How to Organize the Systems Selection Process Using the SCOR Framework Pittiglio Rabin Todd &...

How to Organize the How to Organize the Systems Selection Process Systems Selection Process Using the SCOR Framework Using the SCOR Framework

Pittiglio Rabin Todd & McGrathPittiglio Rabin Todd & McGrath

April 12, 2000April 12, 2000David Kennedy, PrincipalDavid Kennedy, Principal

© Copyright 2000 Pittiglio Rabin Todd & McGrath25814

2

Today’s Objectives

Provide an overview of a proven process for system selection

Describe how the SCOR-model can be used to help organize the process


3

Each stage represents a step-level change in people, processes, and technology

Companies Progress Through Distinct Stages As They Improve Their Supply Chain Performance

Average Performance Best-in-Class Performance

Stage 1Functional

Stage 2Internal Process

Integration

Plan

Source

Make Deliver

Stage 3The Extended

Enterprise

• Functional orientationsub-optimizes performance

• Poor SC performance

• Alignment across sub-processes and levelsof management

• Above-average SCmetric performance

• Internal and external process integration

• Each link in the chain focuses on its customers, competencies and creating value


4

Systems and Tools Are Critical to Improving Supply-Chain Performance

• Value Proposition• Core Competencies• Make/Buy Decisions• Capacity Rationalization

Operations Strategy

Organization and Decision-MakingPolicies and Procedures

xxx xxxxxxxx xxxxx xxxxxInformation

Systems and Tools

Senior Management

PlanSource Make Deliver

Supply-Chain Management Processes

Performance Metrics and Benchmarks

AssetsDeliveryPerformance/

Quality

CostFlexibility &Responsiveness


5

Companies Can Follow a Proven and Simple Companies Can Follow a Proven and Simple Process to Help Select Systems SolutionsProcess to Help Select Systems Solutions

Fact-BasedSystemsSelection

AssessCurrent

Supply ChainPerformance

Define the Future

OperatingModel

• ISC Benchmarking• SCOR Levels 1 & 2 Mapping• SCOR Qualitative Assessment

- Practices- Process Constraints- Systems and Enablers- Measurements- Organization and Decision Making

• Develop Value Potential

• SCOR Level 3 & 4 Practices• Organizational and Decision Making• Requirements using SCOR Framework

- Business Requirements- Systems Requirements

• Develop Initial Business Case

• Vendor Responses to SCOR Requirements Document• Vendor Demonstrations• RFP Evaluations• Finalize Business Case• Select Software Solution


6

Benchmarking Provides a Level 1 SCORcard and Helps Quantify the Potential Value in the Supply Chain

Benchmarking Provides a Level 1 SCORcard and Helps Quantify the Potential Value in the Supply Chain

Benchmarking performance is the foundation for the qualitative assessment

Supply-Chain Performance Versus Custom Population

0% – 20% 20% – 40% 40% – 60% 60% – 80% 80% – 100%

Key Perspectives Level 1 MetricsMajor

Opportunity DisadvantageAverage

or Median AdvantageBest-

in-Class

Delivery Performance to Request 90% 99%

Order Fulfillment Lead Time (MTS) 5 days 2 days

Perfect Order Fulfillment 86% 98%

Supply-Chain Response Time 88 days 46 days

Upside Production Flexibility 10% 30 days 4 days

Supply-Chain Management Cost 10.3% 7 %

Value Added per Employee $210K $466K

Total Inventory Days of Supply 47 days 23 days

Cash-to-Cash Cycle Time 59 days 25 days

Net Asset Turns 2.1 turns 5.1 turns

Flexibility &Responsiveness

DeliveryPerformance/

Quality

Cost

Cu

sto

mer

-fac

ing

Inte

rnal

-fac

ing

Company ABC performance

AssetManagement


7

The SCOR Model is the Basis of the Qualitative Assessment

Level Schematic Comments

1

2

3

4

Configuration Level

(Process Categories)

Process Element Level

(Decompose Processes)

Plan

DeliverMakeSource

A company’s supply chain can be “configured” at Level 2 from 17 core “process categories”

F/CNet

DemandsCheck

CapacityCheck

MaterialCheck

InventoryRelease

MPS

Level 3 defines a company’s ability to competesuccessfully in its chosen markets, and consists of:

• Process element definitions

• Process element information inputs, and outputs

• Benchmarks, where applicable

• Best practices, where applicable

• System capabilities required to support best practices

• Systems/tools by vendor

Implementation Level

(Decompose Process

Elements)

Companies implement specific supply-chain management practices at this level. Level 4 defines practices to achieve competitive advantage and to adapt to changing business conditions.

SC

OR

Pro

cess

Re

fere

nc

e M

od

el Top Level

(Process Types)

The basis of competition and supply-chain performance targets are set

Not in

Model

Description


8

Each Level 3 Process Element Identifies Metrics, Best Practices, and Software Features

Each Level 3 Process Element Identifies Metrics, Best Practices, and Software Features

Process Element: Schedule Manufacturing Activities Process Element Number: M1.1

Process Element DefinitionGiven plans for the manufacture of specific parts, products, or formulations in specified quantities and plannedavailability of required materials, the scheduling of the operations to be performed in accordance with these plans.Scheduling includes sequencing, and, depending on the factory layout, any standards for setup and run. Ingeneral, intermediate manufacturing activities are coordinated prior to the scheduling of the operations to beperformed in producing a finished product.

Performance Attributes MetricCycle Time Schedule cycle time

Schedule interval

Cost WIP inventory days of supply

Material losses

Scheduled resource cost

Service/Quality Schedule achievement

Assets Capacity utilization

Best Practices Software Features RequiredCross training/Certification HR/Certification support

Maintain data and system integrity byensuring production data, inventory levels,and schedule requirements are 99+%accurate

Detailed production model that synchronizes PLAN andMAKE activities

Schedule optimizes use of shared resources,such as production equipment and tooling

Detailed production scheduling model and simulationcapabilities

Schedule includes preventive maintenanceprogram

Interface between maintenance management system andscheduling system

Schedule minimizes changeover costs Detailed production scheduling model and simulationcapabilities

Real-time feedback from Manufacturing andTest (1.3) activities

Re-synchronization of MAKE activities


9

Current State Assessments Workshops Can Be Conducted Using SCOR

41

We will use this template to capture our Level 4 discussionsfor each Execution process element

• ( Suppl ier ) ET OPr oposal

• Sou rci ng P lans•ET O Spec or Desi gn

• Pr ocur ement Si gnal( Suppl ier )

• ET O Reque st forPr oposal( Suppl ier )

• Sou rce Execut ion D ata• Sou rci ng P lans• Re pleni shmen t S ignal s

• Pr ocur ementSi gnal ( Suppl ier )

• M ater i al on O r der

• I nvento ry

• M ater i al Pull S ignal s• M ater i al Invent or y

Locat ion• WI P I nvent or y Locat io n• Fi nished G oods I nvent or y

Locat ion

• ( Suppl ier )Pur chasedM ater i als

• Re ceipt V eri fi cati on

Identi fy Sources of

SupplyTransfer Material

Rec eive and Veri fy

Material

Schedule Material

Del iv eries

Selec t Final Suppl ier(s)

and Negotiate

11Inputs: Outputs:

Est. Time

1

2

Who performs:

Systems used:

1

2

1 1

1

2

1

2

1

2

1

2

1

2

1

2

Step: Identify sources of supplySite: Material:


10

Current Practices Can Be Compared toSCOR-based Best Practices

Sample Element of Maturity Framework: Source Execution

Stage 1Functional

Stage 2Integrated Supply-Chain

Stage 3Extended Enterprise

Material planner uses MR andjudgement to generate PO’s andschedule materials

Materials are procured on a basis ofneed using individual PO’s

Significant level of expediting andshortage meetings

Full documentation check, parts countcheck, and visual inspection for allmaterials received; withformulate/engineer to order materialschecked against specifications as well

Material is stocked and released permanufacturing work orders

Material is purchased for the entirecontract or lot

Material inventory managed byMPS/MRP system

Inventory holding policies and cyclecounting used

Inventory aging and stock levelsconsidered only when target maximumlevels are exceeded

Formal excess and obsolescenceprocesses in place, but not proactive

PO routing and approval is electronic Blanket PO’s, monthly invoicing, and pay

upon receipt reduce number and cost oftransactions

ABC material classification based onspend profile, lead time, and usage

Material scheduling techniques differ bycommodity type and ABC classification

“A” class items are inspected only forquantity, with vendor certificationallowing sample testing of most items

High usage material is delivered directlyto point of use

Some high value items have time-phased delivery based on total cost andactual cost of ownership

Some advanced auto-replenishmenttechniques in place (minmax / kanban/breadman)

High value item purchasing based onvisibility of schedule

Differentiated inventory holding policiesby ABC parts/materials classification

Key suppliers carry strategic safety stockat the company site as consignmentstock (pay for use)

Strategic process for quick disposition ofobsolete and excess inventory

Paperless purchasing – orders moveelectronically from requisition topurchase order to payment

No receiving/inspection as vendorcertification allows verification ofquantity and quality

Deliveries made directly to point ofuse for all A and B materials, so onlyoccasional transfers needed

Advanced replenishment techniquesare common

End customers and suppliers arelinked by EDI and have highlyintegrated flow of materials andinformation

Inventory managed by suppliers withreplenishment driven by signals fromcustomers and delivered to point ofuse

Total end-to-end investment isoptimized from customer to keysuppliers

Advance knowledge of obsolescenceprevents any significant build-up ofobsolete inventory


11

Fully Developing a Future Operating Model Identifies Critical Business Requirements

OEMSupply-Chain

S2

M4 M4

M4 M4

M4 M4

M4 M4

M4 D2

D2 D2

D2 D2

D2 D2

D2 D2

M4 M4

M4 M4

M4 M4

M4 M4

M4

Many OEM Suppliers80% of product

supply ($$)

D2 D2

D2 D2

D2 D2

D2 D2

D2 D1

Deliver Stocked Product

60% of productvolume

S1

S1

S1

S1

High VolumeRetailers50% product volume

Retailers: All others15% product volume

OEM5% product volume

Captive Retail30% product volume

P2 P4

ManufacturingSupply-Chain

S1

S1

D2 D2 D1

MTS ComponentsSeveral Hundred

Suppliers

D2 D2 D1

20% of productsupply ($$)

M3

M3

MTS Factories

D1

D1

Collocated Distribution

DeliverStockedProduct

D1


P2

P2

P3

P3

P4

P4

P4

Company

Factory

Single, Collocated Manufacturing, and Distribution

Suppliers Customers

S2 D2

D2 D2 D1 S1

80% ManufacturedProduct Supply

20% ManufacturedProduct Supply

MTO Components

MTS Components

MTO Components

MTS Components

D2 M4

S2

S2

S2

High Volume Retailers80% product volume

Trend

Retailers: All others15% product volume

Trend

OEM5% product volume

Trend


ManufacturingSupply-ChainPlanning

P3VMI

P1

D2 D2 D2 S2 D1

OEM OEM

Cross-docking

5% of productvolume

OEM Supply-ChainPlanning

P2

OEM

P4

P1

Supply-ChainExecution

Future State Configuration

Current State Configuration

P2 P4


12

Future Business and Systems Requirements Can Be Organized Using SCOR

Tracking #SCOR

Identifier Segment Name RequirementImportance

(H = Must Have Does Vendor

have this

In Basic ERP In Partner (Which one ?)

93 S3.1Identify Sources of

SupplyAbility to multi-source all items under one product code

and perform tracking and billing functions H 100


Supply

Ability to source and allocate demand for goods and services from multiple suppliers, automate demand

allocation among suppliers (e.g., split 30/50/20) H 80


Supply

EDI capabilities for all relevant supplier communications (850, 856, 855, 810, 820, 846, 852, & EDIFACT

equivalents). Accommodate country-specific European EDI requirements. H 80 List provided at demo


Supply

Provide latest demand requirements or customer specifications, e.g. Johnson's Blue Book, to all vendors

by various means (EDI, e-mail, fax, etc.) H 90


Supply

Maintain vendor profiles in approved vendor DB (price, delivery perf.,lead time, quality perf., etc.) With

parent/child heirarchical capability. H 100


Supply

Automatic updating of vendor scorecard in approved vendor database (e.g., quality, on-time delivery

performance, etc.) H 90 Scorecard provided at demo


SupplyOne vendor database worldwide for finished goods, raw

materials, or contract services. H 90 By server


Supply

Ability to search approved vendor database by commodity code, services offered, location, minority-

owned businesses, etc. H 90


Supply European 80 character string vendor identifier H 100


SupplyReporting capabilities for vendor purchases by

commodity, vendor, minority-owned businesses, etc. H 100


13

Software Demonstrations, Evaluations, and Selections Can Be Conducted Using SCOR

SoftwareDemonstrations

SoftwareEvaluations

SoftwareSelection

Negotiations andBusiness Case

Justification

Plan

Source Make Deliver


14

Conclusions

The SCOR framework can be easily applied to the systems selection process

Current state assessments of processes, practices, and metrics

Future operating models can be based on the SCOR process elements

Business and systems requirements to enable the future models can be developed referencing SCOR

Software demonstrations can given using the plan, source, make and deliver structure

How to Organize the Systems Selection Process Using the SCOR Framework Pittiglio Rabin Todd &...

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