how to design a business blueprint

7/27/2019 How to Design a Business Blueprint

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How to design a business blueprin

Build a process-driven operations review by defining business requirements.by Peter Bolstorff

Will SCOR solve this problem?This question plus or minus a few other words came from a

general manager in the food processing industry who had justcompleted a quarterly operations review that turned sour. The turned

sour part happened after she presented the sales, cost, inventory andprofitability details by way of explaining why shed missed her planand what she was going to do about it.

As in the past, the gaps were not recognized until late in the quarterand high-level plans were slapped in place. Normally, this was fine,but in this particular quarter the company was feeling under the gun sothe executive team pressed the general manager for more details.

Her question to me about SCOR came about because she was asteering team member for a SCOR project that was about to begin theWork and Information Flow Design phase. Before I relate how Ianswered the question, let me first provide a brief background onquarterly operations reviews, as well as the project itself.

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keepingUpdating the Supply-Chain Councils implementation model


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For those of you who haventhad the opportunity to deliver anoperations review to seniormanagement, here are some keychallenges.

First, you must be able to comparethe actual top-line revenue to yourforecasted top-line and be ready toexplain any gaps.

Second, you must compare youractual costs both direct andindirect to your forecasted costs;if you are short on top-line, you willmost likely need to explain whyspending did not slow tocompensate for the shortfall.

Third, you must compare actualinventory turns with forecasted turnsand be ready to explain gaps ineither service or excess inventory.Usually there is a month lag inactual data, and after the update, you

have about a week to prepare. As aconsequence, in many companiestoday, gathering, analyzing andpreparing data to explain gaps istreated as an event and not a process.

Event-driven operations reviews:1) spend a disproportional amount of time collecting and formatting dataversus analyzing; 2) create a flurryof action (events) to close thegaps; and 3) focus business-leaderthinking on events instead of causeand effect.

To complicate matters, organiza-tional responsibility may be blurredbetween business units who own theP&L (profit & loss) and centralfunctions who operate the processes,creating conflict and finger-pointing.

Defining business requirementsfor process-driven operationalreviews is easier said than done. Ittakes courage. In the case inquestion, the executive team madethe decision to invest in using SCORto define how their businessprocesses would operate in advanceof an upgrade to their enterpriseresource planning (ERP) system thatadded functionality for advancedplanning.

The motives were these: self-fundthe technology investment throughsupply chain savings; design abusiness blueprint to leveragemore functionality faster andleverage out-of-box softwarefunctionality (no newcustomizations); and improve real-time business management.

The answer to the originalquestion is a resounding NO!

The SCOR model itself as itresides in dictionary form willnot change anything; however, aSCOR business blueprint,

effectively put into action, will.A blueprint is the result of theWork and Information Analysis ina SCOR project and summarizeswho performs what work usingwhat information (system modulesand sub-modules) at a definedperformance level. The blueprintforms the basis for the businessrequirements for an applicationimplementation.

This article will summarize aportion of a blueprint that describesthe key process relationshipsbetween plan and the executionprocesses of source , make anddeliver (return is still evolving ) tosupport a process-driven operationsreview.

To get the best value from theblueprint ( see chart, p. 36 ), thereare some important points tounderstand.

First, this is just a partial dia-gram; there are more bi-directionalarrows which exist moving inform-ation between many more processelements than are represented.

Second, for simplicitys sake, Ihave not illustrated the plan

elements in their Level 3 form (i.e.,P1.1, P1.2, etc.).Third, I have tried to simplify the

inputs and outputs that are found inthe SCOR dictionary based on myexperience using them; a live mapwould utilize language consistentwith the applications involved.

Finally, each blueprint is uniqueto the organization; swim lanesvary by size, corporate philosophy,control, etc.

N e w p r o d u c t s

Supply Chain Consultants Inc.(www.supplychain.com) has introdZemeter supply chain planningth eMicrosoft -based software eIt is an integrated platform of services and software that procollaborative decision supportplanning, inventory managemeoperations planning, and orde

Intermec Technologies Corp. s(www.intermec.com) MobileLANplatform-independent netw orkapplication that enables IT mamanage and ensure the availabpoints within their w ireless nscalable solution designed to wWindows , HP-UX , Linux and Solariplatforms.

PeopleSoft 8 eProcurement fromPeopleSoft Inc. (www.peoplesoautomates the entire purchasinrequisition to payment, givingservice capabilities to purchasservices. New business analytpurchasing managers to strateevery aspect of the procuremeincluding their spend by categtheir suppliers, and the effectiworkflow.


A b o u t S C O R

The Supply Chain Operat ions Reference (SCOR)model has been developed by the Supply-ChainCouncil and isSCTN s recommendedimplementation model for SCM initiati ves.W hile the author of this article is affiliated wit hthe Supply-Chain Council, this article w asprepared under the direction ofSCTN and wasnot subject to prior review or approval by theSupply-Chain Council or any of itsmembers/affiliates.

W h a t i s S C O R ?

TheSupply Chain Operations Referencemodel, developed by theSupply-Chain Council , provides a standard methodology formanaging supply chain projects.

Lets look now at key points foreach element within the blueprint.

Align Supply Chain Unit Planwith Financial PlanThis is the process of synchronizingthe financial forecast with the unitre-plan; the unit re-plan, in this case,refers to planned units based on yourdemand and supply plan. For thoseof you who are fans of B2Bconsulting firm Oliver Wight (www.ollie.com ), this step is like theReconciliation and LeadershipReview steps in the Sales andOperations Planning Process .

Without this step, a business unitruns the risk of positioning costs andassets at either of the extremes tosupport revenue, namely, too muchor not enough. The frequency of this

step is user-defined, but shouldoccur monthly at a minimum.The relationship between this step

and the following step PlanSupply Chain is an agreed uponre-plan; without this agreement we


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Finance and/orBusiness Team

SCOR Business Blueprint

Planning& Strategy

Logistics

Manufacturing

Purchasing

Agreed UponReplan

PlanSupplyChain

ReplenishmentRequirements

ConstrainedUnit Plan

MaterialRequirements

Align SupplyChain Unit Planwith FinancialPlan

Plan Deliver

Plan Make

Plan Source

ActualDemand

DistributionRequirementsPlan

MasterProductionSchedule

MaterialRequirementsPlan

ReserveInventory andPromise Date

ScheduleManufacturingActivities

ScheduleProductDeliveries

Blueprint essentials

For you trivia buffs, the SCOR model (assumingproposed 5.0 changes) has, at its lowest levelof decomposition, 72 process elementsdepicting the execution of work andinformation forSource , Make , Deliver andReturn . In addition, thePlan category contains20 process elements depicting the planning ofw ork and information. Lastly, the modelcontains 43 process elements describing dataand policy toenable the supply chain to planand execute.

The blueprint effectively documentsw ho isto perform the process step, what triggers theprocess (input), w hat and w here does theoutput trigger go, and what softw arefunctionality at either the module or sub-module level supports the w ork. The blueprintfocuses on six transaction types: sales order,purchase order, work order, returnauthorizations and tw o planning events replenishment orders and forecasts.

would potentially pit supply chainmanagement against businessperformance.

Experience says that the mosteffective owner of this step is thebusiness general manager (or theperson accountable for the P&Lperformance). In fact, this processstep helped our general manager inthe earlier example to reconcile andmanage costs and assets in relationto demand fluctuations before it wastoo late.

Plan Supply ChainThis is the process of taking actualdemand data and generating asupply plan for a given supplychain ( supply chain in this casecould be defined by customer,market channel, product,

geography or business entity). Thebasic steps require: a unit forecast that is adjusted formarketing and sales events; a supply plan that constrains theforecast based on resourceavailability ( resources in this case

assessing root cause forfluctuations in unit demand,exceptions in service, supply chaincost and inventory position.

Going back to our openingexample, this step helped our

general manager understand areconcile top-line gaps andestablish a course of action to balance costs and assets betwereviews and, hence, created a story based on facts.

Plan DeliverThis is the process of compariactual committed orders with tconstrained forecast generatedabove, and generating adistribution resource plan to saservice, cost and inventory gois carried out for each warehostocking location and may beaggregated to region or anothegeography type. This process is most closely associated withOliver Wights DistributionRequirements Planning .

The frequency of this step iuser-defined, but should occurmonthly at a minimum. This ishared process step betweenPlanning and Logistics; howevexperience says that the mosteffective owner of this procesis the centrally managed plannteam, as most of the activity isfocused on supply planning.

The relationship between thprocess step and:

1) Plan Make arereplenishment requirements,which tell the plant manager hmuch product to plan for;

2) Reserve Inventory andPromise Date is a distributrequirements plan, which letscustomer service know howinventory will be available topromise .

This process step helped ougeneral manager understand thbalance between inventory anservice levels in specific regioand is particularly important anew products are introduced inew markets.

Plan MakeThis is the process of compariactual production orders plusreplenishment orders with theconstrained forecast generatedabove, and generating a masteproduction schedule resource to satisfy service, cost andinventory goals. It is carried oeach plant location and may baggregated to region or anothegeography type. This step is m

Updating the Supply-Chain Councils impkeeping SCOR

could be inventory, manufacturingcapacity, or transportation); and a balance step wheredemand/supply exceptions areresolved and updated on thesystem.

Again, for Oliver Wight fans,this step is like the new Demandand Supply Planning steps in theSales and Operations PlanningProcess. The frequency of this stepis user-defined, but should occurmonthly at a minimum.

While the formal reportingstructure may vary, experience saysthat the most effective owner of this process step is a centrallymanaged planning team; there is abalance of activity betweendemand and supply planning .

The relationship between thisprocess step and Plan Deliver,

Make and Source is a constrainedunit plan because, without thisagreement, we would potentiallypit supply chain managementagainst business performance. Theprocess step provides moreeffective analytical resources


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closely associated with OliverWights Master ProductionScheduling .

The frequency of this step isuser-defined, but should occur atleast weekly. This is a sharedprocess step between Planning andManufacturing; but experiencesays the most effective owner of this process step is the centrallymanaged planning team; most of the activity is focused on supplyplanning.

The relationship between thisprocess step and:

1) Plan Source arereplenishment requirements,which tell the purchasing (orcommodity) manager how muchproduct to plan for ;

2) Schedule ManufacturingActivities is the master

production schedule, which letsthe plant scheduler know howmuch total product must be madeby the ship date.

This step helped our generalmanager understand the balancebetween unit cost, inventory leveland service levels by productfamily, and is important forseasonal fluctuations in demandwhere level loading factoryschedules for future demand iscritical.

Plan SourceThis is the process of comparingtotal material requirements with theconstrained forecast generatedabove, and generating a materialrequirements resource plan tosatisfy landed cost and inventory

goals by commodity type. It iscarried out for items on the bill of materials and may be aggregatedby supplier or commodity type.This process step is associated withOliver Wights MaterialRequirements Planning .

The frequency of this step isuser-defined, but should occurmonthly. This is a shared processstep between Planning andPurchasing; however, experiencesays that the effective owner of thisprocess step is the centrallymanaged planning team; most of the activity is focused on supplyplanning.

The relationship between thisprocess step and Schedule ProductDeliveries is the materialrequirements plan, which lets thebuyer know how much productmust be purchased based oncurrent orders, inventory and futurerequirements.

This step helped our generalmanager understand the balancebetween unit price from suppliersand total landed price, includinginventory carrying and transporta-tion cost. This is important for

seasonal demand fluctuationswhere purchasing quantities forfuture demand is critical.

In fact, the courage exhibitedby the executive paid off. Morefunctionality was implementedfaster and more effectively as aresult of the blueprint not thatthere werent any more souroperation reviews, since bad news isstill bad news.

Manahttan Associates (www.mhas releasedPkMS Pronto , an inw arehouse and transportation system for small- to mid-sizedThe product is designed to prodelivery time and increased orbenefits.

OptiSite 1.2 site location plannfromMicroAnalytics (www.besthelps with supplier selection astock products. It includes mulayers that can be exported and

Liaison Technology (www.liaisoreleasedContent Hub 1.0 softwardesigned to automate the prodmanagement of electronic catafeatures process rules, processintelligent exception handlingcustomization, flexible w orkfclassification functionality.

iristaTransport 8.2 fromIrista Inc.(www.irista.com) is an integratedtransportation solutions, incluiristaPlan , iristaShip and iristaAuditfunctionalities include high voplanning and consolidation, trplanning console, and freight aownership.

Engineers guide totransactional performance

Performance is measured for each transactiontype, focusing on productivity. Productivity, inthis case, refers to two simple concepts cycle time andyield .

Cycle time is defined tw o w ays. Eventcycle time is defined asthe amount of time spent from start to f inish on the task,assuming no lag time . Elapsed cycle time isdefined asthe amount of time spent from start to finish for all tasks to be completed .

For example, it may only take t hree minutesto enter a purchase order on the system buttw o days for the approval process to completethe w ork. In this case, event time is threeminutes and elapsed time is 48 hours. Theconstraint here as Im sureTheory of Constraints guru Eli Goldratt w ould agree is somewhere in the approval process; if it ispolicy, then a slick new system will not breakthe constraint. Productivity is dependent onelapsed time, which is w hy processimprovement is so important.

Yield is the second concept that impactsproductivity. Yield is defined asthe number (or percent) of transactions that require no rework .

The example here is the customer servicerepresentative w ho enters 1000 orders todayand has to reenter 250 tomorrow because ofcredit problems, customer ID issues, itemprice discrepancies, data entry errors, etc. Theyield in this case is 75%. The fact is that 1250orders were processed, not just 1000.Order management and material acquisitioncost (productivity) is a result of elapsed cycletime and t ransactional yield for sales ordersand purchase orders, respectively.

To learn more about the Supply-Chain Council:www.supply-chain.org

For basic information about SCOR:

www.supplychain.org/html/scor_overview.cfm

Related articlesPeter Bolstorffs entire Keeping SCOR seriesis available in .pdf format at theSCTNwebsite atwww.supplychaintech.com.

To reach Peter Bolstorff :[email protected]

For more about PRAGMA TEK:ww w .PRAGMATEK.com

To comment on this article:[email protected]


N e w p r o d u c t s

Now, theres a differentconfidence level in the teammembers; they have a handle on thekey issues and are responding tochanges in the marketplace betterthan the competition which istruly a sign of good supply chainmanagement.

copyright 2001, Penton Media Inc.

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