Historical Perspective of the SCOR Model

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An unofficial and unauthorized overview of the SCOR Model from the first CTO of the Supply Chain Council. Why and how the SCOR model was constructed for supply chain management and how it was applied.

For current and official documentation please visit - www.supply-chain.org

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Historical Perspective of the SCOR Model

  1. 1. Scott Stephens http://measuredperformance.blogspot.com scottstephens@businessforerunners.com
  2. 2. • Back to Basics - Origins of the SCOR Model • Balancing Theory and Reality • Logistics, Supply Chains, and Value Chains • The Business Imperative • SCOR Introduction • Consensus definitions, best practice, metrics • Model, Tables and Graphics • Using the SCOR Model • Geographic Mapping • Process Mapping • Using Metrics to Link Performance to Processes and the Organization • Case Studies • Q&A 2
  3. 3. “…we must develop yardsticks [measurements] – with some way to distinguish between creative and parasitical overhead; the impact on productivity of time utilization, product mix, process mix, organization structure and the balance of activities.” Peter F. Drucker – The Practice of Management (1954) PULL PUSH 3
  4. 4.  Practitioners (business leaders) created the SCOR Model and the Supply Chain Council to improve competitiveness  Competitiveness improved in three ways: ◦ Reducing costs ◦ Increasing revenue ◦ Improving the efficiency of asset management 4
  5. 5. 2004 1990s 2007 “Among the interesting patterns discovered, the firms making greater progress have moved from a cost- only perspective to primary objectives that are more customer-focused. These goals were oriented around such things as faster and more personalized order fulfillment, shorter order fulfillment lead times, creating and delivering perfect orders, and enhanced cash-to-cash cycle and asset turns.” 2007 Annual Supply Chain Survey - SCMR 5
  6. 6. Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Marketing Service Operations Outbound Logistics Logistics & Sales Marketing Sales Force Sales Force Technical Advertising Promotions Management Administration Operations Literature 6
  7. 7. Revenue Time to Market Time to Volume Market Cost Research Develop Service Level Buy Capacity Source Make Forecast Deliver Sell Inventory Transport Support Warranty 7
  8. 8.  Process reference models integrate the well-known concepts of business process reengineering, benchmarking, and process measurement into a cross- functional framework Business Process Best Practices Process Reference Reengineering Benchmarking Analysis Model Capture the “as-is” state Capture the “as-is” of a process and derive state of a process the desired “to-be” future and derive the state desired “to-be” Quantify the future state operational performance of Quantify the operational similar companies performance of similar and establish companies and establish internal targets internal targets based on based on “best-in- “best-in-class” results class” results Characterize the management Characterize the practices and management software solutions practices and that result in “best- software solutions in-class” that result in “best-in- performance class” performance 9
  9. 9. Plan Deliver Source Make Deliver Source Make Deliver Source Make Deliver Source Return Return Return Return Return Return Return Return Customer’s Suppliers’ Supplier Your Company Customer Customer Supplier Internal or External Internal or External SCOR Model Building Block Approach Processes Metrics Best Practice Technology 10
  10. 10. Level # Description Schematic Comments Plan 1 Level 1 defines the scope and content for the Supply Supply Chain Operations Reference model Source Make Deliver Top Level Chain Operations Reference model Return (Process Types) Return Here basis of competition performance targets are set 2 A company’s supply chain can be “configured-to- order” at Configuration Level 2 from approximately30 core “process categories.” Level (Process Companies implement their operations strategy through Categories) their unique supply chain configuration. 3 Process Level 3 defines a company’s ability to compete Element Level successfully in its chosen markets and consists of: (Decompose • Process element definitions Processes) • Process element information inputs and outputs P3.1 • Process performance metrics Identify, Prioritize, and Aggregate • Best practices, where applicable • System capabilities required to support best Production Requirements P3.3 P3.4 P3.2 Balance Production Resources with Production Requirements Establish Detailed Production Plans practices Identify, Assess, and Aggregate Production Resources Companies “fine tune” their Operations Strategy at Level 3 Companies implement specific supply chain management 4 Implementation practices at this level Not Level in (Decompose Level 4 defines practices to achieve competitive advantage Scope Process and to adapt to changing business conditions Elements) 11
  11. 11. Plan P1 Plan Supply Chain P2 Plan Source P3 Plan Make P4 Plan Deliver P5 Plan Returns Source Make Deliver Suppliers Customers S1 Source Stocked Products M1 Make-to-Stock D1 Deliver Stocked Products S2 Source MTO Products M2 Make-to-Order D2 Deliver MTO Products S3 Source ETO Products M3 Engineer-to-Order D3 Deliver ETO Products D4 Deliver Retail Products Return Return Source Deliver Enable 12
  12. 12. Process Element: Receive, Enter & Validate Order Process Element Number: D1.2 Process Element Definition Receive orders from the customer and enter them into a company’s order processing system. Orders can be received through phone, fax, or electronic media. “Technically” examine orders to ensure an orderable configuration and provide accurate price. Check the customer’s credit. Optionally accept payment. Performance Attributes Metric Reliability None Identified Responsiveness Receive, Enter and Validate Order Cycle Time Flexibility Upside Deliver Flexibility Downside Deliver Adaptability Upside Deliver Adaptability Cost Order cost / type of order Order Entry and Maintenance Costs as % of (S+M+D) cost Assets Return on Supply Chain Assets Best Practices Features Electronic Commerce (customer visibility EDI applications and integrated order management of stock availability, use of hand-held terminals for direct order entry, confirmation, credit approval), On-line stock check and reservation of inventory Enable real-time visibility into backlog, None Identified order status, shipments, scheduled material receipts, customer credit history, and current inventory positions Continuous Replenishment Programs; Integrated demand/deployment planning to customer Vendor Managed Inventory, Telemetry to location driven by POS; Customer movement data automatically communicate replenishment of chemicals Remote (sales, customers) order entry None Identified capability Automatic Multi-level Credit Checking: Integrated Order/Financial Management Dollar Limits; Days Sales Outstanding; Margin Testing Value Pricing based on “Cost to Serve”; Activity Based Costing; Integrated Order Management by EDLP; Cost Plus Pricing Customer by Line Item Inputs Plan Source Make Deliver Return (Customer) Customer Order (Customer) Deliver Contract Terms (Customer) Customer Replenish Signal Outputs Plan Source Make Deliver Return 13
  13. 13. • (P2) Supply Plans • (Customer) Customer • (P3) Production Order • Routing Guide Plans • (Customer) Deliver (carrier) • (P4) Deliver Plans Contract Terms • Rated Carrier • (S) (M) (D) Inventory • (Customer) Customer • (Customer) Data (Carrier) • (M) Scheduled Replenish Signal Inquiry Output D1.7 D1.6 D1.5 D1.4 D1.3 D1.2 D1.1 Select Carriers Receive, Plan and Build Reserve Process Inquiry and Rate Route Consolidate Enter & Loads Inventory and & Quote Shipments Shipments Orders Validate Determine Order Delivery Date • Scheduled • Daily Shipment • Delivery Commit • Validated Order Deliveries (P) Volume Date • (D) Consolidated • (D) Advanced • (S) (M) Scheduled Product Ship Notice Receipts • (D) Inventory D1.8 D1.9 D1.10 D1.11 D1.12 D1.13 D1.14 D1.15 From Load Vehicle Generate Ship Ship Receive & Make or Product Verify at Install Invoice Source Receive Product Pick Pack Docs Product Product Customer Product Site • (D) Inventory • Shipping Documents • Payment (carrier, cust, gov.) • Delivered End Items (cust) 14
  14. 14.  SCOR Spans: ◦ Order entry through paid invoice ◦ Physical material transactions, financials, information flow ◦ Market interactions  From the understanding of aggregate demand to the fulfillment of each order ◦ Returns  SCOR Considers but does not include process descriptions and measurement for related activities including: ◦ Sales and Marketing ◦ Research and Development / Product Design ◦ QA ◦ It 15
  15. 15. Analyze Basis •Competitive Performance Requirements Operations •Performance Metrics of Strategy •Supply Chain Scorecard Competition •Scorecard Gap Analysis •Project Plan SCOR Level 1 •AS IS Geographic Map Configure •AS IS Thread Diagram supply chain Material Flow •Design Specifications •TO BE Thread Diagram •TO BE Geographic Map SCOR Level 2 Align Performance •AS IS Level 2, 3, and 4 Maps Levels, Practices, Information •Disconnects and Systems and Work Flow •Design Specifications SCOR Level 3 •TO BE Level 2, 3, and 4 Maps Implement supply chain Develop, •Organization Processes and Test, and Roll •Technology Systems •Process Out •People 16
  16. 16. (S1, D1) (SR1,DR1,DR3) Manufacturing Warehouse (S1, S2, M1, D1) Customer Customer (SR1,,DR1) European Supplier (S1) (S1) (D2) (SR1,SR3 (SR1,SR3) (DR1) Warehouse Warehouse (S1, D1) (S1, D1) (SR1,DR1,DR3) (SR1, DR3) Latin American Other Suppliers Suppliers (D1) (D1) Customer Warehouse Customer (S1) (S1) (S1, D1) (SR1,SR3) (SR1,SR3) (SR1,DR1,DR3) 17
  17. 17. Americas Distributors S1 SR1 European S2 M2 D2 RM Supplier SR3 S2 M1 D1 S1 D1 S1 DR1 SR1 DR1 SR1 DR1 SR1 DR3 SR3 DR3 SR3 S1 Key Other S1 M1 D1 RM Suppliers Alpha RM ALPHA Regional Distributors Suppliers Warehouses 18
  18. 18. P1 P1 P1 P2 P3 P 4 P 3 P 2 P2 P P 4 4 European S2 M2 D2 RM Supplier Key Other S1 M1 S2 M1 D1 S1 D1 S1 RM D1 Suppliers S1 Alpha Consumer RM ALPHA Regional Distributors Suppliers Warehouses 19
  19. 19. Performance Performance Attribute Definition Level 1 Metric Attribute Supply Chain The performance of the supply chain Perfect Order Fulfillment Reliability in delivering: the correct product, to the correct place, at the correct time, in the correct condition and packaging, in the correct quantity, with the correct documentation, to the correct customer. Supply Chain The speed at which a supply chain Order Fulfillment Cycle Responsiveness provides products to the customer. Time Supply Chain The agility of a supply chain in Upside Supply Chain Flexibility responding to marketplace changes Flexibility to gain or maintain competitive Upside Supply Chain advantage. Adaptability Downside Supply Chain Adaptability Supply Chain The costs associated with operating Supply Chain Costs the supply chain. Management Cost Cost of Goods Sold Supply Chain The effectiveness of an organization Cash-to-Cash Cycle Time Asset in managing assets to support Management demand satisfaction. This includes Return on Supply Chain the management of all assets: fixed Fixed Assets and working capital. 20
  20. 20. Reliability Reliability Assets Responsiveness Responsiveness Assets Cost Flexibility Cost Flexibility Product Introduction – Early Adopters New Product – Market Share Reliability Reliability Responsiveness Assets Responsiveness Assets Cost Flexibility Cost Flexibility Mature Product – “Cash Cow” Mature Product – End of Life 21
  21. 21. Supply Chain SCORcard Performance Versus Competitive Population Overview Metrics SCOR Level 1 Metrics Actual Parity Advantage Superior Value from Improvements Delivery Performance to Supply Commit Date 50% 85% 90% 95% Chain Reliability Fill Rates 63% 94% 96% 98% EXTERNAL Perfect Order Fulfillment 0% 80% 85% 90% $30M Revenue Responsiveness Order Fulfillment Lead times 35 days $30M Revenue 7 days 5 days 3 days Supply Chain Key enabler to cost and Flexibility Response Time 97 days 82 days 55 days 13 days asset improvements Production Flexibility 45 days 30 days 25 days 20 days Total SCM Management Cost 3% $30M Indirect Cost 19% 13% 8% INTERNAL Cost Warranty Cost NA NA NA NA NA Value Added Employee Productivity NA $156K $306K $460K NA Inventory Days of Supply 119 days 55 days 38 days 22 days NA Cash-to-Cash Cycle Time Assets 196 days 80 days 46 days 28 days $7 M Capital Charge Net Asset Turns (Working 2.2 turns 8 turns 12 turns 19 turns NA Capital) 22
  22. 22. Revenue Accounts Receivable Cash Flow Perfect Order Fulfillment Cycle Time Supplier Schedule Perfect Order on time delivery Achievement Fulfillment On Time On Time Delivery In Full In Full Performance Docs Docs European Damage RM Supplier Damage S2 M2 D2 Supplier Perfect Order on time delivery Fulfillment Key Other S2 RM S1 M1 D1 M1 D1 S1 D1 S1 Suppliers S1 RM Alpha Suppliers ALPHA Regional Consumers Warehouses 23
  23. 23. Revenue Accounts Receivable Cash Flow Perfect Order Fulfillment Perfect Order Cycle Time Inventory Fulfillment Goal – 95% Metrics Supplier Schedule Perfect Order Conflict Supplier on time delivery Schedule Achievement Fulfillment Order Perfect on time delivery Achievement Fulfillment Perfect Order Actual – 85% Actual – 95% On Time Actual – 90% On TimeFulfillment Actual - 85% Delivery In Full Delivery In Full Performance Performance Docs Actual – 99% Docs European Under-performance Damage Damage RM Supplier S2 M2 D2 •Process Supplier Perfect Order •Systems on time delivery Fulfillment Key Other S2 Under-performance M1 D1 RM Suppliers S1 M1 D1 S1 •Process S1 D1 •Systems S1 RM Alpha Suppliers ALPHA Regional Consumers Warehouses 24
  24. 24.  SCOR Implementations (Practitioner) ◦ Vary in scope and objective  Green Field – Establishing a new supply chain  Distribution analysis – Implementing distribution strategy  Planning – Improving planning processes  Supply Chain Failure Analysis  Information Technology  SCOR Implementation (Academia) ◦ Curriculum ◦ Research Projects  SCOR Implementation (Consultants)  SCOR Implementation (Government) 25

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