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Supply chain operations reference Model

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Operations Management II- SCOR is he world’s leading supply chain framework, linking business processes, performance metrics, practices and people skills into a unified structure.

The presentation justifies this tool used in one of the leading furniture brands 'Ikea' and implemented into their process flow.

Published in: Leadership & Management

Supply chain operations reference Model

  1. 1. Ideas for today and tomorrow SUPPLY-CHAIN OPERATIONS REFERENCE-MODEL
  2. 2. Standard descriptions of management processes A framework of relationships among the standard processes Standard metrics to measure process performance Management practices that produce best-in- class performance Standard alignment to features and functionality Process Reference Model
  3. 3. Process Reference Model Process reference model, or business process framework: The ability to describe process architecture in a way that makes sense to key business partners. It is especially useful for describing value chains that cut across multiple departments and organizations, providing a common language for managing such processes. Business Process Reengineering Capture the “as-is” state of a process and derive the desired “to-be” future state Benchmarking Quantify the operational performance of similar companies and establish internal targets based on “best-in- class” results Best Practices Analysis Characterize the management practice and software solutions that result in “best-in-class” performance Process Reference Model Capture the “as-is” state of a process and derive the desired “to-be” future state Quantify the operational performance of similar companies and establish internal targets based on “best-in-class” results Characterize the management practice and software solutions that result in “best- in-class” performance
  4. 4. • The Supply Chain Operations Reference (SCOR®) model provides a unique framework that links performance metrics, processes, best practices, and people into a unified structure. The framework supports communication between supply chain partners and enhances the effectiveness of supply chain management, technology, and related supply chain improvement activities. • SCOR® is a consensus model. It was developed and continues to evolve with the direct input of industry leaders who manage global supply chains and use it daily to analyze and improve the performance of their organizations. It features an intentionally broad scope and definitions that can be adapted to the specific supply chain requirements of any industry or application. Supply Chain Operations Reference (SCOR®) Model
  5. 5. • The Supply Chain Operations Reference (SCOR®) has been developed and endorsed by the Supply–Chain Council (SCC) as the cross-industry standard for supply chain management. Supply Chain Operations Reference (SCOR®) Model : Conception and Evolution SCOR® introduction in 1996 Version 11.0 of the SCOR-model is the thirteenth revision Cost metrics were introduced Cost metrics were redefined Enable processes All best practices have clarified descriptions and are linked to processes and metrics Version 10.0 introduced skills/people
  6. 6. 6 / 28 • Rapid assessment of supply chain performance • Clear identification of performance gaps • Efficient supply chain network redesign and optimization • Enhanced operational control from standard core processes • Streamlined management reporting and organizational structure • Alignment of supply chain team skills with strategic objectives • A detailed game plan for launching new businesses and products • Systematic supply chain mergers that capture projected savings Organizational benefits of adopting the SCOR® model
  7. 7. • Superior Customer Service The SCOR model provides a framework for measuring and understanding current supply chain conditions and performance and creates a foundation for improvement. • Cost Control 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 chain strategies. • Planning And Risk Management SCOR helps users establish rules and strategies, assign responsibilities, coordinate responses, and monitor current conditions. • Supplier/Partner Relationship Management 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. • Talent The SCOR skills management framework complements process reference, metrics reference, and practice reference components with baseline skills, experience, aptitudes, and training. SCOR® solves supply chain challenges
  8. 8. SCOR® includes all customer interactions from order entry through paid invoice; all product (physical material and service) transactions, including equipment, supplies, spare parts, software, etc.; and all market interactions, from understanding aggregate demand to the fulfillment of each order. Scope of SCOR® model
  9. 9. ALL CUSTOMER INTERACTIONS From order entry through paid invoice ALL MARKET INTERACTIONS From the understanding of aggregate demand to the fulfillment of each other ALL PHYSICAL MATERIAL TRANSACTIONS From supplier’s supplier to customer’s customer Including equipment, supplies, spare parts, bulk product, software,etc. SCOR® Boundaries
  10. 10. PERFORMANCE METRICS: Standard metrics to measure process performance The SCOR® process reference model contains: 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 aligned with processes, best practices, and metrics SCOR® Contents:
  11. 11. • A performance attribute is a group of metrics used to express a strategy. An attribute itself cannot be measured; it is used to set strategic direction. Metrics measure the ability of a supply chain to achieve these strategic attributes. • SCOR® identifies five core supply chain performance attributes: Reliability, Responsiveness, Agility, Costs, and Asset Management. Consideration of these attributes makes it possible to compare an organization that strategically chooses to be the low-cost provider against an organization that chooses to compete on reliability and performance. SCOR® Contents: Performance Performance Attributes
  12. 12. Reliability Responsiveness Agility Costs Asset Management Efficiency (Assets) The ability to perform tasks as expected. Reliability focuses on the predictability of the outcome of a process. Typical metrics for the reliability attribute include: On-time, the right quantity, the right quality. The speed at which tasks are performed. The speed at which a supply chain provides products to the customer. Examples include cycle-time metrics. The ability to respond to external influences, the ability to respond to marketplace changes to gain or maintain competitive advantage. SCOR Agility metrics include Flexibility and Adaptability The cost of operating the supply chain processes. This includes labor costs, material costs, management and transportation costs. A typical cost metric is Cost of Goods Sold. The ability to efficiently utilize assets. Asset management strategies in a supply chain include inventory reduction and in-sourcing vs. outsourcing. Metrics include: Inventory days of supply and capacity utilization.
  13. 13. • A metric is a standard for measurement of the performance of a process. SCOR® metrics are diagnostic metrics. SCOR® recognizes three levels of predefined metrics: • • Level 1 metrics are diagnostics for the overall health of the supply chain. These metrics are also known as strategic metrics and key performance indicators (KPIs). Benchmarking level 1 metrics helps establish realistic targets that support strategic objectives. • • Level 2 metrics serve as diagnostics for the level 1 metrics. The diagnostic relationship helps to identify the root cause or causes of a performance gap for a level 1 metric. • • Level 3 metrics serve as diagnostics for level 2 metrics. Metrics SCOR® Contents: Performance
  14. 14. SCOR® Metrics
  15. 15. • The Process section in SCOR® provides a set of pre-defined descriptions for activities most companies perform to effectively execute their supply chains. SCOR® identifies the unique processes a supply chain requires to support the objective of fulfilling customer orders. By definition, a process is a unique activity performed to meet predefined outcomes. • SCOR® processes help standardize the description of the supply chain architecture (level 1 and level 2 processes) and the implementation of the architecture (level 3 processes). SCOR® provides standards down to the level where process descriptions are applicable across a range of industries. Further detail is industry and organization specific (level 4 and below). SCOR® Contents: Process
  16. 16. 16 / 28 Top Level (Process Types) Level 1 Description Schematic Level 1 defines the scope and content for the Supply Chain Operations Reference-model. Here basis of competition Performance targets are set. Comments Plan DeliverMakeSource Return Return Levels of SCOR® Processes
  17. 17. Scope of SCOR® Processes Plan Source Make Deliver Return Balance resources with requirements and establish/communicate plans for the whole supply chain. Demand/Supply Planning and Management Align the supply chain unit plan with the financial plan Management of business rules, supply chain performance, data collection, inventory, capital assets, transportation, planning configuration, and regulatory requirements and compliance.
  18. 18. Plan Source Make Deliver Return Schedule deliveries; receive, verify, and transfer product; and authorize supplier payment Sourcing Stocked, Make-to-Order, and Engineer-to-Order Product Manage business rules, assess supplier performance, and maintain data. Identify and select supply sources when not predetermined, as for engineer-to-order product. Manage inventory, capital assets, incoming product, supplier network, import/export requirements, and supplier agreements. Scope of SCOR® Processes
  19. 19. Plan Source Make Deliver Return Schedule production activities, issue product, produce and test, package, and release product Make-to-Stock, Make-to-Order, and Engineer-to-Order Production Execution Finalize engineering for engineer-to-order product. Manage rules, performance, WIP, equipment and facilities, transportation, production network, and regulatory compliance for production. to deliver. Scope of SCOR® Processes
  20. 20. Plan Source Make Deliver Return All order management steps from processing customer inquiries and quotes to routing shipments Order, Warehouse, Transportation, and Installation Management for Stocked, Make-to-Order, and Engineer-to-Order Product Manage deliver business rules, performance, information, finished product inventories, capital assets, transportation, product life cycle, and import/export requirements. Warehouse management from receiving and picking product to load and ship product. and selecting carriers. Invoicing customer. Scope of SCOR® Processes
  21. 21. Plan Source Make Deliver Return Return of Raw Materials and Receipts of Returns of Finished Goods Manage return business rules, performance, data collection, return inventory, capital assets, transportation, network configuration, and regulatory requirements and compliance. All returns from materials and finished goods. Scope of SCOR® Processes
  22. 22. • Recently added as the last of the six Macro-level process, Enable processes support the realization and governance of the planning and execution processes of supply chains. • 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 (for example: Financial processes, HR (Human Resource) processes, I(C)T (Information, Communication & Technology) processes, facilities management processes, product & portfolio management processes, product and process design processes and sales and support processes). Scope of SCOR® Processes
  23. 23. Configuration Level (Process Categories) Level 2 Description Schematic A company’s supply chain can be “configured-to-order” at Level 2 from 30 core “process categories”. Companies implement their operations strategy through the configuration they choose for their supply chain. Comments 23 / 28 Levels of SCOR® Processes
  24. 24. Plan Level 2 Toolkit Customers Suppliers P1 Plan Supply Chain Source Return SR1 Return Defective Product SR2 Return MRO Product SR3 Return Excess Product P2 Plan Source P3 Plan Make P4 Plan Deliver P5 Plan Return S1 Source Stocked Product S2 Source Make- to-Order Product S3 Source Engineer- to-Order Produst M1 Make-to-Stock M2 Make-to-Order M3 Engineer-to-Order D1 Deliver Stocked Product D2 Deliver Make- to-Order Product D3 Deliver Engineered- to-Order Product Deliver Return DR1 Return Defective Product DR2 Return MRO Product DR3 Return Excess Product D4 Deliver Retail Product Source Make Deliver MRO : Maintenance Repair and Operating Levels of SCOR® Processes
  25. 25. 25 / 28 “SCOR® Configuration Toolkit” Enable Execution Planning Process Type EP P1 ES S1–S3 P2 EM M1–M3 P3 ED D1–D3 P4 ER R1–R3 P5 Process Category SCOR® Process Plan Source Make Deliver Return Process Categories are defined by the relationship between a SCOR® Process and Process Type Levels of SCOR® Processes
  26. 26. Process Element Level (Decompose Process) Level 3 Description Schematic 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 Comments P1.1 Identify, Prioritize, and Aggregate Supply-Chain Requirements P1.2 Identify, Assess, and Aggregate Supply-Chain Resources P1.3 Balance Supply-Chain Resources with Supply-Chain Requirements P1.4 Establish and Communicate Supply-Chain Plans 26 / 28 Levels of SCOR® Processes
  27. 27. Level 3 Detailed Process Element Information Levels of SCOR® Processes S1 Source Stocked Product S2 Source Make- to-Order Product S3 Source Engineer- to-Order Produst Source
  28. 28. Implementation Level (Decompose Process Elements) Level 4 Description Schematic 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. Comments 28 / 28 Levels of SCOR® Processes
  29. 29. 29 / 28 Level 4 Implementation of Supply-Chain Management Practices Levels of SCOR® Processes
  30. 30. 30 / 28 Levels of SCOR® Processes
  31. 31. 31 / 28 Each basic supply-chain is a “Chain” of Source, Make, and Deliver Execution Processes Each intersection of two execution processes (Source-Make-Deliver) is a “link” in the supply chain Execution processes transform or transport materials and/or products Each process is a customer of the previous process and a supplier to the next Planning processes thus “balance” the supply chain Every link require an occurrence of a plan process category Planning processes manage these customer-supplier links Levels of Process
  32. 32. SCOR® Practices : Supply Chain Risk Management
  33. 33. The systematic identification, assessment, and mitigation of potential disruptions (both within and outside the supply chain) in logistics networks with the objective to reduce their negative impact on the logistics network’s performance. SCOR® Practices : Supply Chain Risk Management Define and document the objective and scope (internal and external) for managing risk. Establish Context Identify Risk Collect and document all potential risk events that may impact the organization from meeting its goals. Assess Risk Collect and document for each potential risk the causes, probability, and consequences (Understand the Value at Risk). Determine for each risk whether mitigation actions are required or the risk is acceptable; prioritize risks. Determine the actions required to eliminate, reduce, or accept and monitor the risks (Risk Mitigation Plan). Continuously monitor effectiveness of mitigation plans; identify emerging risks and changes in internal and external context. Evaluate Risk Mitigate Risk Monitor Risk
  34. 34. SCOR® People Training – Training develops a skill or type of behavior through instruction Skill – A Skill is the capacity to deliver predetermined results with minimal input of time and energy Experience – Experience is the knowledge or ability acquired by observation or active participation. Aptitudes – A natural, acquired, learned, or developed ability to perform a certain kind of work at a certain level. Competency – Competency levels describe the level or state of qualification to perform a certain role or tasks. Novice – Untrained beginner, no experience, requires and follows detailed documentation to be able to perform the work. Experienced beginner – Performs the work; limited situational perception. Competent – Understands the work and can determine priorities to reach organizational goals. Proficient – Oversees all aspects of the work and can prioritize based on situational aspects. Expert – Intuitive understanding. Experts can apply experience patterns to new situations.
  35. 35. • The SCOR® Model, which is a proven framework for defining supply chain scope and process operations as well as measuring supply chain performance, provides an excellent foundation for environmental accounting in the supply chain. • The following strategic environmental metrics allow the SCOR® model to be used as a framework for environmental accounting: • • Carbon Emissions (Tons CO2 Equivalent) • • Air Pollutant Emissions (Tons or kg) • • Liquid Waste Generated (Tons or kg) • • Solid Waste Generated (Tons or kg) • • Recycled Waste (Percent) SCOR® Special Applications :GreenSCOR® Sustainable business models and environmental accounting are growing business concerns. However, there are multiple approaches to measuring the total environmental footprint of an organization or supply chain with no agreed upon standards.
  36. 36. A Sweden based retail chain which deals in furniture and house decor items 345 branches in 42 countries. Fortune’s “100 Best Companies to work for” list (three consecutive years) Training magazine’s annual “Top 100” ranking of companies that excel in human capital development Four consecutive years) Ranked 20th in “The World’s Most attractive Employers 2011’ in the Universum Awards, an employer Branding event Working Mother magazine’s annual list of the “100 Best Companies for Working Mothers” Four Consecutive years SCOR® Case Study
  37. 37. • Legitimacy & Common Terminology (Integration) in supply chain for better communication • Sustainable Supplier Relationship Management • Designing Performance Measurement • A framework for guidance & control • More holistic view for co-workers – • I-people need to become T-people • Designed by practitioners • Neutral • No need to invent the wheel 37 Why does IKEA use SCOR® model?
  38. 38. IKEA Performance Goals (FIVE YEAR PLAN) QUALITY -Meet the specifications -Supplementary Services SPEED -Unique Store Layout -Automation (conveyor belts) DEPENDABILITY -Hub and Spoke Model to ensure availability FLEXIBILITY Global Sourcing to adjust for volume changes Mix and Match to avail large variation in offerings COST -Automation (Less re- work) -Self Service -Flat packs (less space) Capacity Supply Network Process and Technology Operations Decisions Shape Competencies and Constraints PerformanceObjectives Market Competitiveness
  39. 39. IKEA Performance Goals
  40. 40. IKEA Journey to SCOR® • Cost Saving in Furniture Design • Sustainable Relationships with suppliers • Combining Retail and Warehousing Processes
  41. 41. IKEA Business Process Flow
  42. 42. 42 IKEA Inventory Planning and Forecasting • Cost-Per-Touch Inventory Tactic • In-Store Logistics • Maximum/Minimum Settings as Proprietary System • Usage Of High-Flow & Low-Flow warehouse facilities • Do-It-Yourself Assembly lowers Packaging Costs • Ikea currently has: • 1046 suppliers in 52 countries, • 9500 different products, • 40 distribution centers in 16 countries.
  43. 43. Manufacturing at IKEA • Designs for furniture, lamps, kitchen equipment and beds are logistically formed • The packaging also is designed to squeeze as many units as possible into trucks delivering inventory to the stores. “Air out, product-in” – Loading Ledge technology Once a product is designed and manufactured, it can be checked for quality by an independent firm whose location is as proximate to the manufacturer as possible.
  44. 44. Logistics at IKEA • IKEA has about 40 distribution centers worldwide in 16 different countries • Cross-Docking method used • Astro WMS adopted by IKEA in 2010 increases and improves efficiency in their distribution centre. IKEA products are transported by road, rail and sea between suppliers, distribution centers and IKEA stores, and from the stores to customers. IKEA transport service providers must comply with the requirements in the supplier code of conduct IWAY, including industry-specific requirements
  45. 45. • IKEA takes returned products seriously. • Customers have at least 30 days to bring back purchased products for a full refund regardless of the reason for the return • Recovery team present at each store • After necessary repairs, they offer them to customers in store space tagged “As Is,” • More damaged products are broken down to their components and recycled. • Every return and complaint is systematically documented so that IKEA can analyze reasons for returns and take action throughout the value chain when needed. Return Policy at IKEA
  46. 46. • It launched a code of conduct called ‘IWAY’ as corporate sustainability standards through the practice of following environmental responsibility in relation to customers, co-workers and suppliers • Offer solutions and know-how that help customers live a more sustainable life • Use natural resources in a sustainable manner within the entire supply chain ; careful waste management • Minimize the carbon footprint from all IKEA related operations • Be transparent to all stakeholders and communicate more to customers and co- workers • IKEA’s sustainability effort, successfully spans across all major supply chain processes from Source to Make, Deliver and Return, which demonstrates long- term management commitment. 46 Return Policy at IKEA
  47. 47. • Rigorous safety alarm procedures • Every IKEA store and national Service Office has dedicated resources working with safety alarm procedures, and they receive regular training. • Proactive risk assessment and extensive testing • Special focus on children’s safety • Using the safest possible chemicals 47 Best Practices at IKEA (RISK MANAGEMENT)
  48. 48. “Our co-workers are our most valuable resource – when they grow, IKEA grows.” • Values - IKEA embraces human rights and respect for the individual, and the way we work is based on a strong and living company culture. • Listening to our co-workers IKEA uses “VOICE” – a company-wide survey – to monitor how coworkers view various aspects of their employment at IKEA. • Safe and healthy working conditions • Keeping co-workers involved • Dialogue with unions • Supporting work-life balance 48 Managing People as a resource at IKEA
  49. 49. GREEN SCOR® at IKEA o Ikea Sustainability Product Score Card Criteria: -More is Less -Renewable material -Recycled Material -Environmentally better material -Separable and recyclable material -Product quality -Transport efficiency (number of products per container) -Energy efficiency production -Renewable energy production -Raw material utilization at suppliers -Product use (less use of energy and water and less waste in customers’ homes)
  50. 50. How does it all come together at IKEA?
  51. 51. 52 / 28 SCOR® is a process reference model that provides a language for communicating among the supply-chain partners. SCOR® is used to describe, measure and evaluate Supply-Chain configurations. • A standard language helps management to focus on management issues. • As and industry standard, SCOR® helps management focus across inter-company supply chains. • 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. Conclusion

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