1. Executive Summary
Accounting for an incredible 60 to 90% of overall expenses, supply chain costs can
be a significant lever for driving bottom-line performance. In fact, it’s estimated that
a 5% reduction in supply chain spending can increase net income by over 40%. Yet,
without a well-run supply chain, costs will rise and a business will fail to respond to
customer demands, let alone market uncertainties. In contrast, enhancing supply chain
performance can help find new sources of revenue more effectively, greatly improve
financial results, and reinforce fiscal stability by reducing costs, increasing working
capital, and strengthening customer loyalty.
But improving a company’s supply chain operations is a complex process, with
many challenges. Globalization of markets, though it opens up opportunities in both
production and distribution, also exponentially increases complexity – not to mention
susceptibility to disruptions due to manmade or natural disasters or political unrest.
In the face of such uncertainty, companies wanting to succeed need both visibility
across the supply chain and insight into performance. Metrics can both provide greater
visibility and drive insight into opportunities and risks, though it can be difficult to
choose the most effective metrics, not to mention selecting the best model for tracking
multiple and interacting metrics. Metric frameworks help standardize definitions and
facilitate benchmarking, yet real differentiation and process improvements come from
how a company monitors, interprets, and uses metrics to drive tactical and strategic
decision making. While many models to track metrics exist, the Supply Chain Operations
Reference (SCOR®
) model is one of the most widely recognized. SCOR provides a unique
structure designed to align a critical web of business processes, metrics, best practices,
and technology.
Establishing the right metrics framework as part of an overall performance management
strategy means companies can break down enterprise-level goals – such as order
fulfillment, forecast accuracy, and material costs – into department-level metrics such
as on-time delivery, plant utilization, and order processing time. Providing robust
visualizations, business analytics further translate metrics data into powerful business
insight. This helps increase visibility, drive accountability, and improve performance.
Companies such as DuPont have successfully used metrics and benchmarking to drive
ongoing supply chain improvements. The SCOR model lets such companies focus on a
standardized set of metrics, making it easier to identify, communicate, and replicate the
most effective practices. The result for even the most complex organization: the ability
to better manage an ever-changing supply chain in a highly volatile world.
Metrics vs. Analytics
A performance management
strategy requires clear metrics and
powerful analytics.
Metrics quantify results and measure the
success of an organization’s programs,
operations, and investments. For example,
project metrics inform the organization
whether the project is on time, on budget,
and meeting goals. Supply chain metrics
define and quantify the performance of the
supply chain.
Analytics use statistical methods, analysis,
and modeling to develop new insights and
understandings of business performance
based on data, such as metrics and other
inputs. Analytics focus on predicting what
will happen next and then optimizing the
related business decision.
Driving Sustained Improvements with
Supply Chain Metrics and Analytics

2. 2
Increasing Supply Chain Complexity
and Risk
Globalization Creates Complexity and Opportunity
Whatever your business or your industry, it’s constantly affected by continued
globalization. New markets emerge and regional manufacturing influence shifts. Not so
long ago, for example, the BRIC nations were referred to as “emerging.” Today, all four
are top-10 world economies: Brazil is ranked ninth, Russia sixth, and India fourth. China,
currently the world’s second-largest economy, is predicted to pass the United States in
the next few years and become number one.The Economist Intelligence Unit forecasts
the real GDP in China and India will grow faster than any other country in the world.1
Market evolutions and increasing worldwide demand for products and services mean
that supply routes will remain complex and ever-changing.
1%
4%
7%
2%
5%
8%
3%
6%
9%
10%
China
India
Middle
East
ASEAN
Latin
America
Eastern
Europe
CIS
US
Euro
Zone
UK
Japan
Africa
Figure 1: 2010 Real GDP, Year on Year Percentage Change
Such shifts have led many companies to invest heavily in BRIC countries, as well as
emerging secondary markets such as Vietnam and Turkey. However, notes SAP®
supply
chain expert Richard Howells, “Emerging markets no longer constitute an automatic
‘low-cost producer.’ Labor disputes and wage-related strikes are pushing up wages in
many regions.”
Wage increases also have other effects. On the demand side, globalization continues
to lift incomes in developing countries – making them extremely desirable not just
as manufacturing hubs but also as new and hungry markets. A company planning to
establish manufacturing or distribution, find a contract supplier, or open a regional
sales office in an emerging market must be armed with effective strategies and tactics to
monitor costs and mitigate supply risks.
Addressing Risks from Supply Disruptions
A recent report by the insurance company Swiss Re estimates that, in 2010 alone,
economic losses across the globe resulting from natural and man-made disasters
totaled $222 billion, more than triple the numbers of 2009. This included losses from
earthquakes, forest fires, oil spills, volcanic eruptions, and extreme weather conditions.
1 The Economist Intelligence Unit, Global Forecasting Service, 2010.

3. 3
Add to the list flooding, tornados, and other effects of climate change, not to mention
political unrest. Any one of these events can send major sources of supply and
demand into turmoil. Consider the price and supply volatility of raw materials, fuel,
and commodities in the wake of a major natural disaster, and how much any one
element affects the others. Howells elaborates: “Natural disasters and extreme weather
have always been a part of life. However, in today’s global economy, the impact is
exaggerated by the interdependence of our global society. If one link in the supply chain
is broken, it can have a huge ripple effect.”
In short, the more we’re connected, the more disruption in any area broadcasts
its effects throughout the world economy. Take into account multiplying levels of
complexity, and it’s clear that companies destined to survive and thrive are those
that can react quickly and flexibly across the board. Whether facing economic,
environmental, supply, or demand changes, businesses are looking for solutions that
enable responsive planning, support collaboration, and mitigate risk across supply
chain networks.
Using Metrics to Drive Performance
To respond rapidly to disruptions, supply chain managers need both flexibility and
comprehensive visibility into supply chain performance. According to Rich Sherman, a
member of the founding team for Supply Chain Council (SCC) and Director at the Council
of Supply Chain Management Professionals (CSCMP), “Whether the economy is trending
up and growth and expansions are the norm – or down and cutbacks are needed –
organizations must be able to adapt the supply chain to support their objectives.”
Continues Sherman, “For organizations desiring this level of insight and flexibility,
supply chain analytics are critical.” One valuable analytical model is the Supply Chain
Operations Reference (SCOR) from SCC, an independent, nonprofit global corporation
working to advance the state of the art in supply chain management systems
and practices.
The SCOR Model
The SCOR model provides a unique framework that links business processes, metrics,
best practices, and technology into a unified structure designed to improve the
effectiveness of supply chain management. This includes collaborating with partners to
identify and implement supply chain improvements.
SCOR helps manage common problems through a standardized set of language, metrics,
and business practices that accelerate change and improve performance. Applying SCOR
streamlines communication while dramatically improving the overall effectiveness of
daily management and targeted improvement initiatives; gains are measured using the
organization’s SCORindex. “We’ve seen drastic improvements in companies that use
SCOR; [they] are consistent top performers in their industries,” says Sherman.

4. 4
Figure 2 shows how best-in-class companies using SCOR outperform their median
competitors with more than a 50% cost advantage in supply chain costs.2
$20
$80
$140
$40
$100
$160
$60
$120
$180
$81.32
Consumer
Products/
Packaged Goods
Parity (5oth Percentile)
Supply chain management costs per $1,000 revenue
Superior (9oth Percentile)
Electronics Industrial
Products
Petroleum/
Chemical
Retail and
Wholesale
Services
$22.86
$70.12
$29.48
$80.52
$168.11
$24.60
$24.58
$91.49
$23.98
$56.36
$9.75
Figure 2: Superior Supply Chain Management is a Source of Competitive Advantage
Organizations that use SCOR:
▸ Achieve consistent annual bottom-line improvements of 1–3%
▸ Reap significant cost savings and economic returns on SCOR-related investments
▸ Grow in aggregate share value two to three times faster than the Dow Jones and
S&P 500 indexes
Leveraging Supply Chain Performance
Management
Tracking metrics using a model such as SCOR is an important piece of an overall supply
chain performance management strategy. To drive supply chain value and effectiveness,
a company must align trading partners, service providers, employees, processes,
and systems with a common set of goals and objectives. According to Siddharth
Taparia, Senior Director of Business Analytics Solution Marketing at SAP, “Supply chain
performance management is especially useful as a guide to managing the inevitable
tradeoffs that occur in running a business in ways that support corporate objectives
while mitigating risk.”
Continues Taparia, “The SAP BusinessObjects™ Supply Chain Performance
Management application is based on the SCOR model and helps measurably improve
the effectiveness of supply chain operations. With it, companies can better deliver on
mandates such as lowering costs and improving return on working capital.”
2 American Productivity and Quality Center, SCORmark benchmarking database, www.apqc.org/scc.
Spotlight on DuPont
DuPont is a multinational products and
services company. In keeping with a
corporate culture that values building
internal competencies, it is now recognized
as a leader in supply chain performance,
with powerful results.
But a decade ago, DuPont’s values and
performance didn’t line up as well as its
leaders would like. In 2001, the company
recognized the need to embrace the
supply chain as a strategic driver. Since
then, it has focused on a range of factors
affecting its supply chain, and embarked
on a 10-year journey in which it recreated
and transformed its supply chain practices
and processes. Now, in 2011, DuPont uses
both SAP software and the SCOR model
to address supply chain challenges that
are dynamic and broad at the highest
levels, and tactical and transactional at the
lowest. The changes have been deep and
wide-ranging, with striking effects across
the business.
One of the company’s foremost supply chain
experts, Peter Murray, notes, “From the
start, we realized we had a long way to go.
We had poor data quality and our practices
weren’t effective, let alone standardized.
We lacked the knowledge and processes
to manage our end-to-end supply chain.
We needed a framework to pull all the
pieces together.”
DuPont, explains Murray, understood the
strategic value of the supply chain, but
lacked a strong organizing framework
to drive it. “So we began to look at the
SCOR model,” Murray explains. “As we
incorporated SCOR, we were able to identify
processes that we needed to fix. We were
also able to build out core business metrics
that tied to financial and operational goals.”
The road to supply chain excellence wasn’t
always smooth. The company started by
“playing around with a lot of metrics – too
many metrics,” admits Murray. The result?
“Before we knew it, we had metric overload
and nobody was looking at KPIs.”

5. 5
In addition to providing a more accurate measure of whether a company is meeting
its supply chain goals, the application can warn of potential bottlenecks, identify new
opportunities, and help evaluate tradeoffs. For example, it makes little sense to set an
objective of cutting supply chain costs by 6% if these same costs would have to increase
to meet the corporate objective of increasing market share. But simply shifting the
focus to revenue growth without regard to cost, risk, or strategic impact would also be
incomplete. For instance, raising the perfect order shipment goal from, say, 92% to 98%
would be counterproductive if the resulting higher product and shipping costs would be
prohibitive for customers.
In such complex scenarios, supply chain performance management makes it possible
for a company to make better, data-supported decisions about such important
tradeoffs – including using risk management to assess the potential financial and
operational impacts of decisions on KPIs. In alignment with the SCOR model, the
SAP BusinessObjects Supply Chain Performance Management application gives
organizations the complete support to:
▸ Provide full visibility into supply chain processes from start to finish, via a hierarchy of
more than 350 KPIs
▸ Show how each metric relates to and affects the others
▸ Use this information to respond proactively to both near-term potential disruptions
and long-term supply chain trends
Strategic Goals
Supply Chain
Effectiveness
Order Management
Cost
Outbound
Transportation Cost
Fuel
Cost
Invoices
Outstanding
Supply Chain
Management Cost
Perfect Order
Fulfillment
Material
Acquisition Cost
Finished Goods
Warehouse Cost
Express
Freight
Planning and
Finance Cost
Customer
Service Cost
Returns
Level 2 Metrics
Level 1 Metrics
Level 3 Metrics
Diagnostic Metrics
Figure 3: Metrics Hierarchy Example
Taparia goes on to explain, “With the right metrics architecture, an organization can
break down enterprise level goals – such as perfect-order fulfillment, forecast accuracy,
and supply chain costs – into department-level metrics such as on-time delivery by
suppliers, plant utilization, and order cycle time.” The metrics hierarchy also helps
identify key drivers and root causes of performance, such as fuel costs, express freight,
returns, and outstanding invoices.
The SAP BusinessObjects Supply Chain Performance Management application helps
each company identify and monitor the metrics that really matter for its particular
organization, as illustrated in Figure 3. The application’s prebuilt metrics architecture is
based on the SCOR model and other industry standards frameworks, yet remains flexible
enough to meet each organization’s individual requirements. In fact, SAP received the
Spotlight on DuPont, continued from page 4
The company also focused on benchmarking
as a way to determine what portfolio of
projects and initiatives were needed to either
improve performance of the supply chain or
make a step change in capability. Comparing
typical results from other companies helped
DuPont quantify and monetize the potential
of supply chain improvements, providing the
direction the company needed to pursue the
right set of initiatives. The results of inventory
and cash performance benchmarking
during the 2009 financial downturn firmly
established the value of the approach
for DuPont.
SCOR helped DuPont use what worked and
refine what didn’t, Murray notes, and the
refinements continue even after remarkable
improvement. “Our current focus is on
standardizing the way we implement supply
chain improvements across the company.
We want to drive improved performance and
more transparency, and standardizing on the
SCOR model is a big part of this thrust.”
DuPont learned a lot from its journey,
and continues to improve. Lessons
Murray considers essential to the
company’s success:
▸ Any change made to the supply
chain must ultimately drive a desired
business outcome.
▸ Remember to constantly balance the
inevitable tradeoffs among cost, capital,
and service level.
▸ Supply chain improvements generally
require changes in three areas: processes
and effective practices; people and
behaviors; and tools, high-quality data,
and technology.
▸ Figure out how to scale a project, so
you can start small and expand in an
effective way.
▸ Competency development of people is
critical. Emphasizes Murray, “You have to
acquire the knowledge and apply it. That’s
the surest way to success.”

6. 6
SCC’s 2011 North American Supply Chain Excellence Award for Technology Advancement
to recognize excellence in methodology or product development that enables superior
supply chain performance.
Accountability, too, is a key premise for strategy-aligned supply chain execution –
one that SAP’s solution supports throughout its processes. “Once the metrics are
defined, documented, and associated with specific individuals within your supply
chain network, you are well on your way to fostering greater accountability,” concludes
Taparia. “In the end, the right metrics drive the right behavior, and behavior drives
enterprise performance.”
Conclusion
In any organization, the supply chain will continue to evolve and change, reacting to
internal pressures as well as external events large and small, natural and man-made.
To manage such complexity and volatility, businesses need improved visibility into the
drivers of supply chain performance. They must not only identify and track the right
metrics, but use analytics to model how different decisions impact risk and results.
A flexible, powerful solution that uses SCOR analysis, such as the award-winning SAP
BusinessObjects Supply Chain Performance Management application, can give even
the most complex organization the ability to better manage its supply chain – whether
through economic upticks or downturns. Companies such as DuPont have successfully
transformed the supply chain function into a strategic differentiator that contributes
to corporate performance on a daily basis. Enhanced supply chain performance and
risk management will ultimately drive financial results and organizational success by
reducing costs, increasing working capital, improving service levels, and strengthening
customer loyalty.
To learn more about how SAP solutions can help improve supply chain performance,
go to www.sap.com/scpm or www.sap.com/i2d. To learn more about SCC, go to
www.supply-chain.org.

7. About the Contributors
Peter Murray is the Supply Chain Innovation and Development Program Manager at
DuPont, and a leader in the company’s long-term supply chain transformation. He serves
on the APICS Board of Directors, is active with the SCC and the Institute of Business
Forecasting, and is one of the team that developed the APICS Certified Supply Chain
Professional body of knowledge. He is a graduate of the University of Vermont.
Richard Howells heads supply chain marketing at SAP, where he drives market direction
and positioning for SAP’s SCM solutions. Previously, he served as VP of marketing at
Marcam Solutions and helped implement ERP and SCM systems at companies such
as Nestle, Gillette, Colgate Palmolive, Rohm & Haas, Wyeth, Royal Worcester Spode,
and Dairy Crest. A regular contributor to www.forbes.com, he holds a B.S. in computer
science from the University of Mid Glamorgan in the UK.
Rich Sherman is Director of Strategic Development for the Council of Supply Chain
Management Professionals. He successfully launched supply chain advisory services for
AMR Research (now Gartner), helped develop the SCOR model, and was a member of the
founding team of the Supply Chain Council. He has held senior management positions
with Microsoft, EXE, DEC, Unisys, and Numetrix, serving clients in retail, distribution,
manufacturing, and logistics. He holds bachelor’s and master’s degrees from the
University of Notre Dame.
Siddharth Taparia is Senior Director of Business Analytics Solution Marketing at SAP. He
joined SAP as part of the 2006 acquisition of BusinessObjects, and is now responsible
for SAP Supply Chain Performance Management, a business analytics solution based
on the SCOR model. He holds a master’s degree in information and operations
management from Texas A&M University and a bachelor’s degree in engineering from
Rajiv Gandhi Technical University, India.
About Supply Chain Council
Supply Chain Council (SCC) is a global not-for-profit consortium whose methodology,
diagnostic, and benchmarking tools help organizations dramatically improve supply
chain processes.
SCOR (Supply Chain Operations Reference) is the world’s most widely recognized
framework for evaluating and comparing supply chain activities and performance.
Continually upgraded, SCOR provides a unique framework for defining and linking
performance metrics, processes, best practices, and people into a unified structure.
SCOR is a registered trademark of Supply Chain Council in the United States and Europe.
All rights reserved.