Overview of Model Structure Revision 3.0 European Conference Hotel Metropole, Brussels October...

Overview of Model StructureRevision 3.0

European Conference

Hotel Metropole, Brussels

October 25-27, 1998

SCOR Primer

The Supply Chain Operations Reference-model (SCOR) has been developed and endorsed by the Supply-Chain Council (SCC), an independent not-for-profit corporation, as the cross-industry standard for supply-chain management (SCM)

SCOR is freely available to all who wish to use the standard reference model

The SCC was organized in 1996 by Pittiglio Rabin Todd & McGrath (PRTM) and Advanced Manufacturing Research (AMR), and initially included 69 voluntary member companies

Council membership is now open to all companies and organizations interested in applying and advancing state-of-the-art supply-chain management systems and practices

Member companies pay a modest annual fee to support Council activities

All who use the SCOR model are asked to acknowledge the SCC in all documents describing or depicting the SCOR model and its use

All who use SCOR are encouraged to join the SCC, both to further model development and to obtain the full benefits of membership

Further information regarding the Council and SCOR can be found at the Council’s web site, www.supply-chain.org

© Copyright 1998 Supply-Chain Council3651MV—SCOR Overview 2


Session objectives and take-aways

Introduce you to the Supply Chain Operations Reference-model (SCOR) developed by the Supply-Chain Council

Educate you on how to apply SCOR– To configure your supply chain

Help you understand next steps toward supply-chain improvement


Supply Chain Operations Reference-model Overview

Introduction

History

SCOR

Applying the Model– A Case Study– Developing Supply-Chain Configurations

Summary

Contents


Introduction to the Supply Chain Operations Reference-model (SCOR)

This document provides a basic overview of the Supply Chain Operations Reference-model (SCOR)

This document is intended for use in a comprehensive SCOR training program

Please review SCOR materials carefully—we need your feedback. Feedback may be:– Posted on the appropriate Supply-Chain Council web forums at

www.supply-chain.org• Integration• Plan• Source• Make• Deliver


Introduction to the Supply Chain Operations Reference-model (SCOR)

SCOR feedback may be:

– Emailed or faxed to Bill Hakanson, Executive Director of the Supply-Chain Council

• Email address: [email protected]

• Tel: (412) 781- 4101

• Fax: (412) 781-2871

– Please include your name and contact information so SCC technical committees may clarify your feedback or questions

Continued


% of Revenue 5.8

7.1 6.76.1 6.5

12.213.1

11.310.3

10.911.5

7.0

0

2

4

6

8

10

12

14

Computers Industrial Telecom Chemicals Packaged Goods

Overall

Best-in-Class '97

Average '97

Source: PRTM’s 1997 Integrated Supply-Chain Benchmarking StudyDefinition: Total supply-chain management cost is the sum of Order Management, Material Acquisition, Inventory Carrying, and Supply-Chain Finance,

Planning, and MIS Costs

Total Supply-Chain Management Cost

Why is supply-chain management so important?A $1B company can save $30M – $60M

Best-in-class companies have an advantage in total supply-chain management cost of 3% – 6% of revenue


Cash-to-Cash Cycle Time

Calendar Days

2517

46

25

45

30

106

70

127

59

88 89

0

20

40

60

80

100

120

140

Computers Industrial Telecom Chemicals Packaged Goods

Overall

Best-in-Class '97

Average '97

Source: PRTM’s 1997 Integrated Supply-Chain Benchmarking StudyDefinition: Cash-to-cash cycle time is calculated as inventory days of supply + days sales outstanding - average payment period for materials

Why is supply-chain management so important?Leading companies have cash available 2 – 3 months faster

Leading companies have a 40% – 65% advantage in cash-to-cash cycle time over average companies

Supply Chain Operations Reference-model (SCOR) History



Broad industry interest in supply-chain management triggered the SCOR project

PRTM and AMR helped form the Supply-Chain Council (SCC) in Q1 1996– Approximately 70 charter companies participated– A wide range of industry segments was represented

The SCC objective is to develop a standard supply-chain process reference model enabling companies to:– Communicate supply-chain issues – Measure their performance objectively– Influence future SCM software


Who are the founding Supply-Chain Council members?

AlliedSignal Inc.

Alza Corporation

Amoco Petroleum Product

Analog Devices

Armstrong World Industries, Inc.

Avnet

Bayer Corporation

Becton DickinsonSupply-Chain Services

Bethlehem Steel

BHP Information Technology

BHP Transport

Black & Decker

Bristol-Myers Squibb Company

C.R. Bard — Medical Division

Carrier Corp.

Case Corp.

CertainTeed Corp.

Chesebrough-Pond’s USA

Ciba Geigy

Colgate Palmolive Company

Compaq Computer Corp.

CPC — Baking Business

Digital Equipment Corp.

Dow Chemical

Dow Corning

Eastman Kodak Company

Eaton Cutler-Hammer

Emerson Electronics

Ethicon

Exabyte, Inc.

Federal Express

General Electric

General Mills

GTE Government Systems

Harris

Hasbro

Haworth, Inc.

IBM

Heineken USA, Inc.

Hoffman-LaRoche

IMATION

Johnson & Johnson

L.L. Bean, Inc.


Who are the founding Supply-Chain Council members?

Lockheed Martin Corp.

Lonza Corp.

Lotus Development Corp.

Lucent Technologies

Merck & Co., Inc.

Miller Brewing Co.

Minnesota Mining & Manufacturing (3M)

Monsanto Business Services

Motorola (Semicon)

Nabisco

Nortel

Occidental Chemical Corp.

Uniden America Corp.

Warner-Lambert Co.

Western Digital Corp.

Whirlpool

Witco Corp.

Xerox Corp

Olympus America, Inc.

Pitney-Bowes, Inc.

Procter & Gamble

QUALCOMM, Inc.

QUALCOMM PersonalElectronics

Rhone-Poulenc Rorer

Rockwell International Corp.

Solectron Corp.

Sonoco Products Co.

Synopsys, Inc.

Texas Instruments (Semicon)

UPS Logistics Group

Continued


The 1998 Supply-Chain Council Board of Directors and its members are responsible for the maintenance of SCOR

SCC European Leadership Team

Supply-Chain Council Membership

Company

Chair: Siemens Business Services

GEC Marconi Cranfield University

Avnet IMSJonker Advies

ICI plcPittiglio Rabin Todd & McGrath

Supply Chain Council

Individual

Herbert Heinzel

Russ ArmitageMartin Christopher

Douglas KentRobin MartensShahpur PatellJoseph Rousel

Bill Hakanson

What is a Process Reference Model?



What is a process reference model?

Process reference models integrate the well-known concepts of business process reengineering, benchmarking, and process measurement into a cross-functional framework

Quantify the operational performance of similar companies and establish internal targets based on “best-in-class” results


Benchmarking

Characterize the management practices and software solutions that result in “best-in-class” performance


Best Practices Analysis

Process Reference Model

Capture the “as-is” state of a process and derive the desired “to-be” future state



Business Process Reengineering




Provide a balanced horizontal

(cross-process) and vertical

(hierarchical) view

Designed to be (re)configurable

Used to represent many different

configurations of a similar

process

Aggregate a series of

hierarchical process models

Classic process decomposition modelsare strictly hierarchical

Process decomposition models are developed to address one specific configuration of process elements

Process Reference Models accommodate a number of constructs

Process Element

Level

1

2

3

4

Process

Process Element

Task

Activities

Task

Activities

Contains:

A process reference model differs from classic process decomposition models


What is a process reference model?

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

Software tools that enable best practices

A Process Reference Model describes


Why use a process reference model?

A process reference model allows companies to:– Communicate, using common terminology and standard descriptions of

the process elements – Leverage metrics and benchmarking to determine performance goals,

set priorities, and quantify the benefits of process changes– Understand the best practices that yield the best performance– Understand the overall SCM process and evaluate overall performance– Identify the software tools best suited for their process requirements

Once a business process has been “captured” in a process reference model it can be:– Described unambiguously– Communicated consistently– (Re)designed to achieve competitive advantage– Measured, managed, controlled, and refined to meet specific purposes

Supply Chain OperationsReference-model:

The Basics



SCOR is founded on four distinct management processes

SCOR spans– All customer interactions, from order entry through paid invoice– All physical material transactions, from your supplier’s supplier

to your customer’s customer, including:• Equipment, supplies, spare parts, bulk product, software, etc.

– All market interactions, from the understanding of aggregate demand to the fulfillment of each order

“From your supplier’s supplier to your customer’s customer”

Supplier

Plan

Customer Customer’s

Customer

Supplier’sSupplier

Make DeliverSource Make DeliverMakeSourceDeliver SourceDeliver

Internal or External Internal or External

Your Company

Source


The boundaries of any model must becarefully defined

SCOR does not include

– Sales administration processes

– Technology development processes

– Product and process design and development processes

– Post-delivery customer support operations including technical support processes

Links to processes not included within the model’s scope, such as product development, are noted in SCOR


Processes that balance aggregate demand and supply to develop a course of action which best meets the business rules processes

Demand/supply planning

– Assess supply resources, aggregate and prioritize demand requirements, plan inventory, distribution requirements, production, material, and rough-cut capacity for all products and all channels

Manage planning infrastructure

– Make/buy decisions, supply-chain configuration, long-term capacity and resource planning, business planing, product phase-in/phase-out, manufacturing ramp-up, end-of-life management, product-line management

Plan


Processes that procure goods and services to meet planned or actual demand

Sourcing/material acquisition

– Obtain, receive, inspect, hold, and issue material

Manage sourcing infrastructure

– Vendor certification and feedback, sourcing quality, in-bound freight, component engineering, vendor contracts, initiate vendor payments

Source

Continued


Processes that transform goods to a finished state to meet planned or actual demand

Production execution

– Request and receive material, manufacture and test product, package, hold and/or release product

Manage make infrastructure

– Engineering changes, facilities and equipment, production status, production quality, shop scheduling/sequencing, short-term capacity

Make

Continued


Processes that provide finished goods and services to meet planned or actual demand

Order management– Enter and maintain orders, generate quotations,

configure product, create, and maintain customer database, manage allocations, maintain product/price database, manage accounts receivable, credits, collections, and invoicing

Warehouse management– Pick, pack, and configure products, create customer

specific packaging/labeling, consolidate orders, ship products

Transportation and installation management– Manage traffic, manage freight, manage product

import/export

– Schedule installation activities, perform installation, verify performance

Manage deliver infrastructure– Manage channel business rules, order rules, manage

deliver inventories, manage deliver quality

Deliver

Continued


Each basic supply chain is a “chain” of Source, Make, and Deliver Execution processes

Source Make Deliver. . .

Customer & Supplier

A Supply Chain

Customer & SupplierCustomer & Supplier

Plan Plan PlanPlan

Each intersection of two execution processes (Source-Make-Deliver) is a “link” in the supply chain

Planning processes manage these customer-supplier links


SCOR contains three levels of process detail

#

Level

Schematic Comments

1

2

3

4

Configuration Level

(Process Categories)

Process Element Level

(Decompose Processes)

Plan

DeliverMakeSource

A company’s supply chain can be “configured-to-order” at Level 2 from approximately 19 core “process categories.” Companies implement their operations strategy through the configuration they choose for their supply chain

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• Systems/tools by vendor

Implementation Level

(Decompose Process

Elements)

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

Su

pp

ly C

ha

in O

pe

rati

on

s R

efe

ren

ce

-mo

de

l

Top Level

(Process Types)

Level 1 defines the scope and content for the Supply Chain Operations Reference-model

Here basis of competition performance targets are set

Not in

Scope

Description

Balance Production 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


At Level 1, SCOR is based on four core management processes

SCORProcess

Definitions

Plan Processes that balance aggregate demand and supply todevelop a course of action which best meets the establishedbusiness rules

Source Processes that procure goods and services to meet planned oractual demand

Make Processes that transform goods to a finished state to meet plannedor actual demand

Deliver Processes that provide finished goods and services to meetplanned or actual demand, typically including order management,transportation management, and distribution management

1


SCOR Level 1Supply-Chain Management Metrics AssetsDelivery

Performance/Quality

CostFlexibility & Responsiveness

Delivery performance

Order fulfillment performance

• Fill rate (Make-to-stock)

• Order fulfillment lead time (ETO, MTO, CTO)

Perfect order fulfillment

Supply-chain response time

Production flexibility

Total supply-chain management cost

Value-added productivity

Warranty cost or returns processing cost

Cash-to-cash cycle time

Inventory days of supply

Asset turns

Customer-Facing Internal-Facing

SCOR Level 1 metrics characterize performancefrom customer-facing and internal-facing perspectives

1


At Level 2, SCOR provides a “toolkit” of 17 process categories

Cu

sto

mer

s

Su

pp

lier

s

P1 Plan Supply ChainPlan

P2 Plan Source P3 Plan Make P4 Plan Deliver

Source Make Deliver

S1 Source Purchased Materials

S2 Source Make-to-Order Products

M1 Make-to-Stock

M2 Make-to-Order

M3 Engineer-to-Order S3 Source Engineer-to-Order Products

S0 Source Infrastructure M0 Make Infrastructure D0 Deliver Infrastructure

D1 Deliver Stocked Products

D2 Deliver Made-to-Order Products

D3 Deliver Engineered-to-Order Products

P0 Plan Infrastructure

Any supply-chain configuration can be represented with this toolkit

2


At Level 2, each SCOR process can be further described by process type

SCORProcess Type

Characteristics

Planning

A process that aligns expected resources to meet expected demandrequirements. Planning processes:

• Balance aggregated demand and supply

• Consider consistent planning horizon

• (Generally) occur at regular, periodic intervals

• Can contribute to supply-chain response time

Execution

A process triggered by planned or actual demand that changes the state ofmaterial goods. Execution processes:

• Generally involve

1. Scheduling/sequencing,

2. Transforming goods, and/or

3. Moving goods to the next process

• Can contribute to the order fulfillment cycle time

Infrastructure A process that prepares, maintains, or manages information or relationships onwhich planning and execution processes rely

2


For each “SCOR Process,” Level 2 “Process Categories” represent supply-chain variations

Type SCOR Process

Process Category Characteristics

Planning Plan Which execution process is being planned(Source, Make, Deliver, Supply Chain)?

Execution SourceIs the sourced part standard or custom?

Is the sourced part stocked by suppliers, or not?

Execution MakeIs the manufacturing process discrete or process-based?

What triggers the “Make” signal?

Execution DeliverIs the product standard or custom?

Is the product stocked in finished goods, or not?

SCOR process categories reflect distinctions in how products are planned, sourced, made, and delivered

2


Process categories are defined by the relationship between a SCOR process and a process type

Practitioners select appropriate process categories from the SCOR configuration toolkit to represent their supply-chain configuration(s)

“SCOR Configuration Toolkit”

ProcessType

Planning

Execution

Infrastructure

ProcessCategory

SCOR Process

Plan Source Make Deliver

P1 P2 P3 P4

S1 – S3 M1 – M3 D1 – D3

P0 S0 M0 D0

2


An example of SCOR Level 3 process element logic flow

Inventory

Source Execution DataSourcing PlansReplenishment Signals

Procurement Signal Material on Order

Purchased Materials

Material Pull SignalsMaterial Inventory LocationWIP Inventory LocationFinished Goods Inventory Location

Receipt Verification

Schedule Material

Deliveries

S1.1

Receive & Verify

Material

Transfer Material

S1.3S1.2

Inputs

Process Elements

Outputs

Level 3 Example — S1 Source Stocked Product

Inputs, outputs, and basic logic flow of process elements are captured

3


An example of a SCOR Level 3 standard process element definition and standard performance metrics

Process Element:Schedule Material Deliveries

Process Number: S1.1

Process Element DefinitionScheduling and managing the execution of the individual deliveries of material against anexisting contract or purchase order. The requirements for material releases aredetermined based on the detailed sourcing plan or other types of material pull signals.

PerformanceAttributes

Metric

Cycle Time Total Source Lead Time

% of EDI Transactions

Cost Materials Management as a % of Material Acquisition Costs

Service/Quality % defective

Assets Raw Material Days of Supply (DOS)

3


An example of SCOR Level 3 best practices, software features, and vendors

Process Element:Schedule Material Deliveries

Process Number: S1.1

Process Element DefinitionScheduling and managing the execution of the individual deliveries of material against an existing contract or purchaseorder. The requirements for material releases are determined based on the detailed sourcing plan or other types ofmaterial pull signals.

Best Practices Software FeaturesRequired

Software ApplicationSuppliers

Utilize EDI transactions to reducecycle time and costs

EDI interface for 830, 850, 856 and862 transactions

All major ERP vendors: SAP, Oracle,JD Edwards, Baan, QAD, SSA, etc.

VMI agreements allow suppliers tomanage (replenish) inventory

Vendor managed inventories withscheduling interfaces to externalvendor systems

Oracle, Manugistics, Logility, SAP

Mechanical (Kanban) pull signals areused to notify suppliers of the need todeliver material

Electronic Kanban support Discrete ERP vendors: SAP, Oracle,Baan, JD Edwards, QAD, SSA

Consignment agreements are used toreduce assets and cycle time whileincreasing the availability of criticalitems

Consignment inventory management Typically custom programming

Advanced ship notices allow for tightsynchronization between source andmake processes

Blanket order support with schedulinginterfaces to external vendor systems

All major ERP vendors: SAP, Oracle,JD Edwards, Baan, QAD, SSA, etc.

3


• % of order changes• # of end devices/SKUs• Production volume• Inventory carrying cost

Level 3Diagnostic Metrics

• Product volume by channel

• # of channels• Supply-chain

complexity, # of S/M/D sites

• Planning cycle time• Forecast accuracy• Obsolete/end of life

inventory days of supply• Replan cycle• Order entry methods• Order entry modes

Supply-Chain Management

Practices Measures

Level 2 Performance Metrics

Supply-Chain ComplexityMeasures

Supply-ChainConfiguration

Measures

• Material acquisition costs• Source cycle time• Raw material DOS

• Purchased material by geography

• % of purchasing spending by distance

• Supplier delivery performance

• Payment period• % part numbers received

with lead time < 8 weeks• % unpenalized 30-day

decrease

• % purchasing spending by distance

• # of suppliers

• Supply-chain finance and planning costs

• Demand/supply planning costs• Inventory days of supply

So

urc

eP

lan

AssetsDeliveryPerformance/

Quality

CostFlexibility &Responsiveness

Levels 2 and 3 performance metrics and diagnostic measures drive performance improvement 3

2


• Value-add %• % build-to-stock, %

build-to-order• % of mfg. order changes

due to internal issues• WIP & plant FG DOS

• # of devices/SKUs• Upside production

flexibility

• # of orders, line items & shipments by channel

• % parts returned• % re-returns

• Delivery locations by geography

• # of channels• Field & samples FG

DOS

• Published delivery lead time

• # of faultless invoices

• Manufacturing process steps by geography

• Asset turns

• Fill rates• Order management costs• Order fulfillment lead time• Forecast accuracy by channel

• # of returns/complaints• Build order attainment• Make cycle time• Product quality

Level 3Diagnostic Metrics

Supply-Chain Management

Practices Measures

Level 2 Performance Metrics

Supply-Chain ComplexityMeasures

Supply-ChainConfiguration

Measures

Del

iver

Mak

e

AssetsCostFlexibility &Responsiveness

DeliveryPerformance/

Quality

Levels 2 and 3 performance metrics and diagnostic measures drive performance improvement (continued) 3

2


Implementation of supply-chain management practices occurs at Level 4 (and below)

Below Level 3, each process element is described by classic hierarchical process decomposition

D1 - Deliver Stocked Product

Level 4Process Element - D1.2

Activities

Tasks

1. Contact customer account rep.

2. Look up customer history

3. If necessary, account rep. calls sales manager to authorize additional credit

4a. Account rep clears credit issue

4b. Account rep refuses credit request

Task - D1.2.3

Activities

Enter Order

Receive Order

Validate Price

Access Credit Screen

Check Credit Availability

Clear Order

Contact Accounting

Communicate Results to Customer

Check Credit

RouteShipments

D1.6

Plan & BuildLoads

D1.5

Reserve Inventory &DetermineDelivery

Date

D1.3

Receive, Enter & Validate

Order

D1.2

Process Inquiry &

Quote

D1.1

Receive Product

D1.8

Pick Product

D1.9

Load Vehicle

Generate Ship Docs

& Ship

D1.10

Receive & Verify Product

at Customer

Site

D1.11

Install Product

D1.12

Invoice & Receive Payment

D1.13

Consolidate Orders

D1.4

Select Carriers &

Rate Shipments

D1.7

From Make

or Source

Level 5

Level 6

4

Applying the Model



SCOR can be used to achieve many objectives

Rapidly map own or others’ supply chain – Illustrate current supply-chain configurations– Establish common reference point and definitions– Communicate effectively with suppliers and customers

Compare process performance to targets– Benchmark metrics across multiple industries– Compare existing practices to industry best practices

Determine required information systems capabilities– Identify software vendors providing required capabilities


SCOR can be used to achieve many objectives

Identify supply-chain management improvement opportunities– Identify gaps in current processes– Quantify the potential benefits of specific process improvements– Provide data for project financial justifications

Implement supply-chain process improvements– Design to meet strategic objectives– “Fine tune” based on pilot results and changing market needs

Influence creation of desired software products– Communicate needed product features to software vendors

Continued


SCOR Level 1Basisof

Competition

Operations Strategy

1

SCOR Level 2

Intra-Company

Configuration

Inter-Company

Configuration

Supply-Chain Configuration

2

Intra-Company Process, Practice,

and System Configuration

Elements

SCOR Level 3Performance Levels,

Practices, and System(s) Selection

Inter-Company Process, Practice,

and System Configuration

Elements

3

Supply-Chain Processes and

System(s) Implementation

SCOR Level 4Intra-CompanySupply-ChainImprovements

Inter-CompanySupply-ChainImprovements

4

Supply-chain configurations are defined and implemented by iterating through the SCOR model

Applying the Model:A Case Study



Beta Corporation designs, manufactures, distributes, and repairs consumer electronics products

Company overview– Number 1 in market share for core product lines in North America,

Beta also has a presence in over 50 other countries– A full breadth of products supports multiple channels of distribution

and consumer preferences– A core competence in manufacturing consistently demonstrates

competitive performance

Problem– Significant losses (20% of revenue) were being incurred despite the

brand premium– The presence in more than 50 countries grossed less than 10% of total

revenue– The product line was unfocused; over 50% were not designed by Beta– More than 70% of the products were produced by Original Equipment

Manufacturers (OEMs) despite the core competence in manufacturing


Beta Corporation designs, manufactures, distributes, and repairs consumer electronics products (continued)

Diagnostic approach– Understand the business problem from management’s viewpoint

(Level 1 metric performance)– Map supply-chain processes using SCOR– Determine the strategic elements requiring change and

associated performance targets– Define the new supply-chain configuration


Supply-Chain Performance VersusCompetitive Population

0% – 20% 20% – 40% 40% – 60% 60% – 80% 80% – 100%

KeyPerspectives Level 1 Metrics

MajorOpportunity

Dis-advantage

Averageor Median Advantage

Best-in-Class

Delivery Performance to Request xx%

Order Fulfillment Lead Time (MTO) xx days

Fill Rate xx%

Perfect Order Fulfillment xx%

Supply-Chain Response Time xx days

Upside Production Flexibility xx days

Supply-Chain Management Cost xx%

Warranty Cost as % of Revenue xx%

Value-Added per Employee $xxxK

Total Inventory Days of Supply xx days

Cash-to-Cash Cycle Time xx days

Net Asset Turns xx turns

Flexibility &Responsiveness

Supply-Chain Reliability

COGS/ Expense

Assets/ Utilization

SCOR Level 1 metrics quickly revealed that the supply chain was a key contributor to the problem

Beta Performance


Pac

ific

Rim

Several HundredSuppliers

CA

Raw Materia

l

Manufacturing

Distribution

Captive Retail Retailers OEM

Manufacturing

Suppliers

Distribution

ManyOEMs

OEM Product

Drawing the supply chain showed that North American operations supported a lot of traffic


SCOR Level 2 modeling reinforced that Beta had a very complex supply chain

OEM SupplyChain

Many OEM Suppliers80% of product supply ($$)

Deliver Stocked Product

60% of productvolume

High Volume Retailers50% product volume

Retailers15% product volume

OEM5% product volume

Captive Retail30% product volume

P

2

P

4

Manufacturing Supply Chain

S

1

S

1

MTS Components20% of product supply ($$)

M

2

M

2

MTSFactories

D

1

D

1

Deliver Stocked Product


P

2

P

2

P

3

P

3

P

4

P

4

P

4

D

1

S

1

S

1

S

1

S

1

S

1

D

1

M

1

M

1

M

1

M

1

M

1

M

1

M

1

M

1

M

1

D

2

D

2

D

2

D

2

D

2

D

2

D

2

D

2

D

1

D

2

D

2

D

2

D

2

D

2

D

2

D

2

D

2

D

1

D

2

D

2

D

1

D

2

D

2

D

1

M

1

M

1

M

1

M

1

M

1

M

1

M

1

M

1

M

1


Management set the performance targets at Level 1 to assure a competitive basis would be achieved

Supply-Chain Scorecard and Performance Targets

COGS/Expense

Asset Utilization

Supply-Chain Flexibility/ Responsiveness

Supply-Chain Reliability

Key Supply-Chain Performance Attribute

Performance vs. CompetitionMajor

Opportunity Disadvantage Parity Advantage Best-in-Class

Actual Performance

Performance Requirement


Performance targets drove the specific actions required to migrate to a new configuration

Simplify supply-chain logistics– Consolidate factories (Make)– Consolidate distribution centers (Deliver)– Reduce the number of distinct channels (Deliver)– Dramatically reduce the number of suppliers and the reliance on

OEM product (Source)– Consolidate product lines (Total Supply Chain)

Improve customer-facing performance – Institute processes and systems to more closely link Beta Co. to

high-volume customers– Move from make-to-stock to make-to-order to improve supply-

chain flexibility and response time and reduce inventory investment

– Implement Enterprise-wide Resource Planning (ERP)


Pac

ific

Rim

<100 Suppliers

SuppliersCA

Raw Materia

l

Co-located Manufacturing

and Distribution

OEM

Retailers

Few OEMs OEM Product

Performance gains came from simplifying and focusing the supply-chain configuration


SCOR Level 2 modeling reveals how the simplified supply chain achieved greater performance

Company

Single, Co-located Manufacturing and Distribution

Suppliers Customers

D2

D2

D2

D1

80% ManufacturedProduct Supply

20% ManufacturedProduct Supply

MTO Components

MTS Components

MTO Components

MTS Components

High-Volume Retailers80% product volume

Trend

Retailers15% product volume

Trend

OEM5% product volume

Trend


ManufacturingSupply-ChainPlanning VMI

OEMOEM

Cross-docking

5% of productvolume

OEM Supply-ChainPlanning

OEM

Supply-Chain Execution

P1

S2

S1

D2

M2

S2

D1

P2 P4

P1

P2 P3 P4

S2

S2

S2

D2

D2

D2


P1

P4

S2 D2

D2 D2 D1

D2 D2 D2

S1

S2

P1

P2 P4

P3

VMIP2

Make

D1

S2

S2

S2

Cross-docking

D2 M2Source

Deliver

Multiple systems were chosen to support the enterprise-wide supply chain, based on Level 3 analysis

Suppliers Customers

ManufacturingSupply-ChainPlanning

OEM Supply-ChainPlanning

Supply-Chain Execution

ERP ERP SystemSystem

& & LegacyLegacy

Advanced Planning Advanced Planning SystemSystem

Advanced Planning Advanced Planning SystemSystem

CustomizedCustomized3rd Party 3rd Party SystemSystem


Delivery Performance

Up 54 pts

% C

us

tom

er

Re

qu

es

ted

Sh

ip

Da

te

Year 1 Year 2

Year 3 Year 4

Inventory Days of Supply

Down 55%

Da

ys

Year 1 Year 2 Year 3 Year 4

Incr. Cash Flow from Operations

Up 10% of Rev

$

Mil

lio

ns

Year 1 Year 2 Year 3 Year 4

100Cash-to-Cash Intervals

Down 55%D

ay

s

Year 1 Year 2

Year 3 Year 4

Gross margin improved 50% in two years on the basis of supply-chain performance

Go

od

Go

od

Go

od

Go

od

Applying the Model:Developing Supply-Chain

Configurations



The concept of “configurability”

The primary use for SCOR is to describe, measure, and evaluate supply-chain configurations

A supply-chain configuration is driven by

– Deliver channels, inventory deployment, and products

– Make production sites and methods

– Source locations and products

– Plan levels of aggregation and information sources

SCOR must accurately reflect how a supply chain’s configuration impacts management processes and practices

Configurability


1. Select the business entity to be modeled (geography, product set, organization)

2. Illustrate the physical locations of:Production facilities (Make)

Distribution activities (Deliver)

Sourcing activities (Source)

3. Illustrate primary point-to-point material flows using “solid line” arrows4. Place appropriate Level 2 execution process categories to describe activities

at each location

Configuring a supply-chain “thread” illustrates how SCOR configurations are done

Source Make Deliver

S1 Source Stocked Materials

S2 Source Make-to-Order Materials

M1 Make-to-Stock

M2 Make-to-Order

M3 Engineer-to-OrderS3 Source Engineer-to-Order Materials

D1 Deliver Stocked Products

D2 Deliver Make-to-Order Products

D3 Deliver Engineer-to-Order Products

Execution Process Toolkit


Step 1: We will focus on ACME’s North American supply-chain execution processes

ACME North America produces desktop and laptop PCs that are sold

through retailers


Step 2: Identify the location of manufacturing facilities

Desktop Production

Monitor Production

LaptopProduction


Step 2 (cont’d): Identify the location of distribution activities

Desktop Production

Desktop DC

Monitor Production

Laptop Distributor

LaptopProduction

DesktopRetailer

Laptop Retailers

Monitor North

American Distribution

Center


Step 2 (cont’d): Identify the location of the major sourcing activities

ACME Taiwan

Desktop Production

Desktop DC

Monitor Production

North American Distribution Center

Laptop Distributor

SemiconductorDistributor

(S1, D2)

LaptopProduction

DesktopRetailer

Laptop Retailers

SemiconductorManufacturer


Step 3: Illustrate primary point-to-point material flows using “solid line” arrows

ACMETaiwan

Desktop Production

Desktop DC

Monitor Production


Laptop Distributor


LaptopProduction

DesktopRetailer

Laptop Retailers



Step 4: Place appropriate Level 2 execution process categories to describe activities

ACMETaiwan

(D2)

Desktop Production

(S1, M1, D2)

Desktop DC

(D1)Monitor

Production

(S1, M1)


(D1)

Laptop Distributor

(S1, D1)Semiconductor

Distributor

(S1, D2)

LaptopProduction

(S1, M1 , D1)

DesktopRetailer

(S1, D1)

Laptop Retailers

(S1, D1)


(S1, M2, D2)

Legend

S1 = Source Stocked MaterialM2 = Make-to-OrderM1 = Make-to-stockD2 = Deliver Make-to-Order Products


5. Describe each distinct supply-chain “thread”– A supply-chain thread ties together the set of Source-Make-

Deliver supply-chain processes that a given product family flows through

– Develop each thread separately to understand common, and distinct, execution process categories

– Consider end-to-end threads in the Intercompany case

6. Place planning process categories, using dashed lines to show links with execution processes

7. Place P1, if appropriate– P1 – Plan Supply Chain aggregates outputs from

P2, P3, and P4

Configuring a supply-chain “thread” illustrates how SCOR configurations are done

Continued


Step 5: Describe each distinct supply-chain “thread”

ACMETaiwan (D2)

San Jose

Desktop Production

(S1, M1, D2)

Desktop DC (D1)

Monitor Production (S1, M1)

North American Distribution Center (D1)

Laptop Distributor

(S1, D1)Semiconductor

Distributor(S1, D2)

LaptopProduction

(S1, M1 , D1)

DesktopRetailer (S1, D1)

Laptop Retailers(S1, D1)

SemiconductorManufacturer(S1, M2, D2)

Legend

S1 = Source Stocked MaterialM2 = Make-to-OrderM1 = Make-to-StockD2 = Deliver Make-to-Order Products

ACME Laptop Supply-Chain Thread


SCOR configurations utilize a horizontal flow to show the total supply-chain links

D3

D2

ACMETaiwan


S1 M1 D1

CustomersACME

ACMELaptop

Production (San Jose)

ACMELaptop


ACMELaptop

Distribution (San Jose)


S1D2

Customer’sCustomer

LaptopDistributor

LaptopRetailer

S1 D1S1 D1

SuppliersSupplier’sSupplier

ACME Laptop Supply-Chain Thread


Step 6: Place planning process categories, using dashed lines to show links with execution processes

D3

D2

ACMETaiwan


S1

P2 P4P3

M1 D1

CustomersACME

ACMELaptop


ACMELaptop


ACMELaptop


P4


S1D2


LaptopDistributor

LaptopRetailer

S1

P2

D1S1 D1

P2



Step 7: Identify any P1 supply-chain planning activities that aggregate the outputs from P2 – P4

D3

D2

ACMETaiwan


S1

P2

P1

P4P3

M1 D1

CustomersACME

ACMELaptop


ACMELaptop


ACMELaptop


P4


S1D2


LaptopDistributor

LaptopRetailer

S1

P2

D1S1 D1

P1

P2



In our ACME example, P1 could be extended to manage an intercompany supply chain

D2

D2

ACMETaiwan


S1

P2

P1

P4P3

M1 D1

CustomersACME

ACMELaptop


ACMELaptop


ACMELaptop


P4


S1D2


LaptopDistributor

LaptopRetailer

S1

P2

D1S1 D1

P1

P2

CustomersSupplier’sSupplier

P1

Plan Intercompany Supply Chain

Supply Chain Operations Reference-model: Summary



SCOR overview — Summary

SCOR is a process reference model designed for effective communication among supply-chain partners

SCOR is used to describe, measure, and evaluateSupply-Chain configurations

The success of SCOR as a standard depends on its use and refinement by Supply-Chain Council practitioners


SCOR has a powerful role in defining complex supply chains

SCOR Level 1SCOR Level 1 Basis of Competition– Set business requirements and define the

basis of competition

– Evaluate the performance of the current operations strategy vis-a-vis required performance

– Set SCOR Level 1 metrics and targets, and define the gap

– Set business priorities and state what needs to change


SCOR has a powerful role in defining complex supply chains

SCOR Level 2SCOR Level 2 Supply-Chain Configuration– Model current supply-chain

configuration, considering asset, product volume and mix, and technology requirements and constraints

– Reconfigure the supply chain at SCOR Level 2 to determine expected performance

Continued


SCOR has a powerful role in implementing supply chains

SCOR Level 3SCOR Level 3 Performance Levels, Practices, and System(s) Selection– Develop process models that support

strategic objectives and work within the new supply-chain configuration

– Set process metrics and performance targets

– Establish business practices at the operating level

– Build system requirements that support the supply-chain configuration, processes, and practices

– Select appropriate system(s)

Continued


SCOR Level 4SCOR Level 4

Continued

Supply-Chain Process and System(s) Implementation– Implement best practices to achieve

results

SCOR has a powerful role in implementing supply chains


A note on additional SCOR educational materials…to learn more about SCOR

The Supply-Chain council has published a curriculum of SCOR-based SCM improvement tips and techniques:– Module 1: Using SCOR to support Supply-Chain Education

and Training– Module 2: Using SCOR to understand implications of a shift

in Operations Strategy– Module 3: Using SCOR metrics to frame and justify supply-

chain improvement programs– Module 4: Using SCOR to integrate your supplier’s supplier

into your supply chain– Module 5: Using SCOR to integrate your customer’s

customer into your supply chain

This material is fully available to SCC members at www.supply-chain.org. The current format is Adobe.pdf


A note on the Supply-Chain Council…to learn more about the SCC

The SCC is a member-company managed, not-for-profit corporation based in Pittsburgh, PA

The SCC maintains a web page at www.supply-chain.org– Membership list– Schedule of events– The SCOR model content– Email discussion forums


The SCC mission statement describes the purposes and approaches of the Supply-Chain Council

A non-profit, member-supported trade organization, the Supply-Chain Council (SCC) enables the discussion, definition, and dissemination of best practice in the rapidly evolving field of supply-chain management (SCM). The Council promotes the Supply Chain Operations Reference-model (SCOR), which embodies a common standard language, consistent metrics, practical models, and analytic tools to expand and enhance leading SCM practices. The SCC provides executive management opportunities to network with peers from all SCM constituencies and share lessons learned to define the frontiers of best practice and enabling software applications. The SCC supports the practical application of best practices through education.

Conclusion

SCOR Primer

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