Process Model Building Within The Supply Chain (SCOR Model

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Process Model Building Within The Supply Chain (SCOR Model

  1. 1. PROCESS MODEL BUILDING WITHIN THE SUPPLY CHAIN Greg Peck, StreamlineSCM This paper presents background and application information of a model that has been developed within an area referred to as the “Supply Chain”. The idea of creating a model was originally created by a group at MIT called the Integrated Roundtable. One conclusion was that in order for the various disciplines that make up the Supply Chain to come together and create synergy in the Enterprise, it would require a working model. Such a model would be built using agreed upon terminology and definitions that identify inputs, processes and outputs within the Enterprise. In essence, the model would become a methodology that would be used within the world of the Supply Chain. The most significant contribution coming from the Integrated Roundtable was the conclusion that in order to successfully integrate various supply chain disciplines it required a working model. This decision would put the group on the path to building a unified, deductive methodology (cross functional) rather than an individual, inductive approach (multi functional). A unified approach allows one to focus on the “interrelatedness” of the various disciplines. “The deductive and unified aspects are related in the following way. Propositions are deduced from models and are then combined in ways that produce further deduced propositions. Particular cases or particular applications are then given names. Depending on the situation, either additional propositions are generated or additional and more specialized models are constructed. This process continues until a substantial scope … is encompassed”.1 This author believes, without supporting documentation, that the foundation of the model has its roots in General Systems Theory since many contributors to General Systems Theory come from MIT. This belief is supported by the fact that the foundations for building a unified model using General Systems Theory concepts, employ an INPUT-PROCESS-OUTPUT approach. In 1995, from the Integrated Roundtable, emerged what is known today as the Supply Chain Council and the SCOR-model that was instituted as its primary building block. The present Version 5.0 of the SCOR-model is the fifth major revision since the Model’s introduction in 1996.2 This version of the Model extends the Return processes that were introduced in Version 4.0. Additionally, this Model release begins the introduction of eBusiness best practice and begins a major restructuring of the metrics that is to be continued in updated versions. The Model is the product of the Supply-Chain Council (SCC), an independent, not-for-profit, global corporation with membership open to all companies and organizations interested in applying and advancing the state-of-the-art in supply-chain management systems and practices. The SCC was organized in 1996 by Pittiglio Rabin Todd & McGrath (PRTM) and AMR Research, and initially included 69 voluntary member companies. At the time of this release, the Council has approximately 750 members worldwide and has established international chapters in Europe, Japan, Korea, Latin America, Australia/New Zealand and Southeast Asia with additional requests for regional chapters pending. The majority of the SCC’s members are practitioners and represents a broad cross-section of industries, including manufacturers, distributors, and retailers. Equally important to the Council and the advancement of the SCOR- model are the technology suppliers and implementers, the academicians, and the government organizations that participate in Council activities and the development and maintenance of the Model. The Supply-Chain Council is interested in providing the widest possible dissemination of the SCOR-model. The wide-spread use of the Model results in better customer-supplier relationships, software systems that can better support members through the use of common measurements and terms, and the ability to rapidly recognize and adopt best practice no matter where it originates. SCC requests that all who use the SCOR-model provide attribution to the Supply-Chain Council. Additionally, members are encouraged to monitor the members section of the SCC website to ensure that they are using the latest version of SCOR. A major challenge facing the Enterprise, in its ability to implement SCOR, is reducing the existing power structure within empire or silo walls. By its nature the SCOR-model is interdisciplinary in that it brings together a number of discipline areas that have not commonly shared in business processes. Each discipline brings its own perceptions, biases and attitudes of its own importance to the Enterprise. SCOR establishes a new framework for the Enterprise in which to operate and requires a significant amount of communication between these areas to be successful. A great deal emphasis in the initial implementation procedures for SCOR is aimed at developing a strategy for bringing SCOR into the Enterprise that includes shedding silo walls. The concept of Collaboration receives a great deal of attention within the Supply Chain Council community because of the basic necessity to communicate across different areas. Effective implementation of the SCOR-model requires that it is applied by taking advantage of the tools designed for planning, process analysis, execution and collaboration.
  2. 2. The Enterprise must recognize the new wave of process management as a business asset, learn the new cultures and methodologies for modeling and begin to leverage process management as it emerges.3 SCOR is a new paradigm that establishes a model identifying a company’s complex internal and external applications in order to understand their present state of existence. The SCOR-model has been applied in a number of businesses throughout the world with success. The following are a couple of cases of SCOR execution. Hewlett-Packard/Compaq Computer 4 At Compaq Computer (now Hewlett-Packard/Compaq) SCOR is considered to be a foundation for Strategy Management, and at Compaq was called Accelerated Enterprise Operations Strategy. After the merger of Compaq Computer with Hewlett Packard SCOR became a tool to assist them in identifying processes that required a high degree of attention in bringing the two companies together. The model is used for Strategy Management in the areas of Process Modeling, Process Measurement, Simulation, Benchmarking, and creation of Libraries. Process Modeling: SCOR facilitates the description of the existing processes and linkage to organizations and systems. Process Measurement: SCOR identifies the process performance by measurement or simulation that leads to identification of gaps and opportunities. Simulation: SCOR facilitates the identification of root causes for performance gaps and analyzing the impact of a proposed change that is metrics driven. Benchmarking: SCOR facilitates the ability to perform comparison to internal and external entities on relevant processes. Libraries: A repository for similar processes and best practices whereby sub-processes in the library are available for re-usage in solution modeling. These can be propositions that come from deduction of observations based on previous deductions. Recently, Compaq computer completed an extension of the model integrating the design chain whereby product design, sales Ford Motor Company 5 Ford Motor Company employed SCOR under its existing program called PS&L (Parts, Supply and Logistics) to design a system that more clearly defines forecasting, inventory planning, electronic supplier communication and management. Ford’s supply chain is extremely complex with hundreds of thousands of SKU parts, a vehicle base in the millions of models from past years, thousands of suppliers and dealers, and plans to increase the network. Within the functional silo areas of purchasing, supply, distribution and customer fulfillment millions of bits of data exist that are not integrated for decision making purposes. Ford’s primary purpose in
  3. 3. implementing SCOR was to break down business barriers and unify business operations thus creating greater operational efficiency through decision making. Ford identified a series of business and technology challenges for the company before implementing SCOR: Business Challenges: • Poor updating of analytical data, was being updated weekly at best • Highly reactive: focus on backorders and blame assessment • High amount of processing time and forecast error led to high inventory for safety • Increasing complex supply chain of external partners, sources and non traditional channels • Different cultures, processes and practices at each node • Metrics are out of alignment and data is not common • Material expedition is very costly at headquarters • Little ability to prioritize actions that are critical for decision making Technology Challenges: • Technology has improved some business efficiency, but many operational problems still exist • A home grown ERP system that does little to integrate information to improve operations • Past inventory information are spread across multiple depots • No unified platform for analysis, alerting, and collaboration A series of requirements were established for SCOR to solve the above challenges that included culture change, improved predictability, better prioritization of processes concerning parts and inventory, enhanced metric analysis and reporting, effective management of new and current operations, more clearly identify disconnects and improved support. Expected results from integrating the existing PS&L into the supply chain using SCOR consisted of the following: • Delivery Performance 16% to 28% improvement • Inventory Reduction 25% to 60% improvement • Fulfillment Cycle Time 30% to 50% improvement • Forecast Accuracy 25% to 80% improvement • Overall Productivity and Supply Chain Improvement 10% to 16% improvement • Fill Rates 20% to 30% improvement The resulting ROI for Ford in its SCOR execution were very favorable. In the Supply Chain performance, daily metrics and trending link planning is done on every SKU, everyday; variability of inventory is monitored, altered and managed; and the system dynamically responds to demand fluctuations. This has led to reduced inventories; improved customer service levels; less overtime and expediting; and higher profit margins. The overall Business Value has resulted in, a one time and recurring inventory reductions; a 20% reduction in open back orders; improved customer satisfaction; a 30% reduction in total cycle time; 25% to 30% reduction in forecast inaccuracies. In six months the ROI was calculated to be five times the cost of the system. In its present form, the Model is presented to its members in a word document listing the input-output process elements, best practices and metrics. In order to effectively use and implement the Model there is an enormous amount of time and resources that need to be allocated by the company. One of the reasons for such a large investment is that there is difficulty in applying the model to a company’s operation from the text document. Tom Mercer, of StreamlineSCM, recognized the complexity in the applying the model to an operation and proceeded to shift the model from a text document into a relational database. In so doing, the interrelationship of the variables could be more easily applied to a specific application. Also, the database assisted in identifying redundant and disconnected variables located in the word document and established a means to create a visual representation of the model on a single page chart, similar to the Periodic Table. What has emerged from the exercise of turning SCOR into a relational database is a solution called Strategia that consists of an application database and wall chart of the SCOR-model. In the structure of an application database it is much easier to identify and maintain the input-output process elements, best practices and metrics of the SCOR-model. The database gives the user the ability to more easily apply SCOR to his operational application and generate reports and visual diagrams in the form of metrics and benchmarking. Also, building the SCOR-model in a relational database allows for the Model to be easily extended beyond the boundaries of the supply chain. Presently, the SCOR-model is undergoing a transformation to satisfy a strong desire to integrate the “Design Chain” including Product Development Management (PDM) and Product Lifecycle Management (PLM) processes. By extending the Model into the design chain, it will become evident that processes from other discipline areas such as Sales, Marketing, Support, Accounting and Human
  4. 4. Resources will become a necessity. StreamlineSCM is working in conjunction with Dassault Systemes, a PLM company, utilizing the framework and taxonomy of the SCOR-model to build what it we are calling the Enterprise Transaction Model (ETM). The Enterprise Transaction Model will become a more inclusive process model allowing more extensive analysis of the overall transaction elements throughout the Enterprise. At the macro level the ETM considers primary discipline areas of Supply Chain Management (SCM), Product Lifecycle Management (PLM), Customer Relations Management (CRM), and Enterprise Resource Planning (ERP) that require integration into the Model. Each of these areas has overlapping and separate business processes that can be brought into practical applications.
  5. 5. 1 1 Kuhn, Alfred, The Logic of Social Systems. Josey Bass Publishers. San Francisco, 1974 2 Supply-Chain Operations Council Overview, 2001. 3 3 Gartner Research. 4 4 Francis, Joe. Presentation of Compaq Computer at Supply Chain North American Conference, 2002. 5 5 Merkle, Roger. Presentation of Ford Motor Company at Supply Chain North America Conference, 2002.

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