A supply chain is a group of processes (not organizations or functions) which span interactions with suppliers up to interactions with customers primarily focused on fulfilment of the customer order. Essentially wherever there are materials or services flowing to an end customer (or from a customer in a return cycle), the processes involved are supply chain processes. There is interaction with suppliers for product design, but that does not involve material flows to end customers. There is interaction with customers for sales to support the selection of materials and services, but it does not directly involve flow of materials to end customers. When we speak of benchmarking, we are measuring the performance of all the processes between the supply “input” and the customer “output”. SCOR provides very clear start and stop points.
Our industry scope is vast – SCOR was designed to be industry neutral, but at the same time relevant and accessable. Whether it’s in consumer packaged goods, Oil and Gas, Pharmeceuticals, High-Tech manufacturing, Automotive, Computers, Chemicals, or Food and Beverage, Industrials, or the biggest names in supply chain management consulting, and the worlds most prestigous academic institutions, we count them as our membership, our volunteer base, and the focus of our benefits.
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Transcription SCOR Benchmarking SCOR metrics are also organized in layers, and with five key strategic attributes. Reliability: The ability to deliver, on-time, complete, in the right condition, packaging and documentation to the right customer Responsiveness The speed at which products and services are provided Agility (Flexibility): The ability to change (the supply-chain) in order to support changing (market) conditions Cost: The cost associated with operating the supply chain Assets: The effectiveness in managing assets in support of demand satisfaction This forms the basis of the SCOR quantitative benchmarking system.
Here’s an example. Reliability – Superior. We use “perfect order fulfilment”. It has four level-2 metric “children” in SCOR. We then choose most of the level-3 children of the level-2 metrics. You don’t need to choose all of the level-2 or level-3 metrics. For instance, SCOR says that you have, for accurate document, “Conformance Documentation Accuracy” as well as “Customs Documentation Accuracy” among others. We don’t have Conformance – for instance, what you might need with chemicals. We only ship within the US, so we don’t need Customs Documentation. If the metric is not relevant, you don’t put it in the SCORcard. We now have 12 metrics in the summary. Let’s keep going.
Responsiveness was an “A for Advantage”, so we choose an advantage metric, and only level-2 metrics under it. Flexibility was “P for Parity”, so we chose upside flexibility, and then stopped. You can see the pattern. We now have 22 metrics in total in our scorecard – perfect. We have more data where we need the best performance, and the least data (but not no data) where it’s less strategic. Get a copy of SCOR, and and try this. It’s very easy.
Unlike many other supply chain improvement organizations, for us it’s been very easy to quantify and follow the value that SCOR accrues to our member organizations, and academics have been studying improvements delivered using SCOR for more than a decade – thousands of reseach papers and articles. In general, companies which use SCOR to align performance to strategy and focus on continuous improvement have the best performance of annual profits, best leverage of assets, and the best in the industry customer performance.
SCOR SUPPLY CHAIN OPERATIONS REFERENCE MODEL
<ul><li>Developed by Supply Chain Council </li></ul><ul><li>Standard framework for managing supply chain across various industries </li></ul><ul><li>Provides integration of well-known concepts of business process reengineering, benchmarking, and process measurement into a cross-functional framework. </li></ul>
What is a Supply-Chain SCOR Benchmarking - Presentation Supplier processes Product Design Customer processes Supply Chain SCOR™ Sales & Support Product Management
Industry Membership Scope SCOR Benchmarking - Presentation
<ul><li>Demand / Supply Planning Management </li></ul><ul><li>Sourcing </li></ul><ul><li>Production Execution (Make to Stock, Make to Order) </li></ul><ul><li>Transportation and Warehousing </li></ul><ul><li>Return of Raw Material or Finished Goods </li></ul>SCOR Model – Scope of Processes PLAN RETURN SOURCE MAKE DELIVER 4
Supply Chain Operations Reference Model (SCOR):Basic Management Processes <ul><li>Plan-Source-Make-Deliver-Return </li></ul>Supplier’s Supplier Make Deliver Source Make Deliver Make Source Deliver Source Deliver Source Customer’s Customer Plan Supplier (Internal or External) Your Company Customer (Internal or External) Return Return Return Return Return Return Plan-Source-Make-Deliver-Return provide the organizational structure of the SCOR-model
Scopes of Basic Management Processes <ul><li>Plan (Processes that balance aggregate demand and supply to develop a course of action which best meets sourcing, production and delivery requirements) </li></ul><ul><ul><li>Balance resources with requirements </li></ul></ul><ul><ul><li>Establish/communicate plans for the whole supply chain </li></ul></ul><ul><li>Source (Processes that procure goods and services to meet planned or </li></ul><ul><li>actual demand) </li></ul><ul><ul><li>Schedule deliveries (receive, verify, transfer) </li></ul></ul><ul><li>Make (Processes that transform product to a finished state to meet planned or actual demand) </li></ul><ul><ul><li>Schedule production </li></ul></ul><ul><li>Deliver (Processes that provide finished goods and services to meet planned or actual demand, typically including order management, transportation management, and distribution management) </li></ul><ul><ul><li>Warehouse management from receiving and picking product to load and ship product. </li></ul></ul><ul><li>Return (Processes associated with returning or receiving returned products) </li></ul><ul><ul><li>Manage Return business rules </li></ul></ul>
<ul><ul><li>Why ? </li></ul></ul><ul><ul><ul><li>Accountability </li></ul></ul></ul><ul><ul><ul><li>Predictability </li></ul></ul></ul><ul><ul><ul><li>Risk Management </li></ul></ul></ul><ul><ul><li>How ? </li></ul></ul><ul><ul><ul><li>aligned to strategic objectives </li></ul></ul></ul><ul><ul><ul><li>have accountability at all levels </li></ul></ul></ul><ul><ul><ul><li>cross-functional </li></ul></ul></ul><ul><ul><ul><li>Data based </li></ul></ul></ul>SCOR Indices 5
Performance Metrics <ul><li>SCOR metrics: Standard Strategic (Level 1) Metrics </li></ul>SCOR Benchmarking - Presentation † upside and downside adaptability metrics Customer Internal Attribute Metric (Strategic) Reliability Perfect Order Fulfillment Responsiveness Order Fulfillment Cycle Time Agility Supply Chain Flexibility Supply Chain Adaptability † Cost Supply Chain Management Cost Cost of Goods Sold Assets Cash-to-Cash Cycle Time Return on Supply Chain Fixed Assets Return on Working Capital
Three Levels of Process Detail 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. Supply Chain Operations Reference Model Return Level Description Schematic Comments 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. Source Make Deliver Plan 1 # Configuration Level (Process Categories) A company’s supply chain can be “configured-to-order” at Level 2 from the core “process categories.” Companies implement their operations strategy through the configuration they choose for their supply chain. 2 Process Element Level (Decompose Processes) <ul><li>Level 3 defines a company’s ability to compete successfully in its chosen markets, and consists of: </li></ul><ul><li>Process element definitions </li></ul><ul><li>Process element information inputs, and outputs </li></ul><ul><li>Process performance metrics </li></ul><ul><li>Best practices, where applicable </li></ul><ul><li>System capabilities required to support best practices </li></ul><ul><li>Systems/tools </li></ul>3 P1.1 Identify, Prioritize, and Aggregate Supply-Chain Requirements P1.2 Identify, Assess, and Aggregate Supply-Chain Requirements P1.3 Balance Production Resources with Supply-Chain Requirements P1.4 Establish and Communicate Supply-Chain Plans Implementation Level (Decompose Process Elements) 4 Not in Scope Return
Some Graphical Tools: <ul><li>1 st Step in configuring a SC: Illustrate physical layout, material flow and place Level 2 execution process categories to describe activities at each location. </li></ul>
SCOR Process Maps <ul><li>2 nd Step: Create the SCOR Process Maps: Place planning process categories, using dashed lines to show links with execution processes </li></ul>
Software Package for Modeling SCOR: ARIS EasySCOR <ul><li>The ARIS Toolset and ARIS Easy Design are process modeling tools. The ARIS Toolset is a BPR tool, Easy Design is used for process capture. </li></ul><ul><li>The EasySCOR Modeler is a software package that includes the ARIS Easy Design modeling kit and the SCOR model in ARIS format. </li></ul><ul><li>ARIS EasySCOR consists of process models that describe the SCOR levels 1 to 3. Implementation level, level 4 is not included. </li></ul>
Process Map Example created in ARIS EasySCOR Suppliers Supplier Suppliers Assemble/ Package Distribution Centers Geo Ports of Entry Americas---> Europe---> Asia--->
Observations <ul><li>SCOR describes processes not functions. In other words, the Model focuses on the activity involved, not the person or organizational element that performs the activity. </li></ul>
SCOR has proven to improve operating results many ways <ul><li>Improvement of operating results of an average of 3% in the initial SCOR implementation phase by means of cost reduction and improvement in customer service 1 </li></ul><ul><li>Increase in profitability (between 2x and 6x) with regard to project investment costs within first 12 months of implementation 1 </li></ul><ul><li>Reduction in IT costs through minimizing system customization and making better use of standard functionality 1 </li></ul><ul><li>Continuous actualization of process change portfolio by continuous conversion of supply chain improvements with the objective of increasing annual profits by 1% to 3% 1 </li></ul>SCOR Benchmarking - Presentation 1 Poluha (2007) Application of the SCOR Model in Supply Chain Management, New York, USA <ul><li>Benefits of SCOR </li></ul><ul><li>Improvement in stock market value </li></ul><ul><li>Increase of profits and margins </li></ul><ul><li>Increase of available financial means through improved investment selection (portfolio management of initiatives) </li></ul><ul><li>Reduction of overall costs </li></ul><ul><li>Optimization of Enterprise Resource Planning </li></ul>
Best practices of Business No. Attributes Typical Superior 1 Delivery Performance 50% 95% 2 Fill Rates 60% 98% 3 Order Fulfillment 50% 90% 4 Production Flexibility 45 days 20 days 5 Logistics Cost to sales 10% 3% 6 Inventory days of supply 60 days 22 days 7 Inventory turns 6.5 12 8 Net asset turns 3 19
data from 110 subscriber organisations from America, Europe, and Asia in chemical and pharmaceuticals, computers and electronic equipment, defence, industrial, telecom equipment and consumer packaged goods sectors. <ul><li>Manufacturers are more accurately adjusting forecasts and production cycles to respond to rapid changes in demand. Best-in-class performers now operate with less than 40 days of inventory throughout the supply chain. • Leading companies have cut their supply-chain management costs to between 4% and 5% of sales. They are adopting innovative practices such as exploiting the Internet to integrate information and decision-making around the globe. • Cash-to-cash cycle time for best-in-class companies is less than 30 days. Companies pay their suppliers quickly, collect from their customers just as quickly and move inventory continuously. • Best-in-class upside production flexibility has dipped below two weeks and in some industries it is less than a week. </li></ul>
<ul><li>Consolidated supplier base </li></ul><ul><li>Reduced the number of DCs </li></ul><ul><li>co-located manufacturing and distribution operations </li></ul><ul><li>eliminated its captive retail outlets. </li></ul>
<ul><li>gross margin improved 50% in two years </li></ul><ul><li>delivery performance jumped 54 points </li></ul><ul><li>inventory days of supply decreased 55% </li></ul><ul><li>the cash-to-cash interval was cut in half. </li></ul>
“ Logistics and Supply Chain Management in India” Report <ul><li>The total logistics cost in the country is estimated at 4.59% of sales and 10% of value added. • Nearly 60% of the logistics cost is transportation (35%) and inventory costs (25%); the rest is due to losses (14%), packaging (11%), handling and warehousing (9%) and customers’ shopping (6%). • A growing number of manufacturers are taking proactive and reactive steps to control logistics cost and improve customer service. • There are major transportation and other infrastructural bottlenecks related to SCM in India, including roads, railways, ports, shipping, etc. </li></ul>