Proceeding, International Seminar on Industrial Engineering and ManagementMenara Peninsula. Jakarta. Au~st 29-30, 2007 ISSN: 1978-774X

PERFORMANCEEVALUATION OF SUPPLY CHAIN USING SCOR MODEL: THE CASE

OF PT. YUASA, INDONESIA

Sudaryantol and Rudiana Bahri2IDepartment ofIndustrial Engineering, Gunadarma University, Jakarta Indonesia

E-mail: sudarvanto@stafffllmadarma.ac.id2Graduate ofIndustrial Engineering, Gunadarma University, Jakarta Indonesia

ABSTRACTSupply Chain Management (SCM) is the process of planning, implementing, and controlling the operationsof the supply chain aims at satisfying customer requirements efficiently. SCM has become increasinglyimportant in a global economy and has received a tremendous attention from both industries andresearchers in recent years. In the face of growing complexity of the global supply chains, more businessentities are realizing that SCM has become a key strategic aspect of their business. It is believed that efficientand effective supply chain management can assists an organization in getting the right goods and services tothe place needed at the right time, in the proper quantity and at acceptable cost. However, until recently, dueto the complexity of supply chain system, it is very difficult to measure its performance. This paper focuseson the performance measurement of supply chain by addressing on these following questions: Whichsupply chain performance measures are used in practice? How was the metric evaluation implemented?What were the problems that occurred in the performance measurement of a supply chain? To deal withthese questions, Supply Chain Operation Reference (SCOR) Model is used to measure the supply chainperformance. It provides a framework for evaluating the performance of supply chain management in thecorporation that comprises offive main processes namely plan, source, make, deliver and return. The SCORmodel contains measures for operational control and until recently is recognized as the mostcomprehensive approach for the evaluation of supply chain operation. The empirical results of themeasurement of supply chain performance with the case of PT. Yuasa Indonesia indicates that the companyhas achieved the best in their class for reliability (delivery performance, fill rate) and warranty return cost.Two attributes i.e. production flexibility and value added employees are still at medium performance and therest attributes have the advantages performance.Keywords: supply chain management, SCOR Model, performance evaluation

INTRODUCTION

The term Supply Chain Management (SCM) wascoined by Keith Oliver in 1982, referring to theprocessof planning, implementing, and controllingthe operationsof the supply chain with the purposeto satisfy customer requirements as efficiently aspossible.Supply Chain Management encompassesthe planning and management of all activitiesinvolvedin sourcing, procurement, conversion, andlogistics management activities that includescoordination and coIlaboration with channelpartners.In other word, SCM integrates supply anddemandmanagement within and across companies(Wikipedia,2007).

Through an efficient and effective supplychainmanagement, an business organization could

Performance Evaluation of Supply Chain ... ...Sudaryanto

get the right goods and services to the place neededat the right time, in the proper quantity and atacceptable cost (Morciniec and Yearworth, 2006).In the face of growing complexity of the globalsupply chains, more business entities are realizingthat SCM has become a key strategic aspectof theirbusiness. Recently, SCM has become one of themost important strategic aspects of any businessentity and increasingly important in a globaleconomy, as evidenced by an increasinglyattentionfrom both industries and researchers.

There are some factors that have dramaticallyincreased the complexity of supply chains, i.e.fragmenting customer needs, increased costpressures based on global competition and a newlevel of complexity. As global competition andadvancing technology makes borders irrelevantand

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Proceeding, International Seminar on Industrial Engineering and ManagementMenara Peninsula. Jakarta. AUj!USt29-30, 2007

link business entities more closely, supply chainsare growing increasingly complex. A new level ofcomplexity of supply chain has been resulted by theinvolvement of more parties and moregeographically dispersed location that certainlyleads to the difficulty in managing the supply chain.In such environment, the complexity will increaseexponentiallythat must be considered and resolvedto lead to competitive advantage. However, untilrecently, due to the complexity of supply chainsystem, it is very difficult to measure how well theirsupply chain performance.

Supply chain performance evaluationbecomes one of the biggest challenges for today'scompetitive companies. SCOR model provides anintegral and comprehensive performance measuresand covering both external and internal facingenvironment comprising both operational andfinancial. These metric should provide sufficientdetail and richness to steer supply chainperformance rather than individual businessperformance.

This paper focuses on the performancemeasurement of supply chain by addressing onthese following questions: Which supply chainperformance measures are used in practice? Howwas the metric evaluation implemented? What werethe problems that occurred in the performancemeasurement of a supply chain? Accordingly, thispaper is organized as follows: section one outlinesa brief summary of the background of the study,mainly focusing on the problem of the performanceevaluation of a supply chain. Section two providesa review of the theoretical background of theresearch. Methodologyfor measuring supply chainperformance will be presented in the section three.The empirical results and discussion of themeasurement of supply chain performance with thecase of PT. Yuasa Indonesia will be presented insection four. The conclusions of the study isdescribed in the section five.

mEORETICAL BACKGROUND

Supply Chain Operations Reference (SCOR)Model

The Supply Chain Operations Reference-model(SCOR) has been developed and endorsed by the

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Supply-Chain Council (SCC) as the cross-industrystandard for supply-chain management. The seewas organized in 1996 by Pittiglio Rabin Todd &McGrath (PRTM) and AMR Research, and initiallyincluded 69 voluntary member companies (SupplyChain Council, 2007a). The membership is nowopen to all companies and organizations interestedin applying and advancing state-of-the-art supply-chain management systems and practices. Since itsintroduction in 1996, the SCOR model has grownsignificantly both in terms of acceptance andusage. Currently, over 800 organizations areinvolved in maintaining and improving the modelthrough continual partnership with the SupplyChain Council. The SCOR model is intendedto bean industrial standard that enables next-generationsupply chain management. The latest version of theSCOR model was SCOR 8 that has been releasedon 2007 (Supply Chain Council, 2007a).

The SCOR model integrates business processreengineering, benchmarking, and processmeasurement into a cross-functional framework.The business process reengineering capture the "as-is" state of a process and derive the desired "to-be"future state. Benchmarking refer to quantificationthe operational perfonnance of similar companiesand establish internal targets based on "best-in-class" results. Finally, Process measurement ischaracterized by the management practices andsolutions that result in "best-in-class" performance(SCC, 2007a). Accordingly, as a reference model,SCOR contains the standard descriptions ofmanagement processes, a framework ofrelationships among the standard processes,standard metrics to measure process performance,management practices that produce best-in-classperformance and standard alignment to featuresandfunctionality

The SCOR model is the first model that canbe used to configure the supply chain based onbusiness strategy by providing standarddescriptions for the activities within the supplychain. It also identifies the performancemeasurements and supporting tools suitable foreach activity and integrates the well-knownconcepts of business process reengineering,benchmarking, and process measurement into across-functional framework. It captures the 'as-is'state of a process and then derives the performance

Performance Evaluation of ... ...Sudaryanto

Proceeding,International Seminar on Industrial Engineering and ManagementMenara Peninsula. JakLzrta. AUJ!USt 29-30. 2007

of similarcompanies and establishes internal targetsbasedon 'best-in-class' performance.

The structural framework of the SCOR model

is composed of the following elements: Standarddescriptionsof the individual elements that makeupthe supply chain processes, standard definitionsof key performance measures, descriptions of bestpractices associated with each of the processelements, Identification of software functionalitythat enables best practices.

Scor Processes and Levels

The SCOR process can go into many levels ofprocessdetailto help a company analyze its supplychain.It spansall customer interactions, from orderentry through paid invoice. The process helpscompaniesunderstand how the 5 steps repeat overand over again between suppliers, the company,and customers. The SCOR model is originallyfoundedon five distinct management processes,namely,Plan, Source, Make, Deliver and Returnwhichare called level 1 processes. The processesare further decomposed into process categories(level2) depending on the type of environment inwhichthe SCOR model is applied. The p~ocesscategoriesfurther contain process elements, whichisthethirdand the last level in the SCOR model. Atlevel3, the elements model contains performanceattributes, metrics, best practices and softwarefeaturesrequired for that element. Figure 1 showstheinfrastructureof the SCOR model, while Figure2 shows the process levels.

Figure 2. Processes covered by seOR (See,2007a)

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The definitions of the above processes arefollows: The Plan process consists of processesthat balance aggregated demand and supply todevelop a course of action which best meetssourcing, production and delivery requirements.Plan processes deal with demand/supply planning,which include the activities to assess supplyresources, aggregate and prioritize demandrequirements, plan inventory, distributionrequirements, production, material, and rough-cutcapacity for all products and all channels. TheSource process contains processes that procuregoods and services to meet planned or actualdemand. Sourcing/material acquisition includes thejobs of obtaining, receiving, inspecting, holding,and issuing material. Management of sourcinginfrastructure includes vendor certification andfeedback, sourcing quality, in-bound freight,component engineering, vendor contracts, andvendor payments. The Make process includesfunctions that transform goods to a finishedstate tomeet planned or actual demand. Make is the coreprocess of the manufacturing system in whichactual production execution takes place. TheDeliver process comprises processes that providefinished goods and services to meet planned oractual demand, typically including ordermanagement, transportation management, anddistribution management. Processes associatedwith returning or receiving returned products forany reason are grouped into Return process. Theseprocesses extend into post-delivery customersupport.

Hierarchically, the SCOR model containsthree Levels of process detail as illustrated onPicture 2. Level 1 is the top level that deals withprocess types and defines the supply chain usingfive key processes:Plan, Source,Make, DeliverandReturn. The SCOR model Level 1 metricscharacterize performance from customer-facingandinternal-facing perspectives. At this level, basis ofcompetition is defined and broad guidelines areprovided to meet the competition.

Level 2 is the configuration level and deals withprocess categories. It defines different categorieswithin the Level 1 processes. At this level,processes are configured in line with supply chain

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Proceeding, International Seminar on Industrial Engineering and ManagementMenara Peninsula, Jakarta. AUJ!USt29-30, 2007

strategy in which internal redundancies can beidentifiedand eliminated.

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Figure 2. The level ofSeOR Model (See, 2007b)

The goal at Level 2 is to simplify the supplychain and enhance its overall flexibility. At Level 2,the SCOR model provides a tool kit of differentprocess categories. At Level 2, market constraints,product constraints and company constraints areconsidered to configure the inter- and intracompanyprocess categories.

Level 3 is the process element level and is thelowest level in the scope of the SCOR model.Implementation levels that are below Level 3, inwhich we decompose process elements into tasksand further activities in classical hierarchicalmanner, are not in scope of the SCOR model. Level3 allows businessesto define in detail the processesidentified, as well as performance metrics and bestpractices for each activity. Performance levels andpractices are defined for these process elements.Benchmarks and the required attributes for theenabling software are also noted at this level. AtLevel 3, inputs, outputs, and basic logic flow ofprocess elementsare captured.

At Level 4, implementation of supply chainprocesses takes place. This level describes thedetailed tasks within each of the Level 3 activitiesneeded to implement and manage the supply chainon a day to day basis.

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There are three types of processes in theSCOR model: planning, execution and enable.Planning processes plan the whole chain alongwithplanning specific type of execution process.Execution processes cover all process categoriesofSource, Make, Deliver and Return except theenable process categories. Enable process of aparticular process type defines the constitutionofthat particular process element. Using the fourlevels of the SCOR model, a business can quicklyand unambiguously describe its supply chain. Asupply chain that is defined using this approachcanalso be modified and reconfigured rapidly asbusiness and market requirements change. TheSCOR model has a powerful role in implementingsupply chains. The SCOR model Levels 1 and 2metrics keep management focused, while Level 3metrics support on-goingdiagnosis.

Metrics

Metric is a standard of measurement ofperformance that gives the basis on which toevaluate the performance of processes in the supplychain that must be reliable and valid. Reliabilitydeals with the consistency of your researchinstrument. Validity deals with whether thevariables are appropriately defined andrepresentative of the concepts or constructs underinvestigation.

Although the SCOR model provided variousperformance metrics for supply chain evaluation, itdid not indicate whether the metrics were suitablefor all type of industry, and therefore, SCOR modelcustomization is sometimes required. The selectionof suitable performance metrics associated to eachprocess element including the suitable performancemetrics to evaluate supply chain performance.Calculation of a metric may be dependent not onlyon the process data items but on the calculation ofmore detailed, lower level metrics as well. TheSCOR model does not prescribe a method forrolling up the metrics.

The latest version of SCOR model endorses13 performances of the level 1 metrics. Eachmetric of SCOR Model is associated with exactlyone out of five performance attributes namely

Performance Evaluation of ......Sudaryanto

Proceeding,International Seminar on Industrial Engineering and ManagementMenaraPeninsula. Jalwrta. AUJ!Ust29-30. 2007

Supply chain reliability, supply chainresponsiveness,supply chain flexibility, supplychaincosts, and efficiency in managing assets, asshownin Table2. In practice, it is very difficult toachievethe best performance in all 13 metrics,therefore,most companies typically choose amongfourto six of the 13 performance metrics to focuson.

The SCOR model has proven to benefitcompaniesthat use it to identify supply chainproblems.Bolstorff & Rosenbaum, (2003) revealsthe benefits of implementing SCOR model inbusinessorganization. The benefits comprise ofoperating cost reduction, customer serviceimprovement, rise in

Table 2. Levell metric

Source: SCOR

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Operating income and profit, improvementin return on investment (ROI) and in return onassets (ROA) as well. The use of a processreference model allows companies to communicateusing common terminology and standarddescriptions of the process elements that helpunderstand the overall supply chain managementprocess and the best practices that yield the optimaloverall performance.

RESEARCH METHOD

The method used to measure the supply chainperformance in this research is Supply ChainOperation Reference (SCOR) Model. It provides atramework for evaluating the performance ofsupply chain management in the corporation thatcomprises of five main processes namely plan,source, make, deliver and return. Moreover, theSCOR Model contains measures for operationalcontrol and until recently is recognizedas the mostcomprehensive approach for the evaluation ofsupply chain operation. The measure used in thisresearch comprises 13 performances of the level 1metrics. Each metric of SCOR Model is associatedwith exactly one out of five performanceattributesnamely supply chain reliability, responsiveness,flexibility, costs and assets.

The definition and calculationfor each metricaccording to Supply Chain Council (2007), canbriefly described as follows: delivery performancemeasures the percentage of orders deliveredon timewith respect to the total number of ordersdelivered.Fill rate is defined as percentage of ship-from-stockorders shipped within 24 hours of order receipt.Order fulfillment lead time indicates the averageactual lead time consistently achieved tromcustomer authorization of purchase order to finalinstallation/order completion at customer end. It iscalculated as percentage of sum of lead timerequired for each order fulfillment trom purchaseorder authorization to final installation divide bytotal number of orders. Perfect order fulfillment ismeasured by the percentage of orders meetingdeliver performance and with complete andaccurate documentation with no shipping damage.Supply chain response time refers to the time ittakes the integrated supply chain to respond toabnormal (significant) change in demand.

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Perfonnance Attributes

Customer Internalfacinl!. facinl!.

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Delivery performance

Fill rates

Perfect order fulfillment

Order fulfillment lead time

Supply chain response time

Production flexibility

Total SCM cost

Cost of goods sold

Value added productivity

Warranty return cost

Cash to cash cycle time

Inventory days of supply

Asset turn

Proceeding, International Seminar on Industrial Engineering and ManagementMenara Peninsula. JakrIrta. AUJ!USt29-30. 2007

Production flexibility can be seen in two parts,upside flexibility and downside flexibility. Upsideflexibility is number of days required to achieve anunplanned sustainable 20% increase in production.Downside flexibility is percentage order reductionsustainable at 30 days prior 'to delivery with noinventory or cost penalties. The productionflexibility is dependent upon internal manufacturingcapacity, direct labor and material availability andaffects inventory on balance sheet. Total logisticsmanagement cost is associated with the sum ofsupply chain related costs for order management,material acquisition, inventory carrying, financeand planning, and MIS costs. Cost of goods soldassociatedwith buying raw materials and producingfinished goods, includes both direct cost andindirect cost Value added productivity is calculatedas the differencebetween total product revenue andtotal material purchases divided by totalemployment. Warranty cost or returns processingcost includes materials, labor, and problemdiagnosis for product defects. Cash-to-Cash cycletime is a measure of the time required in days toconvert cash paid to suppliers into cash receivedfrom customers, including the inventory required.Inventory days of supply indicates the total grossvalue of inventory at standard cost before reservesfor excess and obsolescence. Asset turns refers tothe total turns of capital employed and calculatedas total gross product revenue divided by total netassets.

RESULTS AND DISCUSSION

The supply chain performance is defined as thepercentage of the actual achievement to the highesttarget (best in class) for each measurement metric.It should be noted however, that the consistency inmeasuring good performance should be maintained,whether the attributes associated with benefit orcost For attributes associates with benefits, i.edelivery performance, the higher the value, thebetter, and on the contrary, the lower the better forall attributes associate with the cost, for examplefor total SCM cost.

Through a linear transformation, the bestperformance will have the value of 100 % and theworst performance has the value of 0%. Forexample, based on the threshold value for

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measurement metric, the order fulfillment lead timeof 40 days will equivalent with the performance ofo % and 10 days lead time equal to achievement of75 % of performance. Through similartransformation, the target, actual achievement andthe performance of each attribute, known as SCMmetric score card, can be summarized as the Table1.

The results of the analysis of supply chainperformance of PT. Yuasa clearly indicate that theachievementof some performance attributes couldnot be fully met according with the target. In termsof supply chain reliability, two metrics namelydelivery performance and fill rate, both of them hasachieve the level of best in class with the value of99 %. This level indicates that the supply chainreliability of the company has achieved the ultimateperformance. It worth to be noted that the highachievement is more affected by good performanceof its supplier (external facing) selected by PT.Yuasa rather than due to internal factors.

Table 1. SCM metric score card 0 PT. YuasaNo Perfonnance Attribute Achive- Perfor-

ment mance%

In terms the responsiveness as measured bythe metric of order fulfillment lead time, the actualachievement is 10 days and thus place PT. Yuasaat the level of advantage with the performance levelof 75 %. The metric associated to the supply chainflexibility comprise of response time andproduction flexibility have different performancelevel. The response time (35 days) is still at the

Performance Evaluation of ... ...Sudaryanto

I Deliverv Derformance ("Ai) 100 99.1 99.12 Fill rates (%) 20 19 993 Orderfulfillment lead lime 1-30 10 75

(days)35 30 65

1-10 5 50

20 35 650.5 0.7 700.4 0.2 900.7 0.9 55

30 35 65

30 24 751.7 1.5 70

Proceeding, International Seminar on Industrial Engineering and ManagementMenara Peninsula. JakLlrta. AU$!USt29-30. 2007

advantagelevel, but the production flexibility of 5days clearly place PT. Yuasa its at mediumperformancelevel. Accordingly, the companyshould narrow this gap to achieve betterperformances.

Table 4.2. Actual versus competitive performance

of supply chain

Performance

as-isBest in classBest in classAdvantage

Advantage Best in class

Best in classBest in classBest in classBest in classBest in classBest in classBest in classBest in class

10.11.12.

Concerning the cost performance attributes,thevalueof the metric is mixed. In term of cost ofgoodand total SCM cost, the companyis still atthe performance level of advantage. In term ofwarrantycost, the company has achieve the best inclass performance level, and unfortunately, itsperformancein terms of value added employeeproductivityis fall in the medium competitive level.

Finally,all the metrics associated to the asset, i.einventorydays of supply, cash to cash cycle timeand asset turn have the performance of advantagelevel.

Basedon their actual achievement,therearefivedifferentcategories for supply chainperformance,namely major opportunity (0 - 20 %),disadvantage (>20 % -40%), medium (>40 %-60%),advantage(>60 % - 80%) and best in class(>80% -100%).

Ideally a company should achieve the bestperformancein all 13 metrics, but in practice it isverydifficult to realize them. In the case of PT.Yuasa, three metrics Le. delivery performance, fillrate,cost, warranty return cost) have achieved theirbestperformance. The empirical results reveal thatthe warrantyreturn cost is the only internal facingattributes achieving best in class performance.

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Accordingly, efforts should be made to improve theperformance of their supply chain attributes, bothfrom internal perspectives related to cost and assetand from the external parties such asresponsiveness and flexibility.

CONCLUSION

The empirical results of the measurement of supplychain performance with the case of PT. YuasaIndonesia indicates that the company has achievedthe best in their class for some performanceattributes associated to reliability (deliveryperformance, fill rate) and cost (warranty returncost). Two attributes Le. production flexibilityandvalue added employees still have mediumperformance and the rest attributes associatedwithsupply chain have the advantage performance.

REFERENCES

Morciniec, Michal and Michael Yearworth, Usingthe SCOR Model to Assess the Potential

Impact on Business Metrics of an IT Solution,Hewlett-P~ckard Labs, Bristol, UK, 2006

Supply Chain Council, Supply Chain OperationModel: SCOR Overview version 8.0,URL:www.supply-chain.orf!! galleries/default-file/SCOR800verviewBooklet2.pdf, July,2007a.

Supply Chain Council, SCOR Quick Reference,URL: http://www.supply-chain.orgl galleries/default -file/SCOR8.0ReferenceGuide.pdf, July, 2007b.

Bahri, R. Analisis terhadap pengukuran kinerjarantai pasokan (Supply Chain) denganmetode SCOR pada PT. Yuasa BatteryIndonesia, Skripsi, Department of IndustrialEngineering, Gunadarma University, 2007.

Boston Consulting Group, Creating the OptimalSupply Chain: special report, URL:www.bcg.com. July 2007.

Wikipedia, Supply Chain Management, URL:http://en. wikipedia.orglwiki/SuppIL chain_management August, 2007.

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