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Global supply chain management iCognitive

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  • 1. PLAN SOURCE MAKE DELIVER RETURN ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Global supply chain management challenges and opportunities John PAUL Managing Director, iCognitive Professor & Research Fellow at BEM (Bordeaux Ecole de Management) Qualified SCOR® Instructor by Supply Chain Council
  • 2. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Agenda • Introduction • Five key supply chain trends • Technology impact on supply chain strategies • Priorities for Supply Chain Success • Introduction to SCOR • Solving the Five Biggest Supply Chain Challenges using SCOR 2
  • 3. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Introduction • After the crisis of 2008 and 2009, the global economy continues to recover. • Last year survey by PRTM shows that most of the companies surveyed believed there will be a significant upturn in demand from their customer. 3
  • 4. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Introduction • Companies were optimistic about the revenue and margin potential of their companies and industry in 2012. Expected annual revenue growth in 2012 4
  • 5. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Introduction • However the prediction did not come true! And the problems arising from the global financial crisis still remained unsolved. 5
  • 6. Global Outlook for Growth of Gross Domestic Product, 2012-2025 (November 2011) 6Source: The Conference Board Global Economic Outlook, November 2011
  • 7. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Introduction • Driven by short-term exigencies, many companies did not strengthen critical capabilities during the recession. • They still lack the capabilities critical for managing the complex global supply chain. 7
  • 8. 8 ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Five key supply chain trends 8
  • 9. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Five key supply chain trends • The degree to which companies can capture benefit from an eventual upturn will depend largely on how they deal with five key supply chain trends. 9
  • 10. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Five key supply chain trends • Trend 1: Supply Chain Volatility and Uncertainty Have Permanently Increased: • Market transparency and greater price sensitivity have led to lower customer loyalty. Product commoditization reduces true differentiation in the consumer and business- to-business (B2B) environments. * Source: 2010–2012 Global Supply Chain Trends, PRTM 10
  • 11. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Trend 1 (Flexibility ): Supply Chain Volatility and Uncertainty Have Permanently Increased • Concerns about continued demand volatility hamper companies’ ability to effectively manage supply chains in an upturn. • Many companies do not have the flexibility to meet an increasingly volatile demand. 11
  • 12. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Top Challenges to Supply Chain Flexibility (Percentage of participants) Biggest roadblocks for 2/3 companies 12
  • 13. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Opportunities to improve What best in class companies do? • The best-performing companies have already taken steps to improve supply chain response time and visibility across all supply chain partners. • Companies are focusing primarily on deepening collaboration with key customers to reduce unanticipated changes in demand. 13
  • 14. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Opportunities to improve What best in class companies do? Based on PRTM survey half of participants plan to implement joint “real-time” planning with their key customers by 2012. And half plan to develop processes for improved demand sensing —that is, understanding the market rate of demand in real time, rather than having to wait for after-the-fact reporting. 14
  • 15. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Opportunities to improve Why S&OP is vital? • If Sales and Operations Planning (S&OP) activities are not aligned and integrated, small problems quickly escalate into major challenges, which adversely impact corporate performance. • As each part of an organization wants to satisfy it’s own priorities, valuable time and resources are wasted, ultimately leading to poor customer service. 15
  • 16. S&OP is the top SCM technology investments through 2013 16 Source: Tech Trends report 2011
  • 17. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Opportunities to improve Why S&OP is vital? • The consequences of poor sales & operations planning are substantial: excess inventory, short orders, overtime, inter-plant transfers, expediting, reduced order fulfillment, poor resource utilization. • These issues impact the bottom-line, while fostering a reactive culture of undisciplined business processes. 17
  • 18. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Opportunities to improve Why S&OP is vital? • Bringing together sales/marketing, operations, finance, and product management to facilitate joint objectives of the overall enterprise is what makes effective S&OP work. • This is why S&OP has become more important than ever! 18
  • 19. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Five key supply chain trends • Trend 2: Securing Growth Requires Truly Global Customer and Supplier Networks • Future market growth depends on international customers and customized products. Increased supply chain globalization and complexity need to be managed effectively. 19
  • 20. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Trend 2 (Complexity): Securing Growth Requires Truly Global Customer and Supplier Networks • The years before the financial crisis witnessed an uptick in globalization and access to new consumer groups in emerging markets; these trends will continue. • Future business growth will come primarily from new international customers and products that are customized to meet their needs. 20
  • 21. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Drivers of Supply Chain Complexity (Percentage of participating companies expecting an increase) 21
  • 22. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Opportunities to improve What best in class companies do? • Top companies are managing their growing international customer and supplier base without overloading their supply chains with additional complexity. • Regionally configured supply chains will be the key to success. 22
  • 23. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Five key supply chain trends • Trend 3: Market Dynamics Demand Regional, Cost-Optimized Supply Chain Configurations • Customer requirements and competitors necessitate regionally tailored supply chains and product offerings. End-to-end supply chain cost optimization will be critical. 23
  • 24. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Trend 3: Market Dynamics Demand Regional, Cost-Optimized Supply Chain Configurations • Gains will not come from price increases, but from further reductions of end-to-end supply chain costs. • Globalizing supply chain operations and outsourcing specific functions are critical for controlling costs. 24
  • 25. In-House vs. Outsourced Supply Chain Functions until 2012 (%share of functions managed in-house global/local/outsourced) 25
  • 26. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Opportunities to improve What best in class companies do? • Leading companies understand the impact of outsourcing hidden costs and are taking aggressive steps to identify and manage them. • Many are embracing new concepts like Total Supply Chain Cost Engineering, an integrated approach to calculating and managing total cost across all supply chain functions and interfaces. 26
  • 27. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Opportunities to improve What best in class companies do? • In addition, leading companies are building regional supply chains to meet the cost and quality requirements of their local customers and to outperform the networks their competitors have established in the region. • Rigorous cost optimization across the end-to-end supply chain are critical for success. 27
  • 28. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Five key supply chain trends • Trend 4: Risk Management Involves the End- to-End Supply Chain • Risk and opportunity management should span the entire supply chain—from demand planning to expansion of manufacturing capacity—and should include the supply chains of key partners. 28
  • 29. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Trend 4: Risk Management Involves the End-to-end Supply Chain • During the global financial crisis, many companies operated with the fear that suppliers would be forced into default, cutting off critical sources of components and increasing the cost of introducing alternative suppliers. 29
  • 30. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Trend 4: Risk Management Involves the End-to-end Supply Chain • Many companies began monitoring their suppliers’ financial status and mitigating default risks while they aggressively managed their own working capital. • Today, risk has become a management challenge across the entire supply chain. 30
  • 31. Top Supply Chain Risk Management Strategies (Percentage of participants that plan to pay significant attention to the following risk mitigation strategies by 2012 ) 31
  • 32. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Opportunities to improve What best in class companies do? • Leading companies are taking an end-to-end approach in managing risk at each node of the supply chain. • To keep the supply chain as lean as possible, they are taking a more active role in demand planning, which ensures that they order only the amount of materials needed to fill firm orders. 32
  • 33. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Opportunities to improve What best in class companies do? • Firms are also limiting the complexity of products that receive late-stage customization. • Leading companies mitigate inventory-related risks by shifting the responsibility for holding inventory to their suppliers and, furthermore, by making sure finished product is shipped immediately to customers after production. 33
  • 34. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Five key supply chain trends • Trend 5: Existing Supply Chain Organizations Are Not Truly Integrated and Empowered • The supply chain organization needs to be treated as a single integrated organization. In order to be effective, significant improvements require support across all supply chain functions. 34
  • 35. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Trend 5: Existing Supply Chain Organizations Are Not Truly Integrated and Empowered • Companies that wish to secure future revenue and margins must be able to address many different supply chain challenges. • Yet little can be achieved without a supply chain organization that is truly integrated across all functions and empowered to take bold action. 35
  • 36. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Opportunities to improve What best in class companies do? • Leading companies understand that breakthrough improvements are not possible unless the decisions made are optimal for all supply chain functions. • For this reason, they have already taken steps to integrate and empower their supply chain organization. 36
  • 37. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Opportunities to improve What best in class companies do? • Managing all functions of the supply chain as a single resource under one joint responsibility, these firms are making sure the organization has a strong end-to- end optimization focus and are integrating supply chain partners up- and downstream. • No less important, they are putting increased emphasis on finding and training top talent with end- to-end supply chain knowledge. 37
  • 38. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Opportunities to improve What best in class companies do? • There is reason to believe that building global and integrated supply chain management is becoming an important priority. • According to PRTM survey, in 2010 approximately 50% of the companies will manage supply chain planning and S&OP on a globally integrated level, in contrast with 60% of companies projected for 2012. 38
  • 39. 39 ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Technology impact on supply chain strategies What technologies will have the biggest impact on supply chain in coming years 39
  • 40. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved What technologies will have the biggest impact on supply chain in coming years? • According to annual Logistics CIO and Supply Chain Technology Forum in Chicago (2011) – mobile computing – analytics software – social media have the biggest impact on logistics and SCM. 40
  • 41. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Mobile computing devices • Mobile computing devices, whether in the form of smart phones or tablet computers, could have a more far-reaching impact on logistics than anyone ever imagined. 41
  • 42. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Mobile computing devices Access to information anytime we want it • With a tablet or smart phone in hand, managers can pull up the information wherever they are—whether in the warehouse or on the road. 42
  • 43. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Mobile computing devices Access to information anytime we want it • As these devices are better suited to distribution operations, it is expected that most of the trucking companies equip their drivers with smart phones in the future. 43
  • 44. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Analytics software • As firms get better at collecting data, they use the data more for analysis. • While there are many different types of analytics software, two are particularly relevant to logistics operations: – Prescriptive analytics – Predictive analytics 44
  • 45. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Analytics software Prescriptive analytics • Prescriptive analytics tell a manager what's going on in his supply chain now. The manager can then use that information to take any actions needed to keep the operation running smoothly. 45
  • 46. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Analytics software Predictive analytics • Predictive analytics help managers assess future risks and weigh the pros and cons of alternative responses. • It will come up with a range of options. For example, you could see what your supply chain should look like with oil at $70 a barrel versus $150 a barrel. 46
  • 47. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Analytics software • Some examples of the popular technologies include: – Data mining technologies – Agent based applications – Neural networks, etc. 47
  • 48. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Analytics software • According to Tech Trends report 2011, many companies are growing IT budgets again, albeit cautiously. 48
  • 49. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Expected change in total IT spending for 2012 49 The number of companies expecting budgets to increase improved to 50 percent from 43 percent last year. Source: Tech Trends report 2011
  • 50. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Social media • Facebook, Twitter, LinkedIn, are changing the way information is exchanged in the logistics community. • It's becoming common for companies to use social media to find and recruit younger supply chain professionals. • However for many companies it's still debating whether access to networking sites is more likely to enhance efficiency or drag down productivity. 50
  • 51. 51 ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Priorities for Supply Chain Success 51
  • 52. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Priorities for Supply Chain Success 1. Improve customer access and accuracy of supply chain planning: – Improved point of sale presence/partnering concepts – End-to-end supply cooperation/ optimization – Real-time demand and supply planning – Supply chain response time reduction 52
  • 53. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Priorities for Supply Chain Success 2. Increase upstream and downstream supply chain flexibility – Global network design adjustments – Improved supply chain upward and downward flexibility – Product and process complexity management – Late-stage customization 53
  • 54. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Priorities for Supply Chain Success 3. Focus on Total Supply Chain Cost Engineering – Outsourcing of non-core functions – Regionally configured, optimized supply chains – Total Supply Chain Cost and process optimization – Low-cost country utilization 54
  • 55. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Priorities for Supply Chain Success 4. Implement end-to-end supply chain risk management – Demand and supply risk optimization – Supplier risk management – Working capital and asset optimization – Optimization of key partner’s supply chain risks 55
  • 56. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Priorities for Supply Chain Success 5. Integrate and empower supply chain organization – Integrated supply chain organization across all functions – Empowered decision making with clarity on global versus local responsibilities and functional decisions – Ability to deploy the right skill sets and expertise 56
  • 57. 57 ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Introduction to SCOR How SCOR could solve Supply Chain Challenges Supply chain reference model framework (SCOR) 57
  • 58. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Reconfiguring supply chains • One positive effect of the recent economic crisis was that it forced companies to take an intense look at their supply chains, question some of their assumptions, and root out major inefficiencies. 58
  • 59. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Reconfiguring supply chains • For example, ad hoc decisions to source low-price products from countries with the lowest labor cost may no longer make sense when factors like: – long-term increase in transportation rates – risks of disruption – and weeks of inventory in the pipeline are factored into total landed cost calculations. 59
  • 60. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Reconfiguring supply chains • Such analysis and restructuring is an ongoing requirement for effective supply chain management. 60
  • 61. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved • No clear set guidelines for creating/terminating alliance with supply chain partners • Failure to develop and implement measures for monitoring alliances – Lack of a common set of metrics that can be applied and shared across the chain • Inability to broaden the supply chain vision – Most companies stop at the logistics function, instead of the entire ‘cash-to-cash’ business cycle. Donald J. Bowersox Reconfiguring supply chains: Obstacles of integrating SCM 61
  • 62. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Accelerating SCM improvements through systematic attitude and approach Company A jumped into the upgrading of APS server before the systematic evaluation of all the disconnects and opportunities. This: – Caused the difficulties in analyzing other planning disconnects – Blindly chopped off the possibilities of other root causes – Created biased situation to other potential projects – Make the evaluation difficult – Impact the final project returns 62 Systematic Ad-hoc • Supply Chain is complicated and confused sometimes. The best way to get the maximum return is to do improvement properly and systematically.
  • 63. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved SCOR®: A Systematic Approach • Supply chain council offers a systematic approach for SC management and reconfiguration. 63
  • 64. 64 ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved SCOR® 64
  • 65. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Supply-Chain Council Overview • The SCC is an independent, not-for-profit, trade association • Membership open to all companies and organizations • Focus is on research, application and advancement and advancing state-of-the-art supply chain management systems and practices • Developer and endorser of the Supply Chain Operations Reference (SCOR®) as a cross- industry standard for supply chain management • Offers Training, Certification, Benchmarking, Research, Team Development, Coaching, and Cross-standard Integration focused on the SCOR® framework • Founded in 1996 • Approaching 1000 Association Members • Chapters in North America, Europe, Japan, South Africa, Latin America, Australia/New Zealand, South East Asia and Greater China, with developing Chapters India and Middle East Driving value through the use of SCOR® 65
  • 66. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Process model A change of mindset 66 Porter • Functional view of operations SCOR • Process view of operations DeliverMakeSource Plan ReturnReturnSuppliers Customers Enable
  • 67. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Supply chain configuration SCOR®: A Systematic Approach Supply-Chain Operations Reference-model (SCOR)- A process reference model 67
  • 68. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Process model - SCOR ® SCOR® contains three levels of details 68 Level # Description Schematic Comments SupplyChainOperationsReferenceModel Top Level (Process Types) Configuration Level (Process Categories) Process Element Level (Decompose Processes) Implementation level (Decompose Process Elements) Top-DownProcess 1 2 4 3 BalanceProduction Resources with Production Requirements Establish Detailed Production Plans Identify, Prioritize, and Aggregate Production Requirements Identify, Assess,and Aggregate Production Resources P3.1 P3.3 P3.4 P3.2 Not In Scope Plan DeliverMakeSource Return Return A company’s supply chain can be “configured-to- order” at Level 2 from approximately30 core “process categories.” Companies implement their operations strategy through their unique supply chain configuration. 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 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 Level 1 defines the scope and content for the Supply Chain Operations Reference model Here basis of competition performance targets are set
  • 69. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Customers Suppliers Enable 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 D4 Deliver Retail Products Process model - SCOR ® SCOR® Processes – Level 2 69 SR1 Source Return Defective Product SR2 Source Return MRO Product SR3 Source Return Excess Product DR1 Deliver Return Defective Product DR2 Deliver Return MRO Product DR3 Deliver Return Excess Product P1 Plan Supply Chain P2 Plan Source P3 Plan Make P4 Plan Deliver P5 Plan Returns Plan
  • 70. Copyright2002–2010iCognitivePte.Ltd.Allrightsreserved 70 P1 Plan Supply Chain 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 P5 Plan Returns D4 Deliver Retail Products Plan Level 3 Sub processes of D2 Level 1 processes and Level 2 variations Process Inquiry & Quote D2.1 Receive, Configure, Enter & Validate Order D2.2 Select Carriers & Rate Shipments D2.7 Route Shipments D2.6 Plan & Build Loads D2.5 Consolidate Orders D2.4 Reserve Resources & Determine Delivery Date D2.3 Pick Product D2.9 Receive Product from Source or Make D2.8 Load Product & Generate Shipping Docs D2.11 Ship Product D2.12 Receive & Verify Product by Customer D2.13 Install Product D2.14 Invoice D2.15 Pack Product D2.10 Supply-Chain Operations Reference-model (SCOR) 10.0 - Processes
  • 71. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved SCOR Level 1 Metrics Level 1 Metrics Performance Attributes Customer-Facing Internal- Facing Reliability Responsiveness Agility Costs Assets Perfect Order Fulfillment X Order Fulfillment Cycle Time X Upside Supply Chain Flexibility X Upside Supply Chain Adaptability X Downside Supply Chain Adaptability X Supply Chain Management Cost X Cost of Goods Sold X Cash-To-Cash Cycle Time X Return on Supply Chain Fixed Assets X Return on Working Capital X 71
  • 72. 72 ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Solving the Five Biggest Supply Chain Challenges using SCOR 72
  • 73. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved 1. 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. 73
  • 74. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved 1. Customer service Solution: • Developed and maintained by SCC members, the Supply Chain Operations Reference (SCOR®) model provides a framework for measuring and understanding current supply chain conditions and performance and creates a foundation for improvement. 74
  • 75. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved 1. Customer service Solution: • SCOR can help supply chain managers evaluate cost/performance tradeoffs, develop strategies for meeting new customer expectations, and respond to domestic and global market growth. 75
  • 76. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved 2. Cost control • Supply chain operating costs are under pressure today from rising freight prices, more global customers, technology upgrades, rising labor rates, expanding healthcare costs, new regulatory demands and rising commodity prices. 76
  • 77. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved 2. Cost control • 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. 77
  • 78. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved 2. Cost control Solution: • 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 chain strategies. 78
  • 79. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved 2. Cost control Solution: • SCOR Level 1 metrics are strategic, high-level measures that typically cross multiple SCOR processes. – Lower level metrics are associated with a narrower subset of processes. • For example, delivery performance is calculated as the total number of products delivered on time and in full based on a commit date. 79
  • 80. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved 2. Cost control Solution: • To help SCC members use these metrics to benchmark performance, SCC offers unlimited, on-demand access to two type of benchmark reports: – Global benchmarking portal – Regional benchmarking portal 80
  • 81. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved 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. 81
  • 82. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved 3. Planning and Risk Management • SCC members report that less than half of their organizations have metrics and procedures for assessing, controlling, and mitigating such risks. 82
  • 83. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved 3. Planning and Risk Management Solution: • 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. 83
  • 84. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved 3. Planning and Risk Management Solution: • It helps users establish rules and strategies, assign responsibilities, coordinate responses, and monitor current conditions. • The topic of risk is of such importance that SCC included a special Risk section of the SCOR model to address member needs. 84
  • 85. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved 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. 85
  • 86. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved 4. Supplier/partner relationship management • Trust begins when managers let go of internal biases and make a conscious choice to follow mutually agreed upon standards to better understand current performance and opportunities for improvement. 86
  • 87. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved 4. Supplier/partner relationship management Solution: • SCOR provides a common language for supply chain classification and analysis. • Using a common language and framework makes it easier for teams to communicate, speeds benchmarking efforts, and enhances the evaluation of best practices. 87
  • 88. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved 5. Talent • As experienced supply chain managers retire, and organizations scale up to meet growing demand in developing markets, talent acquisition, training, and development is becoming increasingly important. 88
  • 89. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved 5. Talent • 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 source specific skill sets. 89
  • 90. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved 5. Talent Solution: • SCC members have developed methodologies for applying SCOR to human resource management, and even organized the capabilities of their global supply chain staff around the SCOR framework. Their work is driving the release of SCOR 10.0 in late 2010. 90
  • 91. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved 5. Talent Solution: • The new skills management framework complements process reference, metrics reference, and practice reference components with baseline skills, critical skills, job performance measures, and supply chain management credentials. 91
  • 92. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved SCOR model • The Supply Chain Council (SCC) mission is to aid SC management efforts by advancing supply chain knowledge and its application to solve real-world problems. • SCOR model could help facilitating these efforts in a systematic way. 92
  • 93. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved SCOR 11 what's new • Let’s see – Best practices – Cost to serve or total cost to serve – Enabling processes – Implementation is Core – Sustainability is key •Your partner iCognitive 93
  • 94. PLAN SOURCE MAKE DELIVER RETURN ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved New in SCOR 11 12/19/2012
  • 95. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Agenda • What’s New in SCOR 11 1. The Process Framework • added People and organizational design 2. Cost metrics • new level 1 metric “Total cost to serve” 3. Enable process • restructured as level 1 process following the same coding as P, S, M, D, R…..E 4. Practices • reclassified as emerging, best, standard, and decline practices 95
  • 96. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved • Process reference model integrates the well-known concepts of business process reengineering, benchmarking, process measurement, and organizational design into a cross-functional framework Assess skills and performance needs and align staff and staffing needs to internal targets Organizational Design Identify the practices and software solutions that result in significantly better performance Best Practices Analysis Quantify relative performance of similar supply chains and establish internal targets Performance Benchmarking Capture the ‘as-is’ business activity and design the future ‘to-be’ state Business Process Re-engineering What’s New in SCOR 11 1. The Process Reference Framework People (skills) Practices Performance (metrics) Processes Process Reference Framework 96
  • 97. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved What’s New in SCOR 11 2. Cost metrics • A new level-1 Cost metric (Total Cost to Serve) replaces the prior Cost metrics. • For the reasons that, – The prior cost metrics were confusing and created potential overlaps; – The prior level 1 cost metrics were difficult to benchmark considering the interpretation of COGS differs from industry, company, and even supply chain; – The concern on that making supply chain decisions based on COGS alone can lead to wrong outcomes. • Cost of Goods Sold (COGS) has been demoted to a level-2 metric that serves as a diagnostic for Total Cost to Serve. • The new level 1 cost metric (Total cost to serve) focus on the point of consumption or use. 97
  • 98. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Total Cost to Serve Definition: • The sum of the supply chain cost to deliver products and services to customers. – Total Cost to Serve includes the cost to plan the supply chain, cost to source materials, products, goods, merchandize and services, cost to produce, manufacture, remanufacture, refurbish, repair and maintain goods and services if applicable, cost to manage orders, customer inquiries and returns, and cost to deliver products and services at the agreed location (point of revenue). • Total Cost to Serve comprises of 2 types of cost: – Direct cost. Cost that can be directly attributed to fulfilling customer orders. • For example the cost of the materials used and/or delivered, all direct supply chain labor, etc. – Indirect cost. Cost required (or occurring) to operate the supply chain. • For example: Cost to lease and maintain equipment, inventory depreciation, damage and returns costs, and more. 98
  • 99. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Total Cost to Serve Calculation & Hierarchy: • Total Cost to Serve is the SUM of: – Planning Cost – Sourcing Cost – Material Landed Cost – Production Cost – Order Management Cost – Fulfillment Cost – Returns Cost LEVEL2 Planning Cost Sourcing Cost Material Landed Cost Production Cost Order Management Cost Fulfillment Cost Returns Cost LEVEL1 Total cost to serve LEVEL2&LEVEL3 Planning Cost Planning Labor Cost Planning Automation Cost Planning Property, Plant and Equipment Cost Planning GRC and Overhead Cost Sourcing Cost Sourcing Labor Cost Sourcing Automation Cost Sourcing Property, Plant and Equipment Cost Sourcing GRC, Inventory and Overhead Cost Material Landed Cost Purchased Materials Cost Material Transportation Cost Material Customs, Duties, Taxes and Tariffs Cost Material Risk and Compliance Cost Production Cost Production (Direct) Labor Cost Production Automation Cost Production Property, Plant and Equipment Cost Production GRC, Inventory and Overhead Cost Order Management Cost Order Management Labor Cost Order Management Automation Cost Order Management Property, Plant and Equipment Cost Order Management GRC and Overhead Cost Fulfillment Cost TransportationCost Fulfillment Customs, Duties, Taxes and Tariffs Cost Fulfillment Labor Cost Fulfillment Automation Cost Fulfillment Property, Plant and Equipment Cost Fulfillment GRC, Inventory and Overhead Cost Returns Cost Discounts and Refunds Cost Disposition Cost Return GRC, Inventory and Overhead Cost 99
  • 100. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved What’s New in SCOR 11 3. Enable process • Enable is now a level-1 process, at the same level of detail as Plan, Source, Make, Deliver and Return processes. It recognizes the importance of these enabling processes. • The processes associated with establishing, maintaining and monitoring information, relationships, resources, assets, business rules, compliance and contracts required to operate the supply chain. • Enable processes interact with processes in other domains: ₋ Financial, HR, IT processes ₋ facilities management processes ₋ product & portfolio management processes ₋ product and process design processes ₋ sales and support processes ENABLE Activities to support the realization & governance of the planning & executions 100
  • 101. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved What’s New in SCOR 11 3. Enable process • Enable is now a level-1 process, at the same level of detail as Plan, Source, Make, Deliver and Return processes. It recognizes the importance of these enabling processes. • The processes associated with establishing, maintaining and monitoring information, relationships, resources, assets, business rules, compliance and contracts required to operate the supply chain. • Enable processes interact with processes in other domains: ₋ Financial, HR, IT processes ₋ facilities management processes ₋ product & portfolio management processes ₋ product and process design processes ₋ sales and support processes ENABLE Activities to support the realization & governance of the planning & executions 101
  • 102. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Level 2 Enable Processes 102 E1 Manage Business Rules The process of establishing, documenting, communicating and publishing supply chain business rules. E2 Manage Performance of Process The process of reporting performance, identifying gaps in performance, performing root cause analysis, and developing and launching corrective actions to close gaps in performance. E3 Manage Process Data Collection The process of collecting, maintaining and publishing data and information required to plan, operate, measure and manage the supply chain. E4 Manage Integrated SC Inventory The process of developing, governing and maintaining an organization of permanent, temporary and outsourced staff, with the right qualifications, in support of the business objects and supply chain goals. E5 Manage SC Capital Assets The process of scheduling, maintaining and dispositioning of supply chain assets that operate supply chain processes. E6 Manage Integrated SC Transportation The management and communication of contractual agreements in support of business objectives and supply chain goals. E7 Manage Process Network The process of developing, governing and maintaining a network of supply chain assets (locations, plants, buildings, equipment, people and processes) that support the planning, sourcing, making, delivery and returning of products and services in support of the business objectives and supply chain goals. E8 Manage SC Regulatory Compliance The process of identifying, collecting, assessing and integrating regulatory compliance requirements in standard supply chain processes, policies and business rules. E9 Manage Supply Chain Risk The process of identification and assessment of potential disruptions (risks) in the supply chain and developing a plan to mitigate these threats to operating the supply chain. Supply chain risks include: all supply chain risks
  • 103. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Level 2 & Level 3 Enable Processes 103 E1. Manage Business Rules E2. Manage Performance of Process E3. Manage Process Data Collection E4. Manage Integrated SC Inventory E5. Manage SC Capital Assets E6. Manage Integrated SC Transportati on E7. Manage Process Network E8. Manage SC Regulatory Compliance E9. Manage Supply Chain Risk E1.1Gather Business Rule Requirements E2.1 Initiate Reporting E3.1 Receive Maintenance Request E4.1 Identify Skills/Resource Requirement E5.1 Schedule Asset Management Activities E6.1 Receive Contract/Contract Updates E7.1 Select Scope and Organization E8.1 Monitor Regulatory Entities E9.1 Establish Context E1.2Interpret Business Rule Requirement E2.2 Analyze Reports E3.2 Determine/Scope Work E4.2 Identify Available Skills/Resources E5.2 Take Asset Off-line E6.2 Enter and Distribute Contract E7.2 Gather Input and Data E8.2 Assess Regulatory Publications E9.2 Identify Risk Events E1.3 Document Business Rule E2.3 Find Root Causes E3.3 Maintain Content/Code E4.3 Match Skills/Resources E5.3 Inspect and Troubleshoot E6.3 Activate/Archive Contract E7.3 Develop Scenarios E8.3 Identify Regulatory Deficiencies E9.3 Quantify Risks E1.4 Communicate Business Rule E2.4 Prioritize Root Causes E3.4 Maintain Access E4.4 Determine Hiring/Redeployme nt E5.4 Install and Configure E6.4 Review Contractual Performance E7.4 Model/Simulate Scenarios E8.4 Define Remediation E9.4 Evaluate Risks E1.5 Release/Publish Business Rule E2.5 Develop Corrective Actions E3.5 Publish Information E4.5 Determine Training/Education E5.5 Clean, Maintain and Repair E6.5 Identify Performance Issues/Opportuniti es E7.5 Project Impact E8.5 Verify/Obtain License E9.5 Mitigate Risk E1.6 Retire Business Rule E2.6 Approve & Launch E3.6 Verify Information E4.6 Approve, Prioritize and Launch E5.6 Decommission and Dispose E6.6 Identify Resolutions/Impro vements E7.6 Select and Approve E8.6 Publish Remediation E5.7 Inspect Maintenance E6.7 Select, Prioritize and Distribute Resolutions E7.7 Develop Change Program E5.8 Reinstate Asset E7.8 Launch Change Program
  • 104. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved E1 Level 3 process flow 104
  • 105. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved What’s New in SCOR 11 4. Practices • SCOR 11.0 introduces 4 qualifications of practices: Emerging, Best, Standard and Declining, recognizing that not all business practices are considered best practices. • All practices in SCOR are now classified with the classification categories shown in the table below. Categories Business Process Analysis/Improvement Planning and Forecasting Customer Support Product Lifecycle Management Distribution Management Production Execution Information/Data Management Purchasing/Procurement Inventory Management Reverse Logistics Material Handling Risk/Security Management New Product Introduction Sustainable Supply Chain Management Order Engineering (ETO) Transportation Management Order Management Warehousing People Management (Training) 105
  • 106. ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Practices under Category: Planning and ForecastingEmerging Practices Demand Planning & Forecasting Demand Management Lean Planning Long Term Supplier Agreement/Partnership Best Practices Pull-Based Inventory Replenishment Inventory Optimization Safety Stock Planning Supply Network Planning ABC Inventory Classification Days of Supply Based MRP Proposal Management Work Center Load Evaluation Balance and firm within horizon Publish Production Plan Characteristics-based Forecasting Bill of Material Audit/Control Logistics & Warehouse Planning Facility Master Planning TaskManagement VendorManagedInventory(VMI) VendorCollaboration Automated Data Capture (ADC) Collaborative Planning, Forecasting and Replenishment (CPFR) Convergence of SCOR with Lean and Six Sigma Standard Practices Min-Max Replenishment Safety Stock Planning Demand Planning Sales and Operations Planning MRP I Improve S&OP process Declining Practices TraditionalDemandForecastingImprovement 106
  • 107. www.icognitive.com ©2011CopyrightiCognitivePte.Ltd.Allrightsreserved Thank You for Your Attention! Q & A John.paul@iCognitive.com www.iCognitive.com