Presentation Supply Chain Operations Reference-model (SCOR ... · Challenges facing Petrochemicals...

Supply Chain

Operations Reference-model

(SCOR-model)

Asst.Prof.Dr.Wanchai RattanawongUniversity of Thai Chamber of Commerce

Supply Chain Operations Reference

(SCOR) Model and Performance

Measurement

Why focus on business process

What is SCM ,What is SCOR?

SCOR Model Best Practice & Case Study

SCOR overview Scope and value of the SCOR Model

the SCOR Business Processes and Improvement

How to apply Performance Management & benefit

SCOR processes at tactical & execution levels

ITL-SCBC& SCOR 2011

Challenges facing Petrochemicals Industry

Supply Chains

1. The Chemical Industry is facing exciting times,

requiring higher degrees of excellence in planning,

coordination and execution skills than ever before.

•Cost

•Quality

•Delivery

Introduction SCM in Petrochemicals Industry

Operations Management UTCC

suppliers distributors retailers/customersmanufacturers

MATERIALS MANAGEMENT/ SUPPLY MANAGEMENT

PHYSICAL DISTRIBUTION/ CHANNEL MANAGEMENT

source consumers/end users

Markets/customers

Physical

Distribution

Demand Management

กลยทุธท์างธรุกิจของพนัธมิตรหรอืหุ้นส่วนทางการค้าในโซ่อปุทานท่ีร่วมมือกนั สร้างพนัธกิจในการท างานรว่มกนัอย่างใกล้ชิดเพ่ือสร้างคณุค่าให้แก่ลกูค้ามากขึน้ โดยใช้วิทยาการการจดัการแบบสมยัใหม่ และการใช้เทคโนโลยีประยกุตใ์ห้เหมาะสม เพ่ือเอื้อต่อการเพ่ิมประสิทธิภาพและประสิทธิผล เพ่ือลดต้นทุน ค่าใช้จ่ายและเวลาให้ต า่ท่ีสดุเท่าท่ีจะเป็นไปได้ในโซ่อปุทาน

Supply Chain Defined

ManufacturingPlanning &

Control

2. On one hand competitive pressures in traditional markets are increasing.

19/07/63 6

3. Customers expect higher levels of service and at the same time lower prices.

4. This demands streamlined processes, elimination of

waste & a need for excellence in all aspects of supply

chain operations.

http://www.bloggang.com/data/p/piroonrum/picture/1298340061.jpg

http://www.bloggang.com/data/p/piroonrum/picture/1298340061.jpg

5 PRINCIPLES OF

STREAMLINE PROCESS

1. Specify value :

Specify value from the standpoint of the

end customer by product family.

2. Identify the value stream :

Identify all the steps in the value stream

for each product family, eliminating whenever

possible those steps that do not create value

or identify all the steps along the process

chain.

Pa

ge

11

suppliers distributors retailers/customersmanufacturers

MATERIALS MANAGEMENT/ SUPPLY MANAGEMENT

PHYSICAL DISTRIBUTION/ CHANNEL MANAGEMENT

source consumers/end users

Markets/customers

Physical

Distribution

Demand Management

กลยทุธท์างธรุกิจของพนัธมิตรหรอืหุ้นส่วนทางการค้าในโซ่อปุทานท่ีร่วมมือกนั สร้างพนัธกิจในการท างานรว่มกนัอย่างใกล้ชิดเพ่ือสร้างคณุค่าให้แก่ลกูค้ามากขึน้ โดยใช้วิทยาการการจดัการแบบสมยัใหม่ และการใช้เทคโนโลยีประยกุตใ์ห้เหมาะสม เพ่ือเอื้อต่อการเพ่ิมประสิทธิภาพและประสิทธิผล เพ่ือลดต้นทุน ค่าใช้จ่ายและเวลาให้ต า่ท่ีสดุเท่าท่ีจะเป็นไปได้ในโซ่อปุทาน

Supply Chain Defined

ManufacturingPlanning &

Control

3. Create flow :

Make the value-creating steps occur in

tight sequence so the product will flow

smoothly toward the customer.

4. Let the customer pull product

through the value stream:

Make only what the customer has

ordered.

5 PRINCIPLES OF

STREAMLINE PROCESS

19/07/63 13

5. Seek perfection :

As value is specified, value streams are

identified, wasted steps are removed, and flow

and pull are introduced, begin the process again

and continue it until a state of perfection is

reached in which perfect value is created with no

waste.

5 PRINCIPLES OF

STREAMLINE PROCESS

Over Productionผลติเกนิความจ าเป็น

Inventoryสนิคา้คงคลงั

Excess Processingขัน้ตอนการผลติมากเกนิจ าเป็น

Motionการเคลื่อนไหว

Waitingการรอคอย

Defectของเสีย

Transportationการขนยา้ย

5. At the same time manufacturers are developing

production facilities in Thailand creating new logistics

challenges for raw materials and finished products, both locally as well as for export markets.

SCOR model is tool for

performance measurement and process control.

Superior Supply Chain Management (SCM)

has long been a source of competitive advantage

Source: PRTM/The Performance Measurement Group

% o

f R

evenue

Best-in-class Companies’ Outperform Their Median Competitors with a 50% Cost Advantage

19SCC & SCOR HRdergi Conference 2010

5.40% 5.30% 5.50%

4.20%4.80%

3.40% 3.50% 3.60%

9.20%

12.30%

10.70%10.00%

10.70%

9.10%

6.60%7.40%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

Best-in-Class

Median

© Copyright 1998 Supply-Chain Council

3651MV—SCOR Overview 20

Cash-to-Cash Cycle Time

CalendarDays

2517

46

25

45

30

106

70

127

59

88 89

0

20

40

60

80

100

120

140

Computers Industrial Telecom Chemicals Packaged

Goods

Overall

Best-in-Class '97

Average '97

Source: PRTM’s 1997 Integrated Supply-Chain Benchmarking Study

Definition: Cash-to-cash cycle time is calculated as inventory days of supply + days sales outstanding - average payment period for materials

Why is supply-chain management so important?Leading companies have cash available 2 – 3 months faster

Leading companies have a 40% – 65% advantage in cash-to-cash cycle time

over average companies


SCM is Paramount in Times of Economic Uncertainty

• In 2007, US business logistics costs rose to an all

time high of $1.4 trillion (10.1% of US nominal Gross

Domestic Product ) 3

• Supply-chain generally accounts for between 60%

and 90% of all company costs1

• A 2% improvement in process efficiency for supply-

chain processes has 3000% - 5000% the impact of a

2% improvement in efficiency for… IT… HR…

Finance1… Sales…

1 Exclusive of Financial Services companies

2 Source: Hoovers 2006 Financial Data, Supply-Chain Council 2006

SCM Benchmark data on SCM cost for discrete & process industries

3 CSCMP 19th Annual State of the Logistics Industry

Focused initiatives in Supply Chain Management can result in 30-35% cost reductions, liberation of working capital, and revenue increases of 3-5%!

Fortune-10

Company Supply-

Chain Cost as % of

Total Costs 2

GM 94%

Ford 93%

Conoco 90%

Wal-Mart 90%

Chevron 88%

IBM 77%

Exxon 75%

GE 63%

Citi1 0%

AIG1 0%

SCM Improvement Creates Shareholder Value

•Improve customer service and

response

•Optimize inventory flow,

utilization & productivity

• Best-in-class customer

relationships

• Differentiated service

capabilities

• Best-in-class strategic

supplier partnerships

• Leverage of outsourcing of

business processes

• Unique supply chain models

The Supply Chain Impacts . . .

& Shareholder Value

ImproveCapital

Efficiency

Increase

Profit

Increase

Shareholder Value

All Financial Metrics . . .

Liberate Working Capital

Reduce

Fixed Capital

IncreaseRevenue and

Margin

Optimize

Cost Model

Effective Supply Chain Management can increase a Return on Capital Employed by 30% and More!


THE ROLE OF THE SCOR

MODEL IN OPTIMIZING SUPPLY

CHAIN PERFORMANCE

ITL-SCBC& SCOR 2011

What is a Supply Chain

What is a Supply Chain

Su

pp

lie

r p

ro

ce

sse

s

Product Design

DCOR™

Cu

sto

mer

pro

ce

ss

es

Supply Chain SCOR™

Sales & Support

CCOR™

Product Management

25

What is SCOR?

26

Custo

mer p

roce

ssesS

upplie

r pro

cess

es Supply Chain

Cu

stom

er p

roce

ssesS

up

pli

er

pro

cess

es

Supply Chain

Process, arrow indicates material flow direction

Process, no material flow Information flow

DeliverMakeSource

ReturnReturn

Plan

• SCOR is a supply chain process

reference model containing over

200 process elements, 550

metrics, and 500 best

practices including risk and

environmental management

• Organized around the five

primary management

processes of plan, Source,

Make, Deliver and Return

• Developed by the industry for

use as an industry open

standard - Any interested

organization can participate in

its continual development

26

SCC & SCOR HRdergi Conference 2010

1. Superior Customer Service

Effective supply chain management is all about

delivering the right product in the right quantity

and in the right condition with the right

documentation to the right place at the right time

at the right price. If only it were as simple as it

sounds.

The SCOR model provides a framework for measuring and understanding current supply chain

conditions and performance and creates a foundation for improvement. It can help supply chain

managers evaluate cost/ performance tradeoffs, develop strategies for meeting new customer expectations, and respond to domestic and global market growth.

SCOR Helps Solve the Top 5 Supply Chain Challenges

2. Cost Control

Supply chain operating costs are under pressure

from rising freight prices, global customers,

technology upgrades, rising labor rates, expanding

healthcare costs, new regulatory demands, and

rising commodity prices. To control such costs

there are thousands of potential metrics that

supply chain organizations can and do measure.

Managers need to zero in on the critical few that

drive total supply chain costs within their

organizations.SCOR metrics provide the basis for an organization to measure how successful it is in achieving its

desired objectives. SCOR metrics are designed to be used in conjunction with supply chain

performance attributes, making it easier to compare different supply chains and different supply chainstrategies.

3. Planning And Risk Management

Supply chains must periodically be assessed and

redesigned in response to market changes,

including new product launches, global sourcing,

new acquisitions, credit availability, the need to

protect intellectual property, and the ability to

maintain asset and shipment security. In addition,

supply chain risks must be identified and

quantified.

Organizations in all sectors—commercial, military, and NGOs—have found that using SCOR as a

planning and risk management foundation leads to faster implementation, more comprehensive

identification of potential risks, and easier coordination with customers, suppliers, and other

stakeholders. SCOR helps users establish rules and strategies, assign responsibilities, coordinateresponses, and monitor current conditions.

4. Supplier/Partner Relationship Management

Different organizations, even different departments

within the same organization, can have different

methods for measuring and communicating

performance expectations and results. Trust begins

when managers let go of internal biases and make

a conscious choice to follow mutually agreed upon

standards in order to better understand current performance and opportunities for improvement.

5. Talent

As experienced supply chain managers retire—and

organizations scale up to meet growing demand in

developing markets—talent acquisition, training,

and development are becoming increasingly

important. Supply chain leaders need a thorough

understanding of the key competencies required for

supply chain management roles, specific job

qualifications, methods for developing future talent

and leaders, and the ability to efficiently sourcespecific skills.

SCOR Benefits Companies

SCOR can be used to describe supply chains that are

very simple or very complex using a common set of

definitions and enabling a common understanding

It helps companies:

•Form an integrated measured strategy which

translates overall business objectives clearly and

comprehensively to all operational business entities

•Create a common balanced scorecard by which

customers can measure their performance and by

which SCC members can measure suppliers’

performance33ITL-SCBC& SCOR 2011

• Compare the performance of supply chain and related

operations within their company or against other companies

• Determine what processes to improve and by how much

to improve them either eliminating waste, or by improving

process reliability

• Guide the consolidation of internal supply chains

(which results in significant cost reductions from eliminating

duplicative assets)

• Create standard processes and common information

systems across business units (which generates major cost

savings, cycle-time and quality improvements)

SCOR Benefits Companies

Supplier

Plan

CustomerCustomer’s

CustomerSuppliers’

Supplier

MakeDeliverSource Make DeliverMakeSourceDeliver SourceDeliver

Internal or External Internal or External

Your Company

Source

SCOR is structured around five distinct

management processes

SCOR Model

Return Return ReturnReturn Return Return

Return Return

Building Block Approach

Processes Metrics

Best Practice Technology

ITL-SCBC& SCOR 2011

SCOR Process Model

The SCOR model is built by a process reference

models

The process reference model integrates the

business process reengineering, benchmarking,

and process measurement into a cross-functional

framework.

Quantify the operational performance of similar companies and establish internal targets based on “best-in-class” results

Benchmarking

Characterize the management practices and software solutions that result in “best-in-class” performance

Best Practices Analysis

Process Reference Model

Capture the “as-is” state of a process and derive the desired “to-be” future state

Capture the “as-is” state of a process and derive the desired “to-be” future state

Business Process Reengineering

Quantify the operational performance of similar companies and establish internal targets based on “best-in-class” results

Characterize the management practices and software solutions that result in “best-in-class” performance

Benchmarking

The SCOR Reference Process

SCOR Benchmarking - Presentation38

What is Benchmarking

• Qualitative Benchmarking

– Comparing best practices among organizations

– Maturity Assessments

• Quantitative Benchmarking

– Comparing levels of measured performance

– Assessment of Performance Gaps

• Competitive Benchmarking

– Quantitative Benchmarking between companies

– Identifies superior relative performance

39 SCOR Benchmarking - Presentation

7 Steps of a Benchmarking Program

• Supply Chain Definition

• Supply Chain Prioritization

• Supply Chain Strategy

• Selecting Metrics

• Sourcing Data

• Creating a Balanced SCORcard™

• Performing Benchmark


Supply-Chain Definition

• Supply Chains are the Totality of processes spanning

operations from supplier to end-customer, focused on

material, work and information flow

• We use a tool called the Supply Chain Definition

Matrix to define the supply-chains within an

enterprise

• The Supply Chain Definition (i/o Matrix) Matrix helps

determine the number and size of supply chains

• Columns: Customers (Output)

• Rows: Products (Input)

• The intersection of each column and row – if the goods

or services flow to the customer – is a supply chain41

• The columns in the matrix are focused on demand e.g. channels or segments or customers – start with making a list of customer groups, level by level.

• Ask your Sales or Marketing functions for customer segmentation information

• Where you have one customer base with different fulfillment models create two customer segments one for each model

• In general you can go to any level of detail you want but be sensible.

Examples:

Level 1 Level 2 Level 3

Europe, Asia, US Major Accounts Same-Day Shipping

Commercial, Retail Grouped Accounts Bulk Shipping

Eastern, Western

Region

One-Time Buyer MOQ 1 Ordering

Column Definition

• The rows in the matrix are focused on supply e.g. business

lines or products or locations or suppliers – start by making a

list of products, level by level

• Ask product divisions for product hierarchy data

• If you have the same product that may be build two different

create two different products.

• In general you can go to any level of detail you want but be

sensible.

Examples:

Level 1 Level 2 Level 3

Business Divisions Product Lines Product Families

Fulfillment Models Supplier Groups Parts

Planning Models Warehouses

Row Definition

Group 1 Group 2

Customer A Customer B Customer C Customer D

Group 1 Group 2

Customer A Customer B Customer C Customer D

Business 1Product 1

Product 2

Business 2Product 3

Product 4

• We now place the customer list as column headings repeating

until finished

• And then the products list as row headings repeating until

finished

• For each product that flows to a customer, we put an “X” in

the cell

• It’s that simple.

The Matrix

X

X

X

X

X

X

X

• Columns are Retail/Commercial, and sub-segmented

• Rows are the Major Product Lines

Your Company

Supply-Chain Definition

Matrix

Customer/Market/Channels

Retail Commercial

Big BoxInternet Direct

Mom & Pop

StoresBuilding

Major Account

Distrib

Lin

es

of

Bu

sin

ess

-P

rod

uct

Fam

ilie

s

Air

Co

nd

itio

ne

rs

Big Airco x x xSmall Airco x x x

Custom Industrial x xStandard Industrial x x

Example: Air Conditioning Company

Supply-ChainStrategy Matrix

Big AircoSmall Airco

Comm’l

Exte

rnal

Reliability S

Responsiveness A

Flexibility A

Inte

rnal

Cost P

Assets P

• Each unique combination of ratings defines Your Supply Chain Strategy for the channel

• Think of the rating as a desired state, NOT where you want to improve the most

Supply-Chain Strategy Matrix


S

A

A

P

P

The SCORcard

• We use a tool called the Supply Chain SCORcard™ to Identify performance characteristics of supply-chains.

• Each SCORcard™ is built from a subset of hundreds of SCOR metrics.

• For supply-chain benchmarking we generally use only Level 1, 2 and 3 metrics

• The SCOR Manual provides all necessary definitions


A Metrics Architecture

Supply-ChainSCORcard

S/A/P Level-1 Metric Level-2 Metric Level-3 Metric Summary

Exte

rnal

Reliability S Perfect Order Fulfillment Perfect Order Fulfilment

Reliability% Orders Delivered in Full % Orders Delivered in Full

Reliability Delivery Item Accuracy Delivery Item Accuracy

Reliability Delivery Quantity Accuracy Delivery Quantity Accuracy

ReliabilityDelivery Performance to Commit Date

Delivery Performance to Commit Date

Reliability Date Achievement Date Achievement

Reliability Location Achievement Location Achievement

ReliabilityAccurate Documentation Accurate Documentation

ReliabilityShipping Documentation Accuracy

Shipping Documentation Accuracy

ReliabilityBilling Documentation Accuracy

Billing Documentation Accuracy

Reliability Perfect Condition Perfect Condition

Reliability% Orders Received Damage-Free

% Orders Received Damage-Free


Metrics Selection

Supply-ChainSCORcard

S/A/P Level-1 Metric Level-2 Metric Level-3 Metric Summary

Exte

rnal

Responsiveness AOrder Fulfilment Cycle

Time

Order Fulfillment Cycle

Time

Responsiveness Source Cycle Time Source Cycle Time

Responsiveness Make Cycle Time Make Cycle Time

Responsiveness Deliver Cycle Time Deliver Cycle Time

Flexibility PUpside Supply-Chain

Flexibility

Upside Supplly-Chain

Flexibility

Inte

rnal

Cost PTotal Supply Chain

Management Cost

Total Supply Chain

Management Cost

Assets A Cash to Cash Cycle Time Cash to Cash Cycle Time

Assets Days Sales Outstanding Days Sales Outstanding

AssetsDays Payables

Outstanding

Days Payables

Outstanding

Assets Inventory Days of Supply Inventory Days of Supply


Planning Data Gathering: Sources

of Data

• Financial Data

– 10-K data, Company Annual Reports, Cost Center Reports

– Must be Verified by Financial Team (Controller)

• Non-Financial Data

– Customers

• Delivery Performance

• Total Cycle-Time Performance

– IT Systems

• Process-to-Process Transactions

• Planning System Parameters (Lead Times)

– Suppliers

– 3PL Providers


• Look at who owns the data

• Consider where the transactions may be

• Organize to alert data owners to gather data

• Collect and assess Data Quality

• Use SCOR Metrics Definition as a guide

Metric Process Owner Due Date Status

On-Time Delivery D1.16 Logistics 2/2/2008 Complete

Undamaged D1.17 3PL Provider 2/15/2008 50% Collected

Order Fulfillment

Cycle Time

D1.1 – D1.17 Deliver Team 2/22/2008 Not started

Etc…

Data Gathering Plan


• Based on average data averaged over many samples

• Comes from root transactions, not aggregates

• Six-Sigma team support a big help

The Create the SCORcard


Attribute SAP Metric (level 1) You Parity Adv Superior Gap

Reliability S Perfect Order Fulfillment 97%

Response A Order Fulfillment Cycle Time 14 days

Flexibility P Ups. Supply Chain Flexibility 62 days

Cost P Supply Chain Mgmt Cost 12.2%

Assets A Cash-to-Cash Cycle Time 35 days

SCORmark™

• Once the SCORcard is defined, and data for most metrics are

gathered

• Data are submitted electronically to the SCORmark™ system

• With days or weeks, an electronic report is returned with the

results of comparison against selected demographic groups

• The principal function of the Benchmark is to determine the

gap between actual performance and performance

corresponding to desired strategic positioning.

• The Benchmark is a component of Phase I and II of the SCOR

Implementation Roadmap


Interpreting the Data

• Used for choosing target performance

• Critical to understand Performance in a particular

Demographic

• Can be “internal” (competing against other supply chains in

same company)

• Aligns Strategy, Performance, and Performance Goals

SCOR Benchmarking - Presentation

Attribute SAP Metric (level 1) You Parity Adv Superior Gap

Reliability S Perfect Order Fulfillment 97% 92% 95% 98% 1%

Response A Order Fulfillment Cycle Time 14 days 8 days 6 days 4 days 8 Days

Flexibility P Ups. Supply Chain Flexibility 62 days 80 days 60 days 40 days 0

Cost P Supply Chain Mgmt Cost 12.2% 10.8% 10.4% 10.2% 1.4%

Assets A Cash-to-Cash Cycle Time 35 days 45 days 33 days 20 days 2 Days

54

• Provide a balanced horizontal

(cross-process) and vertical

(hierarchical) view

• Designed to be (re)configurable

• Used to represent many different

configurations of a similar process

• Aggregate a series of hierarchical

process models

Classic process decomposition models

are strictly hierarchical

Process decomposition models are developed to address one

specific configuration of process elements

Process Reference Models accommodate a

number of constructs

Process Element

Level

1

2

3

4

Process

Process Element

Task

Activities

Task

Activities

Contains:

A process reference model differs from

classic process decomposition models

The SCOR process reference model contains:

•Performance Metrics: Standard metrics to measure

process performance

•Processes: Standard descriptions of management

processes and a framework of process relationships

•Practices: Management practices that produce best-

in-class performance

•People: Training and skills requirements alignedwith processes, best practices, and metrics

What is a process reference model?

Why use a process reference model?

• A process reference model allows companies

to:– Communicate, using common terminology and standard descriptions of the

process elements

– Leverage metrics and benchmarking to determine performance goals, set priorities, and quantify the benefits of process changes

– Understand the best practices that yield the best performance

– Understand the overall SCM process and evaluate overall performance

– Identify the software tools best suited for their process requirements

• Once a business process has been “captured”

in a process reference model it can be:– Described unambiguously

– Communicated consistently

– (Re)designed to achieve competitive advantage

– Measured, managed, controlled, and refined to meet specific purposes

Supply Chain Operations

Reference-model : Scope

The boundaries of the model

SCOR boundaries (I) SCOR spans

–All customer interactions, from order entry

through paid invoice

–All physical material transactions, from your

supplier’s supplier to your customer’s customer,

including:

»Equipment, supplies, spare parts, bulk

product, software, etc.

–All market interactions, from the understanding

of aggregate demand to the fulfillment of each

order

SCOR boundaries (II)

SCOR does not include

• Sales administration processes

• Technology development processes

• Product and process design and development processes

• Post-delivery customer support operations including technical support processes

Links to processes not included within the model’sscope, such as product development, are noted in SCOR

Scope of SCOR ProcessesPLAN Demand/Supply Planning and Management

Balance resources and requirements and

establish/communicate plans for whole supply chain,

including Return, and the execution processes of

Source, Make, and Deliver

Management of business rules, supply chain

performance, data collection, inventory, capital assets,

transportation, planning configuration, and regulatory

requirements and compliance

Align the supply chain unit plan with the financial

plan.

ITL-SCBC& SCOR 2011

• Demand/supply planning

– Assess supply resources, aggregate and

prioritize demand requirements, plan

inventory, distribution requirements,

production, material, and rough-cut capacity

for all products and all channels

• Manage planning infrastructure

– Make/buy decisions, supply-chain

configuration, long-term capacity and resource

planning, business planning, product phase-

in/phase-out, manufacturing ramp-up, end-of-

life management, product-line management

SOURCE Source Stocked, Make-to-Order,

and Engineer-to-Order Product

Schedule deliveries, receive, verify, and transfer

product; and authorize supplier payments. Identify

and select supply sources when not predetermined, as

for engineer to order product.

Manage business rules, assess supplier performance,

and maintain data

Manage inventory, capital assets, incoming product,

supplier network, import/export requirements, andsupplier agreements

Scope of SCOR Processes

ITL-SCBC& SCOR 2011

• Sourcing/material acquisition

– Obtain, receive, inspect, hold, and issue

material

• Manage sourcing infrastructure

– Vendor certification and feedback, sourcing

quality, in-bound freight, component

engineering, vendor contracts, initiate

vendor payments


MAKE Make-to-Stock, Make-to-Order, and

Engineer-to-Order Production Execution

Schedule production activities, issue product, produce

and test, package, stage product, and release product

to deliver.

Finalize engineering for engineer-to-order product.

Manage rules, performance, data, in-process products

(WIP),equipment, facilities, transportation, productionnetwork, and regulatory compliance for production.

ITL-SCBC& SCOR 2011

Production execution

– Request and receive material, manufacture and test product, package, hold and/or release product

Manage make infrastructure

– Engineering changes, facilities and equipment, production status, production quality, shop scheduling/sequencing, short-term capacity


DELIVER Order, Warehouse,

Transportation and Installation Management

for Stock, Make-to-Order, and Engineer-to-

Order Product

All order mgmt steps from processing customer

inquires and quotes to routing shipments and

selecting carriers.

Warehouse mgmt from receiving and picking product

to load and ship product.

ITL-SCBC& SCOR 2011

Receive and verify product at customer site and install, if

necessary.

Invoicing customer.

Manage Deliver business rules, performance,

information, finished product inventories, capital assets,

transportation, product life cycle, and import/export compliance.


DELIVER

Order management– Enter and maintain orders, generate quotations,

configure product, create and maintain customerdatabase, manage allocations, maintain product/pricedatabase, manage accounts receivable, credits,collections and invoicing

Warehouse management– Pick, pack and configure products, create customer

specific packaging/labeling, consolidate orders, ship products

Transportation and installation management– Manage traffic, manage freight, manage product

import/export– Schedule installation activities, perform installation,

verify performance

Manage deliver infrastructure– Manage channel business rules, order rules, manage

deliver inventories, manage deliver quality


RETURN Return of Raw Materials and

Receipt of Returns of Finished Goods

All Return Defective Product steps from source

All Return Maintenance, Repair, and Overhaul

product steps from source

All Return Excess Product steps from source

Manage Return business rules, performance, data

collection, returns inventory, capital assets,

transportation, network configuration, regulatoryrequirements and compliance.

ITL-SCBC& SCOR 2011

Each basic supply chain is a “chain” of Source,

Make, and Deliver Execution processes

Source Make Deliver. . .

Customer & Supplier

A Supply Chain

Customer & SupplierCustomer & Supplier

Plan Plan PlanPlan

Each intersection of two execution processes (Source-Make-Deliver) is a “link” in the supply chain

Planning processes manage these customer-supplier links

SCOR Processes – Five Levels of

Decomposition

Level 1 Level 2 Level 3 Level 4 Level 5

Scope Configuration Activity Workflow Transactions

Differentiates

Business

Differentiates

Complexity

Names Tasks Sequences

Steps

Links

Transactions

Defines Scope Differentiates

Capabilities

Links,

Metrics, Tasks

and Practices

Job Details Details of

Automation

Sets Strategy First Tier

Diagnostics

Second Tier

Diagnostics

Industry or

Company

Specific

Technology

Specific

72

S1

Source

Stocked Product

Supply-Chain

SourceS1.2

Receive Product

Standard SCOR definitions Company/Industry definitions

EDI

XML

Material Flow

SCOR Level 1

Operations

Strategy

Analyze Basis

of

Competition

SCOR Level 2

Configure

supply chain

Align

Performance

Levels, Practices,

and Systems

Implement

supply chain

Processes and

Systems

SCOR Project Roadmap

•Competitive Performance Requirements

•Performance Metrics

•Supply Chain Scorecard

•Scorecard Gap Analysis

•Project Plan

•AS IS Geographic Map

•AS IS Thread Diagram

•Design Specifications

•TO BE Thread Diagram

•TO BE Geographic Map

Information

and Work Flow

•AS IS Level 2, 3, and 4 Maps

•Disconnects

•Design Specifications

•TO BE Level 2, 3, and 4 Maps

Develop,

Test, and Roll

Out

•Organization

•Technology

•Process

•People

SCOR Level 3

ITL-SCBC& SCOR 2011

SCOR present.ppt

SCOR contains three levels of process detail

#

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-to-

order” at Level 2 from approximately 19 core

“process categories.” Companies implement their

operations strategy through the configuration they

choose for their supply chain

Companies “fine tune” their Operations Strategy at Level 3

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

• Process element definitions

• Process element information inputs and outputs

• Process performance metrics

• 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

Su

pp

ly C

ha

in O

pe

rati

on

s R

efe

ren

ce

-mo

de

l

Top Level

(Process Types)

Level 1 defines the scope and content for the Supply

Chain Operations Reference-model

Here basis of competition performance targets are set

Not

in

Scope

Description

Balance Production Resources with

Production RequirementsEstablish Detailed

Production Plans

Identify, Prioritize, and Aggregate

Production Requirements

Identify, Assess, and Aggregate

Production Resources

P3.1

P3.3 P3.4

P3.2

ReturnReturn

Cu

sto

mers

Su

pp

liers

P1 Plan Supply ChainPlan

P2 Plan Source P3 Plan Make P4 Plan Deliver

Source Make Deliver

S1 Source Stocked Products M1 Make-to-Stock

M2 Make-to-Order

M3 Engineer-to-Order

D1 Deliver Stocked Products

D2 Deliver MTO Products

D3 Deliver ETO Products

S2 Source MTO Products

S3 Source ETO Products

Supply-Chain Operations Reference-model

Return

Source

P5 Plan Returns

Return

Deliver

Enable

D4 Deliver Retail Products

ITL-SCBC& SCOR 2011

SCOR Level 1

SCOR Level 1 Performance Categories and Attributes

Performance Category Performance Attribute

Reliability 1. Delivery performance

2. Fill rates

3. Perfect order fulfillment

Responsiveness 1. Order fulfillment lead times

Flexibility 1. Supply chain response times

2. Production flexibility

Cost 1. Supply chain management cost

2. Cost of goods sold

3. Value-added productivity

4. Warranty cost or returns processing cost

Assets 1. Cast-to-cash cycle time

2. Inventory days of supply

3. Asset turns

ITL-SCBC& SCOR 2011

Linking Supply Chain Performance

Attributes and Level 1 Metrics

ITL-SCBC& SCOR 2011

Performance Attribute Performance Attribute Definition Level 1 Metric

Supply Chain Reliability

The performance of the supply chain in

delivering: the correct product, to the

correct place, at the correct time, in the

correct condition and packaging, in the

correct quantity, with the correct

documentation, to the correct customer.

Perfect Order Fulfillment

Supply Chain

Responsiveness

The speed at which a supply chain

provides products to the customer.


Time

Supply Chain Flexibility

The agility of a supply chain in

responding to marketplace changes to

gain or maintain competitive

advantage.

Upside Supply Chain

Flexibility

Upside Supply Chain

Adaptability

Downside Supply Chain

Adaptability

Supply Chain CostsThe costs associated with operating the

supply chain.

Supply Chain Management

Cost

Cost of Goods Sold

Supply Chain Asset

Management

The effectiveness of an organization in

managing assets to support demand

satisfaction. This includes the

management of all assets: fixed and

working capital.


Return on Supply Chain

Fixed Assets

SCOR Level 1Supply-Chain Management

MetricsAssetsDelivery

Performance/Quality

CostFlexibility &

Responsiveness

Delivery performance

Order fulfillment performance

• Fill rate (Make-to-stock)

• Order fulfillment lead time (ETO, MTO, CTO)

Perfect order fulfillment

Supply-chain response time

Production flexibility

Total supply-chain management cost

Value-added productivity

Warranty cost or returns processing cost

Cash-to-cash cycle time

Inventory days of supply

Asset turns

Customer-Facing Internal-Facing

SCOR Level 1 metrics characterize performance

from customer-facing and internal-facing

perspectives

1

Supply Chain Scorecard v. 3.0 Performance Versus Competitive Population

Overview

Metrics

SCOR Level 1 Actual Parity AdvantageSuperior

Delivery Perform-

ance to Commit Date

50% 85% 90% 95%

Fill Rates 63% 94% 96% 98%

EX

TE

RN

AL

Delivery

Performance/

Quality

Perfect Order

Fulfillment 0% 80% 85% 90%

Order Fulfillment

Lead times 7 days 7 days 5 days 3 days

Flexibility & ResponsivenessProduction Flexibility45 days 30 days 25 days 20 days

Total Logistics

Management Costs19% 13% 8% 3%

INT

ER

NA

L

CostWarranty Cost NA NA NA NA

Value Added

Employee Productivity$122K $156K $306K $460K

Inventory Days

of Supply 119 days 55 days 38 days 22 days

Assets

Cash-to-Cash

Cycle Time

196 days80 days 46 days 28 days

Net Asset Turns

(Working Capital)2.2 turns 8 turns 12 turns 19 turns

Analyze Basis of Competition

Supply Chain Scorecard - Representative

Supply Chain Scorecard & Gap Analysis

NEW Product Line - Representative of All Scorecards

Supply Chain SCORcard v. 7.0 Performance Versus Competitive Population

Overview Metrics SCOR Level 1 Metrics Actual Parity Advantage Superior Value from Improvements

EX

TE

RN

AL

Perfect Order

Fulfillment 80% 85% 90%

Order Fulfillment

Cycle Time 7 days 5 days 3 days

Flexibility

Responsiveness

Upside Supply

Chain Adaptability

Total SCM

Management Cost

19% 13% 8% 3%

INT

ER

NA

L Cost

Assets

Cash-to-Cash Cycle Time 196 days 80 days 46 days 28 days

Return on SC Fixed

Assets

Upside Supply

Chain Flexibility 82 days 55 days 13 days

Supply

Chain

Reliability

Downside Supply

Chain Adaptability

Cost of Good Sold

0% $30M Revenue

$30M Revenue

Key enabler to cost

and asset

improvements

$30M Indirect Cost

$7 M Capital Charge

35 days

97 days

0%

54%

N/A

50%

ITL-SCBC& SCOR 2011

SCOR Level 2 Process Type

At Level 2, each SCOR process can be

further described by process type

SCOR Level 2 Process

Process categories are defined by the relationship

between a SCOR process and a process type

Practitioners select appropriate process categories from the SCOR

configuration toolkit to represent their supply-chain configuration(s)

“SCOR Configuration Toolkit”

Process

Type

Planning

Execution

Enable

Process

Category

P1 P2 P3 P4

S1 – S3 M1 – M3 D1 – D4

EP ES EM ED

2

Scor Process

Plan Source Make Delivery Return

P5

SR1 –

SR4

DR1 –

DR3

SCOR Level 2 Process

At Level 2, SCOR provides a “toolkit” of 21

process categories

SCOR Level 2SCOR Level 2 Process Type and Categories

SCOR

Process

Type Characteristics Process Category

Planning Processes that align expected resources P1: Plan supply chain

to meet expected demand requirements. P2: Plan source

P3: Plan make

P4: Plan deliver

P5: Plan return

Execution Processes triggered by planned or actual S1: Source stocked product D1: Deliver stocked product

demand that changes the state of S2: Source MTO product D2: Deliver MTO product

material goods. These are source (S1-3), S3: Source ETO product D3: Deliver ETO product

make (M1-3), deliver (D1-3), and return M1: Make-to-stock R1: Return defective

product

(R1-3) processes. M2: Make-to-order R2: Return MRO product

M3: Engineer-to-order R3: Return excess product

Enable Processes that prepare, maintain, or EX1: Establish and manage rules

manage information or relationships on EX2: Assess performance

which planning and execution processes EX3: Manage data

rely. EX4: Manage inventory

EX5: Manage capital assets

EX6: Manage transportation

EX7: Manage supply chain configuration

EX8: Manage regulatory compliance

EX9: Process specific elements (align SC/financials,

supplier agreements

(Note: X = P,S,M,D,R)ITL-SCBC& SCOR 2011

For each “SCOR Process,” Level 2 “Process

Categories” represent supply-chain variations

Type SCOR

Process

Process Category Characteristics

Planning Plan Which execution process is being planned(Source, Make, Deliver, Supply Chain)?

Execution Source

Is the sourced part standard or custom?

Is the sourced part stocked by suppliers, or not?

Execution Make

Is the manufacturing process discrete or process-based?

What triggers the “Make” signal?

Execution Deliver

Is the product standard or custom?

Is the product stocked in finished goods, or not?

• SCOR process categories reflect distinctions in how

products are planned, sourced, made, and delivered

2

Definition of SCOR Level 2 Processes

Mapping the execution processes

S1

D1 S1

M2S2 D2

M1 D1 S1

S2

D1M1

European

RM Supplier

Key Other

RM

Suppliers

Alpha

Regional

Warehouses

S1

DR1 SR1

DR1 SR1 DR1 SR1

DR3 SR3

RM

Suppliers

DistributorsALPHA

DR3 SR3

S1

Americas

Distributors

SR1

SR3

ITL-SCBC& SCOR 2011

Mapping material flow

Latin American

Suppliers

(D1)

Warehouse

Other Suppliers(D1)

Manufacturing

European Supplier(S1)

(SR1,SR3)

Customer

Customer

Customer

Customer

(S1, D1)

(SR1,DR1,DR3)

(D2)

(DR1)

Warehouse

Warehouse

Warehouse

(S1, D1)

(SR1, DR3)

(S1, D1)

(SR1,DR1,DR3)

(S1, D1)

(SR1,DR1,DR3)

(S1)

(SR1,SR3)

(S1)

(SR1,SR3)

(S1)

(SR1,SR3)

(S1, S2, M1, D1)

(SR1,,DR1)

ITL-SCBC& SCOR 2011

Configure Supply Chain

Geographic Map - Sample

Identifying Plan Activities

Consumer

P2

P

4

P3

P

4

S1 D1 S1

P

2

P2

P

3

P

4

M2S2 D2

M1 D1 S1S2D1

M1

European

RM Supplier

Key Other

RM

Suppliers

S1

Alpha

Regional

WarehousesRM

Suppliers

DistributorsALPHA

P1 P1 P1

ITL-SCBC& SCOR 2011

Configure Supply Chain

Thread Diagram

Integrated Level 2 Metrics

Supplier On Time

Delivery

to 97%

Source Cycle Time

90 to 1 day

Material Acquisition

Cost

3.2% to 2.2%

$32M to $22M

RM Days of Supply

72 to 15 days

$107M to $22M

P1Schedule

Achievement

to 97%

Make Cycle Time

30 to 3 days

Unit Cost

WIP Days of

Supply

17 to 25 days

$26M to $37M

Faultless Invoices

to 97%

Order Management Cycle

Time

1 day

Order Management Cost

11.3% to 9.3%

$113M to $93M

Finished Good Inventory

30 to 15 days

$44M to $22M

Days Sales Outstanding

107 to 55 days

$292M to $151M

P2P4

P3

Linking Supply Chain Performance Attributes

between Level 1 and Level 2 Metrics

ITL-SCBC& SCOR 2011

Performance Attribute Performance Attribute Definition Level 1 Metric

Supply Chain Reliability

The performance of the supply chain in

delivering: the correct product, to the

correct place, at the correct time, in the

correct condition and packaging, in the

correct quantity, with the correct

documentation, to the correct customer.

Perfect Order Fulfillment

Supply Chain

Responsiveness

The speed at which a supply chain

provides products to the customer.


Time

Supply Chain Flexibility

The agility of a supply chain in

responding to marketplace changes to

gain or maintain competitive

advantage.

Upside Supply Chain

Flexibility

Upside Supply Chain

Adaptability

Downside Supply Chain

Adaptability

Supply Chain CostsThe costs associated with operating the

supply chain.

Supply Chain Management

Cost

Cost of Goods Sold

Supply Chain Asset

Management

The effectiveness of an organization in

managing assets to support demand

satisfaction. This includes the

management of all assets: fixed and

working capital.


Return on Supply Chain

Fixed Assets

Calculation: [ Total Perfect orders/ Total number of orders] x 100%

Calculation: [ Total number of orders delivered in full/ Total number of orders delivered] x 100%

Calculation:

[ Total number of orders delivered on the original commitment date] x 100 %[Total number of orders delivered]

Calculation:

[ Number of orders in perfect condition] x 100 %[Number of orders delivered]

Calculation:

[ Total number of orders delivered with accurate documentation] x 100 %[Total number of orders delivered]

Calculation:

[ Sum actual cycle time for all orders delivered][Total number of orders delivered]

SCOR Level 3

Process Flow

SCOR Level 3

P1.1 Identify, Prioritize, and Aggregate Supply Chain Requirements (Metric)

Best Practice

Output

P1.2 Identify, Assess, and Aggregate Supply Chain Resources (Metric)

Best Practice

Output

SCOR Level 3

SCOR Level 3 Performance Categories and Measures

Process Element: Schedule Process Deliveries

Performance Attribute Categories Measures

Reliability Percentage of schedules generated within supplier’s lead time

Percentage of schedules changer within supplier’s lead time

Responsive Average release cycle of changes

Flexibility Average days per schedule change

Average days per engineering change

Cost Product management and planning costs as a percentage of

product acquisitions costs

Assets None identified

ITL-SCBC& SCOR 2011

An example of SCOR Level 3 process

element logic flow

Inventory

Source Execution Data

Sourcing Plans

Replenishment Signals

Procurement Signal Material on Order

Purchased Materials

Material Pull Signals

Material Inventory Location

WIP Inventory Location

Finished Goods Inventory Location

Receipt Verification

Schedule

Material

Deliveries

S1.1

Receive &

Verify

Material

Transfer

Material

S1.3S1.2

Inputs

Process

Elements

Outputs

Level 3 Example — S1 Source Stocked Product

• Inputs, outputs, and basic logic flow of

process elements are captured

3

An example of a SCOR Level 3 standard process

element definition and standard performance metrics

Process Element:Schedule Material Deliveries

Process Number: S1.1

Process Element DefinitionScheduling and managing the execution of the individual deliveries of material against anexisting contract or purchase order. The requirements for material releases aredetermined based on the detailed sourcing plan or other types of material pull signals.

PerformanceAttributes

Metric

Cycle Time Total Source Lead Time

% of EDI Transactions

Cost Materials Management as a % of Material Acquisition Costs

Service/Quality % defective

Assets Raw Material Days of Supply (DOS)

3

• % of order changes

• # of end devices/SKUs

• Production volume

• Inventory carrying cost

Level 3

Diagnostic Metrics

• Product volume by

channel

• # of channels

• Supply-chain

complexity, # of

S/M/D sites

• Planning cycle time

• Forecast accuracy

• Obsolete/end of life

inventory days of supply

• Replan cycle

• Order entry methods

• Order entry modes

Supply-Chain

Management

Practices

Measures

Level 2

Performance Metrics

Supply-Chain

Complexity

Measures

Supply-Chain

Configuration

Measures

• Material acquisition costs

• Source cycle time

• Raw material DOS

• Purchased material by

geography

• % of purchasing

spending by distance

• Supplier delivery

performance

• Payment period

• % part numbers received

with lead time < 8 weeks

• % unpenalized 30-day

decrease

• % purchasing spending

by distance

• # of suppliers

• Supply-chain finance and

planning costs

• Demand/supply planning costs

• Inventory days of supply

So

urc

eP

lan

AssetsDeliveryPerformance/

Quality

CostFlexibility &

Responsiveness

Levels 2 and 3 performance metrics and diagnostic

measures drive performance improvement3

2

•Value-add %

•% build-to-stock, %

build-to-order

•% of mfg. order changes

due to internal issues

•WIP & plant FG DOS

• # of devices/SKUs

• Upside production

flexibility

• # of orders, line

items & shipments

by channel

• % parts returned

• % re-returns

• Delivery locations by

geography

• # of channels

• Field & samples FG

DOS

• Published delivery

lead time

• # of faultless invoices

• Manufacturing

process steps by

geography

• Asset turns

• Fill rates

• Order management costs

• Order fulfillment lead time

• Forecast accuracy by channel

• # of returns/complaints

• Build order attainment

• Make cycle time

• Product quality

Level 3

Diagnostic Metrics

Supply-Chain

Management

Practices

Measures

Level 2

Performance Metrics

Supply-Chain

Complexity

Measures

Supply-Chain

Configuration

Measures

De

liv

er

Ma

ke

AssetsCostFlexibility &

Responsiveness

DeliveryPerformance/

Quality

Levels 2 and 3 performance metrics and diagnostic measures

drive performance improvement (continued)3

2

Implementation of supply-chain management

practices within the company occurs at Level 4

(and below)

• Below Level 3, each process element is described by classic

hierarchical process decomposition

D1 - Deliver Stocked Product

Level 4Process Element - D1.2

Activities

Tasks

1. Contact customer account rep.

2. Look up customer history

3. If necessary, account rep. calls sales

manager to authorize additional

credit

4a. Account rep clears credit issue

4b. Account rep refuses credit request

Task - D1.2.3

Activities

Enter

Orde

r

Receive

Order

Validat

e Price

Access

Credit Screen

Check Credit

Availability

Clear

Order

Contact

Accounting

Communicate

Results to

Customer

Check

Credit

Route

Shipments

D1.6

Plan & Build

Loads

D1.5

Reserve

Inventory

&

Determine

Delivery

Date

D1.3

Receive,

Enter &

Validate

Order

D1.2

Process

Inquiry &

Quote

D1.1

Receive

Product

D1.8

Pick

Product

D1.9

Load

Vehicle

Generate

Ship Docs

& Ship

D1.10

Receive & Verify Product

at Customer

Site

D1.11

Install

Product

D1.12

Invoice &

Receive

Payment

D1.13

Consolidate

Orders

D1.4

Select

Carriers &

Rate

Shipments

D1.7

From Make

or Source

Level 5

Level 6

4

Applying the Model



SCOR can be used to achieve many

objectives

• Rapidly map own or others’ supply chain

– Illustrate current supply-chain configurations

– Establish common reference point and definitions

– Communicate effectively with suppliers and

customers

• Compare process performance to targets

– Benchmark metrics across multiple industries

– Compare existing practices to industry best

practices

• Determine required information systems capabilities

– Identify software vendors providing required

capabilities

SCOR can be used to achieve many

objectives

• Identify supply-chain management improvement

opportunities

– Identify gaps in current processes

– Quantify the potential benefits of specific process

improvements

– Provide data for project financial justifications

• Implement supply-chain process improvements

– Design to meet strategic objectives

– “Fine tune” based on pilot results and changing market

needs

• Influence creation of desired software products

– Communicate needed product features to software

vendors

Continued

SCOR Level 1Basis

of

Competition

Operations

Strategy

1

SCOR Level 2

Intra-

Company

Configuration

Inter-Company

Configuration

Supply-Chain

Configuration

2

Intra-Company

Process, Practice,

and System

Configuration

Elements

SCOR Level 3Performance

Levels, Practices,

and System(s)

Selection

Inter-Company

Process, Practice,

and System

Configuration

Elements

3

Supply-Chain

Processes and

System(s)

Implementation

SCOR Level 4

Intra-Company

Supply-Chain

Improvements

Inter-Company

Supply-Chain

Improvements

4

Supply-chain configurations are defined and

implemented by iterating through the SCOR model

Applying the Model:A Case Study

138

Beta Corporation designs, manufactures, distributes, and

repairs consumer electronics products

• Company overview– Number 1 in market share for core product lines in

North America, Beta also has a presence in over 50 other countries

– A full breadth of products supports multiple channels of distribution and consumer preferences

– A core competence in manufacturing consistently demonstrates competitive performance

• Problem– Significant losses (20% of revenue) were being incurred

despite the brand premium– The presence in more than 50 countries grossed less

than 10% of total revenue– The product line was unfocused; over 50% were not

designed by Beta– More than 70% of the products were produced by

Original Equipment Manufacturers (OEMs) despite the core competence in manufacturing

Beta Corporation designs, manufactures, distributes,

and repairs consumer electronics products (continued)

• Diagnostic approach

– Understand the business problem from

management’s viewpoint (Level 1 metric

performance)

– Map supply-chain processes using SCOR

– Determine the strategic elements requiring change

and associated performance targets

– Define the new supply-chain configuration

Supply-Chain Performance VersusCompetitive Population

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

KeyPerspectives Level 1 Metrics

Major

Opportunity

Dis-

advantage

Average

or Median Advantage

Best-

in-Class

Delivery Performance to Request xx%

Order Fulfillment Lead Time (MTO) xx days

Fill Rate xx%

Perfect Order Fulfillment xx%

Supply-Chain Response Time xx days

Upside Production Flexibility xx days

Supply-Chain Management Cost xx%

Warranty Cost as % of Revenue xx%

Value-Added per Employee $xxxK

Total Inventory Days of Supply xx days

Cash-to-Cash Cycle Time xx days

Net Asset Turns xx turns

Flexibility &

Responsiveness

Supply-Chain

Reliability

COGS/

Expense

Assets/

Utilization

SCOR Level 1 metrics quickly revealed that the supply

chain was a key contributor to the problem

Beta Performance

Pacif

ic R

im

Several

Hundred

Suppliers

CA

Manufacturing

Distribution

Captive Retail Retailers OEM

Manufacturing

Suppliers

Distribution

Many

OEMs

Drawing the supply chain showed that North

American operations supported a lot of traffic

SCOR Level 2 modeling reinforced that Beta

had a very complex supply chain

OEM SupplyChain

Many OEM Suppliers

80% of product supply ($$)

Deliver

Stocked

Product

60% of productvolume

High Volume Retailers

50% product volume

Retailers

15% product volume

OEM

5% product volume

Captive Retail

30% product volume

P2

P4

Manufacturing Supply Chain

S1

S1

MTS Components20% of product supply ($$)

M2

M2

MTSFactories

D1

D1

Deliver Stocked Product


P2

P2

P3

P3

P4

P4

P4

D1 S

1

S1

S1

S1

S1

D1

M1 M

1 M1 M

1 M1 M

1 M1 M

1 M1

D2 D

2 D2 D

2 D2 D

2 D2 D

2 D1

D2 D

2 D2 D

2 D2 D

2 D2 D

2 D1

D2

D2

D1

D2

D2

D1

M1 M

1 M1 M

1 M1 M

1 M1 M

1 M1

Management set the performance targets at Level 1 to

assure a competitive basis would be achieved

Supply-Chain Scorecard and

Performance Targets

COGS/Expense

Asset Utilization

Supply-Chain Flexibility/

Responsiveness

Supply-Chain

Reliability

Key Supply-Chain

Performance Attribute

Performance vs. CompetitionMajor

Opportunity Disadvantage Parity Advantage Best-in-Class

Actual

Performance

Performance

Requirement

Performance targets drove the specific actions

required to migrate to a new configuration

• Simplify supply-chain logistics

– Consolidate factories (Make)

– Consolidate distribution centers (Deliver)

– Reduce the number of distinct channels (Deliver)

– Dramatically reduce the number of suppliers and the reliance

on OEM product (Source)

– Consolidate product lines (Total Supply Chain)

• Improve customer-facing performance

– Institute processes and systems to more closely link Beta Co.

to high-volume customers

– Move from make-to-stock to make-to-order to improve supply-

chain flexibility and response time and reduce inventory

investment

– Implement Enterprise-wide Resource Planning (ERP)

Pacif

ic R

im

<100

Suppliers

SuppliersCA

Co-located

Manufacturing

and Distribution

OEM

Retailers

Few OEMs

Performance gains came from simplifying

and focusing the supply-chain configuration

SCOR Level 2 modeling reveals how the simplified supply

chain achieved greater performance

Company

Single, Co-located Manufacturing and Distribution

Suppliers Customers

D2

D2D2D1

80% Manufactured

Product Supply

20% Manufactured

Product Supply

MTO Components

MTS Components

MTO

Components

MTS

Components

High-Volume Retailers

80% product volume

Trend

Retailers

15% product volume

Trend

OEM

5% product volume

Trend


ManufacturingSupply-ChainPlanning VMI

OEMOEM

Cross-

docking

5% of productvolume

OEM Supply-ChainPlanning

OEM

Supply-Chain Execution

P1

S2

S1

D2M2

S2 D1

P2 P4

P1

P2 P3 P4

S2

S2

S2

D2D2D2

P1

P4

S2D2

D2D2D1

D2D2D2

S1

S2

P1

P2 P4

P3

VMIP2

Make

D1

S2

S2

S2

Cross-

docking

D2M2Source

Deliver

Multiple systems were chosen to support the enterprise-

wide supply chain, based on Level 3 analysis

Suppliers Customers

ManufacturingSupply-ChainPlanning

OEM Supply-ChainPlanning

Supply-Chain Execution

ERP

System

&

Legacy

Advanced Planning

System

Advanced Planning

System

Customized

3rd Party

System

Delivery Performance

Up 54 pts

% C

us

tom

er

Req

ue

ste

d S

hip

Date

Year 1 Year 2 Year 3 Year 4

Inventory Days of Supply

Down 55%

Da

ys


Incr. Cash Flow from Operations

Up 10% of Rev

$

Mil

lio

ns


100

Cash-to-Cash Intervals

Down 55%

Days


Gross margin improved 50% in two years

on the basis of supply-chain performance

Go

od

Go

od

Go

od

Go

od

Applying the Model:Developing Supply-Chain

Configurations



The concept of “configurability”

• The primary use for SCOR is to describe, measure, and

evaluate supply-chain configurations

• A supply-chain configuration is driven by

– Deliver channels, inventory deployment, and products

– Make production sites and methods

– Source locations and products

– Plan levels of aggregation and information sources

• SCOR must accurately reflect how a supply chain’s

configuration impacts management processes and

practices

Configurability

1. Select the business entity to be modeled (geography, product set, organization)

2. Illustrate the physical locations of:

Production facilities (Make)

Distribution activities (Deliver)

Sourcing activities (Source)

3. Illustrate primary point-to-point material flows using “solid line” arrows

4. Place appropriate Level 2 execution process categories to describe activities at each location

Configuring a supply-chain “thread”

illustrates how SCOR configurations are done

Source Make Deliver

S1 Source Stocked Materials

S2 Source Make-to-Order Materials

M1 Make-to-Stock

M2 Make-to-Order

M3 Engineer-to-OrderS3 Source Engineer-to-Order Materials

D1 Deliver Stocked Products

D2 Deliver Make-to-Order Products

D3 Deliver Engineer-to-Order Products

Execution Process Toolkit

Step 1: We will focus on ACME’s North

American supply-chain execution

processes

ACME North America produces desktop and laptop PCs that are sold

through retailers

Step 2: Identify the location of

manufacturing facilities

Desktop

Production

Monitor

Production

Laptop

Production

Step 2 (cont’d): Identify the location of

distribution activities

Desktop

Production

Desktop

DCMonitor

Production

Laptop

Distributor

Laptop

Production

Desktop

Retailer

Laptop

Retailers

Monitor

North American

Distribution

Center

Step 2 (cont’d): Identify the location of the

major sourcing activities

ACME

Taiwan

Desktop

Production

Desktop

DC

Monitor

Production

North American

Distribution Center

Laptop

Distributor

Semiconductor

Distributor

(S1, D2)

Laptop

Production

Desktop

Retailer

Laptop

Retailers

Semiconductor

Manufacturer

Step 3: Illustrate primary point-to-point

material flows using “solid line” arrows

ACME

Taiwan

Desktop

Production

Desktop

DC

Monitor

Production

North American

Distribution Center

Laptop

Distributor

Semiconductor

Distributor

Laptop

Production

Desktop

Retailer

Laptop

Retailers

Semiconductor

Manufacturer

Step 4: Place appropriate Level 2 execution

process categories to describe activities

ACME

Taiwan

(D2)

Desktop

Production

(S1, M1, D2)

Desktop DC

(D1)Monitor

Production

(S1, M1)

North American

Distribution Center

(D1)

Laptop

Distributor

(S1, D1)

Semiconductor

Distributor

(S1, D2)

Laptop

Production

(S1, M1 , D1)

Desktop

Retailer

(S1, D1)

Laptop

Retailers

(S1, D1)

Semiconductor

Manufacturer

(S1, M2, D2)

Legend

S1 = Source Stocked Material

M2 = Make-to-Order

M1 = Make-to-stock

D2 = Deliver Make-to-Order Products

5. Describe each distinct supply-chain “thread”

– A supply-chain thread ties together the set of Source-Make-Deliver supply-chain processes that a given product family flows through

– Develop each thread separately to understand common, and distinct, execution process categories

– Consider end-to-end threads in the Intercompany case

6. Place planning process categories, using dashed lines to

show links with execution processes

7. Place P1, if appropriate

– P1 – Plan Supply Chain aggregates outputs from P2, P3, and P4

Configuring a supply-chain “thread” illustrates

how SCOR configurations are doneContinued

Step 5: Describe each distinct supply-chain

“thread”

ACME

Taiwan (D2)

San Jose

Desktop

Production

(S1, M1, D2)

Desktop

DC (D1)

Monitor

Production (S1, M1)

North American

Distribution Center (D1)

Laptop

Distributor

(S1, D1)Semiconductor

Distributor

(S1, D2)

Laptop

Production

(S1, M1 , D1)

Desktop

Retailer

(S1, D1)

Laptop

Retailers

(S1, D1)

Semiconductor

Manufacturer

(S1, M2, D2)

Legend

S1 = Source Stocked Material

M2 = Make-to-Order

M1 = Make-to-Stock

D2 = Deliver Make-to-Order Products

ACME Laptop

Supply-Chain Thread

SCOR configurations utilize a horizontal flow to show

the total supply-chain links

D3

D2

ACME

Taiwan

Semiconductor

Distributor

S1 M1 D1

CustomersACME

ACME

Laptop

Production

(San Jose)

ACME

Laptop

Production

(San Jose)

ACME

Laptop

Distribution

(San Jose)

Semiconductor

Manufacturer

S1D2

Customer’s

Customer

Laptop

Distributor

Laptop

Retailer

S1 D1S1 D1

SuppliersSupplier’s

Supplier

ACME Laptop Supply-

Chain Thread

Step 6: Place planning process categories, using dashed

lines to show links with execution processes

D3

D2

ACME

Taiwan

Semiconductor

Distributor

S1

P2 P4P3

M1 D1

CustomersACME

ACME

Laptop

Production

(San Jose)

ACME

Laptop

Production

(San Jose)

ACME

Laptop

Distribution

(San Jose)

P4

Semiconductor

Manufacturer

S1D2

Customer’s

Customer

Laptop

Distributor

Laptop

Retailer

S1

P2

D1S1 D1

P2


Supplier

Step 7: Identify any P1 supply-chain planning

activities that aggregate the outputs from P2 – P4

D3

D2

ACME

Taiwan

Semiconductor

Distributor

S1

P2

P1

P4P3

M1 D1

CustomersACME

ACME

Laptop

Production

(San Jose)

ACME

Laptop

Production

(San Jose)

ACME

Laptop

Distribution

(San Jose)

P4

Semiconductor

Manufacturer

S1D2

Customer’s

Customer

Laptop

Distributor

Laptop

Retailer

S1

P2

D1S1 D1

P1

P2


Supplier

In our ACME example, P1 could be extended

to manage an intercompany supply chain

D2

D2

ACME

Taiwan

Semiconductor

Distributor

S1

P2

P1

P4P3

M1 D1

CustomersACME

ACME

Laptop

Production

(San Jose)

ACME

Laptop

Production

(San Jose)

ACME

Laptop

Distribution

(San Jose)

P4

Semiconductor

Manufacturer

S1D2

Customer’s

Customer

Laptop

Distributor

Laptop

Retailer

S1

P2

D1S1 D1

P1

P2

CustomersSupplier’s

Supplier

P1

Plan Intercompany Supply Chain

Supply Chain Operations

Reference-model: Summary

165

SCOR Summary

SCOR is a process reference model

designed for effective communication

among supply chain partners

– A standard language helps management to

focus on management issues

– As an industry standard, SCOR helps

management focus across inter-company

supply chains.

SCOR Summary (II)

SCOR is used to describe, measure and

evaluate Supply Chain configurations

– Describe: Standard SCOR process definitions

allow virtually any supply-chain to be configured.

– Measure: Standard SCOR metrics enable

measurement and benchmarking of supply-chain

performance.

– Evaluate: Supply-chain configurations may be

evaluated to support continuous improvement

and strategic planning.

SCOR has a powerful role in defining

complex supply chains

SCOR Level 1 Basis of Competition

– Set business requirements and define the basis of competition

– Evaluate the performance of the current operations strategy vis-a-visrequired performance

– Set SCOR Level 1 metrics and targets, and define the gap

– Set business priorities and state what needs to change

SCOR has a powerful role in defining

complex supply chains

SCOR Level 2 Supply-Chain Configuration

– Model current supply-chain

configuration, considering

asset, product volume and mix,

and technology requirements

and constraints

– Reconfigure the supply chain

at SCOR Level 2 to determine

expected performance

Continued

SCOR has a powerful role in

implementing supply chains

SCOR Level 3 Performance Levels, Practices, and System(s) Selection

– Develop process models that support strategic objectives and work within the new supply-chain configuration

– Set process metrics and performance targets

– Establish business practices at the operating level

– Build system requirements that support the supply-chain configuration, processes, and practices

– Select appropriate system(s)

Continued

SCOR Level 4

Continued

Supply-Chain Process and System(s) Implementation

– Implement best practices to achieve results

SCOR has a powerful role in

implementing supply chains

Case Study

Oil Producing CompanyIn Iran

Case Study IOC : A schematic diagram of IOC’s Supply Chain

pipeline

Case Study IOC : Geographical of IOC Supply Chain

Supplier

Plan

CustomerCustomer’s

CustomerSuppliers’

Supplier

MakeDeliverSource Make DeliverMakeSourceDeliver SourceDeliver

Internal or External Internal or External

Your Company

Source

Level 1

SCOR Model

Return Return ReturnReturn Return Return

Return Return

Building Block Approach

Processes Metrics

Best Practice Technology

ITL-SCBC& SCOR 2011

ITL-SCBC& SCOR 2011

Level 2

Level 3

Supply Chain PerformanceImprovement Projects

Projects Prioritize

Q&Awww.supplychainbiz.com

www.logisticsthailand.com

www.logisticsbook.com

www.purchasingthailand.com

Tel.662-514-2839 Fax.662-514-2839

http://www.supplychainbiz.com/

http://www.logisticsthailand.com/

http://www.logisticsbook.com/

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