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.
Production Execution (Make to Stock, Make to Order)
Transportation and Warehousing
Return of Raw Material or Finished Goods
SCOR Model – Scope of Processes PLAN RETURN SOURCE MAKE DELIVER 4
Supply Chain Operations Reference Model (SCOR):Basic Management Processes
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
SCOR metrics: Standard Strategic (Level 1) Metrics
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)
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
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
SCOR has proven to improve operating results many ways
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
Increase in profitability (between 2x and 6x) with regard to project investment costs within first 12 months of implementation 1
Reduction in IT costs through minimizing system customization and making better use of standard functionality 1
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
SCOR Benchmarking - Presentation 1 Poluha (2007) Application of the SCOR Model in Supply Chain Management, New York, USA
Benefits of SCOR
Improvement in stock market value
Increase of profits and margins
Increase of available financial means through improved investment selection (portfolio management of initiatives)
Reduction of overall costs
Optimization of Enterprise Resource Planning
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.
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.
“ Logistics and Supply Chain Management in India” Report
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.