus, the third dimension is introduced and with it, the following criteria for the new effectiveness indicator emerge: Supply Management’s Financial Effectiveness – Return on Spend 31 Ð Future-oriented – For management decisions, past actions as well as future realistic scenarios need to find impact on the performance indicator (Gleich, 2001b, p.