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TRANSCRIPT
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Supply Chain
Performance Measurement
Semaine ATHENS
18 - 23 November 2013
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What is Supply Chain?
Supply Chain is a network of facilities and distribution
options that performs the function of procurement of
materials, transformation of these materials into
intermediate and finished products and the distribution of
these finished products to customers. Supply chains exist
in both service and manufacturing organizations, although
the complexity of the chain may vary greatly from industry
to industry and firm to firm.
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Suppliers
Transporters
Customers
Manufacturers
Distributers3PL
What is Supply Chain?
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ConsumersRetailersDistributorsManufacturersSuppliers
Material Flow
Information flow
Financial flow
What is Supply Chain?
There is a close connection between the design and management of
supply chain flows (product, information, and funds) and the success
of a supply chain.
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What is SC Management?
Supply Chain Management (SCM) is the network of
organizations and systems that are involved through
upstream and downstream linkages, in the different
processes and activities that produce value in the form
of products and services in the hands of the ultimate
consumer.
The objective of every supply chain should be to
maximize the overall value generated
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Brief Introduction to SC/SCM
Performance Management and its importance
for SCM
Performance Drivers of SC
SCPM models
SCOR model / SCOR Metrics
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CustomersMonoprix
Stores
DCs +Log. Hubs
Detergentsmanufacturers
SuppliersSuppliers
Example 1 : Monoprix
Textile & LeatherManufacturersSuppliers
Electronics P.Manufacturers
Suppliers
Fresh productssuppliers
Suppliers
Food & DrinkManufacturers
Suppliers need to reduce costs or inventory
need to improve customer satisfaction
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CommunityPharmacies
+Private hospitals
Wholesalers
CPT(DC)
Foreign
Suppliers
Example 2 : Pharma SC
NationalManufacturers
Public hospitals
+Other P. Structures
Patients
Imported drugs
Locally manufactured drugs
Very regulated SC
Uncertain demand
Suppliers have long lead times
Main goal : supply availability
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Example 3 : HP
Suppliers
Suppliers
Suppliers
European DC Retailer
US DC Retailer
Far East DC Retailer
FAT
IC Mfg
PCAT
PrintMech Mfg
IC Mfg = Integrated Circuit Manufacturing
PCAT = Printed Circuit Assembly and Testing
FAT = Final Assembly and Testing
Print Mech. Mfg. = Print Mechanism Manufacturing
DC = Distribution Center
Suppliers
Customers
Customers
Customers
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SC Performance Management
Todayscompetition is supplychain versus supply chain
Creation of customer value.
Speedy, cost efficient and reliable supply chain.
Performance measures :
to enable improvements
to enable benchmarking
Key is to see what customers expect, how your
competition is doing and what do we need to do to bridge
and exceed that gap.
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MEASUREMENT is the key to performance
management since:
If you cannot measuresomething, you cannot
manageit
If you cannot managesomething, you cannotimproveit
SC Performance Measurement
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Total Supply Chain Management Costs (% of Revenue)
9,2%
12,3%
10,7%10,0%
10,7%
9,1%
6,6%7,4%
4,8%5,5%5,3%
4,2%3,5% 3,6%
5,4%
3,4%
0,0%
2,0%
4,0%
6,0%8,0%
10,0%
12,0%
14,0%
Automotive Indus tr ial Chemical &
Advanced Materials
Computer Consumer Goods Pharmaceutical Semiconductor Telecommunications
Equipment
Best-in-Class
Median
Source: PRTM/The Performance Measurement Group (http://www.pmgbenchmarking.com/ )
%o
fRe
venue
Best-in-class Companies Outperform Their Median Competitors with a50% Cost Advantage
SC Performance Measurement
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Competi tive Strategy
Supply Chain
Strategy
Efficiency Responsiveness
Faci li ti es Inventory Transpor tation
Information
Supply chain structure
Cross Functional Drivers
Sourcing Pricing
Logistical Drivers
Drivers of Supply Chain Performance
Performance drivers are those things that make performance go up or down
Source : Sunil Chopra and Peter Meindl, Supply Chain Management, 4rdedition, Prentice Hall, 2010.
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Drivers of Supply Chain Performance
trade-off between efficiency and responsiveness
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Top Supply Chain Challenges(source : http://supply-chain.org/)
Unable to apply the right metrics to manage supply
chains effectively
Difficulty prioritizing supply chain improvement efforts
Performance is lagging
Complexity of supply chains
Finding and holding on to supply chain talent
SC Performance Measurement
http://supply-chain.org/http://supply-chain.org/http://supply-chain.org/http://supply-chain.org/ -
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Supply chain metrics are very different from traditional
logistics metrics in that they measure inter-company
performance rather than just internal performance.
These measures of performance must be common
across the firms in the supply chain to be meaningful.
SCP Measurement Models
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SCP Measurement Models
SCOR
Balanced Scorecard
Activity-Based Costing (ABC)
The Logistics Scoreboard
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Custom
erprocessesS
upplierpro
cesses
Supply Chain
Custom
erprocessesS
upplierpro
cesses
Supply Chain
Process, arrow indicates material flow direction
Process, no material flow Information flow
DeliverMakeSource
ReturnReturn
Plan
SCOR: A Process Framework
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Process frameworks :
Standard processes: Plan, Source, Make, Deliver, Return
Standard metrics: Perfect Order Fulfillment, Cash-to-Cash
Cycle Time, Cost of Goods Sold, Order Fulfillment Cycle Time,..
Standard practices: EDI, CPFR, Sales & Operations Planning,
Pre-defined relationships between processes, metrics
and practices and inputs and outputs
SCOR: A Process Framework
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SCOR: A Process Framework
End-to-End Supply Chain
Supplier CustomerSuppliersSupplier
Source
Internal or External Internal or External
Your Company
Return
Deliver MakeSource
Return
Plan
Deliver
Return
Source
Return
MakeSource
Return
Plan
Deliver
Return
DeliverMake
Plan
Return Return
Customers
Customer
SCOR reference model
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Level 1 Level 2 Level 3 Level 4 Level 5
Scope Configuration Activity Workflow Transactions
Differentiates
Business
Differentiates
Complexity
Names Tasks Sequences Steps Links Transactions
Defines Scope Differentiates
Capabilities
Links, Metrics,
Tasks and
Practices
Job Details Details of
Automation
FrameworkLanguage
FrameworkLanguage
FrameworkLanguage
Industry orCompany
Language
TechnologySpecific Language
EDIXML
SCOR Hierarchy
S1 SourceStockedProduct
SSource
S1.2ReceiveProduct
Standard SCOR practices Company/Industry definitions
(source : http://supply-chain.org/)
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Stocked Product (S1) Make-to-Order (S2) Engineer-to-Order (S3)
S2.1 Schedule ProductDeliveries
S3.1 Identify Sources of
Supply
S3.2 Select Final Supplier(s)
and Negotiate
S1.1 Schedule ProductDeliveries
S3.3 Schedule ProductDeliveries
S1.2 Receive Product S2.2 Receive Product S3.4 Receive Product
S1.3 Verify Product S2.3 Verify Product S3.5 Verify Product
S1.4 Transfer Product S2.4 Transfer Product S3.6 Transfer Product
S1.5 Authorize Supplier
Payment
S2.5 Authorize Supplier
Payment
S3.7 Authorize Supplier
Payment
Source Process Elements
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Make-to-Stock (M1) Make-to-Order (M2) Engineer-to-Order (M3)
M1.1 Schedule Production
Activities
M2.1 Schedule Production
Activities
M3.1 Finalize Production
Engineering
M3.2 Schedule Production
Activities
M1.2 Issue Material M2.2 Issue Sourced/In-Process Product
M3.3 Issue Sourced/In-ProcessProduct
M1.3 Produce and Test M2.3 Produce and Test M3.4 Produce and Test
M1.4 Package M2.4 Package M3.5 Package
M1.5 Stage Product M2.5 Stage Finished Product M3.6 Stage Finished Product
M1.6 Release Product to
Deliver
M2.6 Release Finished
Product to Deliver
M3.7 Release Product to
Deliver
M1.7 Waste Disposal M2.7 Waste Disposal M3.8 Waste Disposal
Make Process Elements
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Deliver Process Elements
Stocked Products (D1) Make-to-Order (D2) Engineer-to-Order (D3)
D1.8 Receive Product from
Source or Make
D2.8 Receive Product from
Source or Make
D3.8 Receive Product from
Source or Make
D1.9 Pick Product D2.9 Pick Product D3.9 Pick Product
D1.10 Pack Product D2.10 Pack Product D3.10 Pack Product
D1.11 Load Product & Create
Documentation
D2.11 Load Product & Create
Documentation
D3.11 Load Product & Create
Documentation
D1.12 Ship Product D2.12 Ship Product D3.12 Ship Product
D1.13 Receive & VerifyProduct by Customer
D1.13 Receive & Verify Productby Customer
D1.13 Receive & VerifyProduct by Customer
D1.14 Install Product D2.14 Install Product D3.14 Install Product
D1.15 Invoice D2.15 Invoice D3.15 Invoice
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Different Model Types
SCOR recognizes different types of models. Each
serving a different purpose:
Business Scope diagram: Set the scope for a project or
organization
Geographic Map : Describes material flows in a geographic
context; Highlights node complexity or redundancy
Thread Diagram: Material flow diagram, focused on level 2
process connectivity; Describes high level process
complexity or redundancy
Workflow or Process Models: Information, material and work
flow diagram at level 3 (or beyond); Highlights information,
people and system interaction issues
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SCOR Metrics
P er fo r m a n c e A t t ri b u te: a characteristic to describe astrategy. Performance attributes serve as classification for
KPIs and metrics
K ey Per fo rm an c e In d ic at or (K PI): a metric that is
representative to measure the overall performance or state-of-
affairs
Metric: a standard for measurement
M e a s u r e m e n t : an observation that reduces the amount of
uncertainty about the value of a quantity
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Attribute Strategy
Reliability (RL) Consistently getting the orders right, product
meets quality requirements
Responsiveness (RS) The consistent speed of providing
products/services to customers
Agility (Flexibility)
(AG)
The ability to respond to changes in the
market (external influences)
Cost (CO) The cost associated with managing and
operating the supply chain
Assets (AM) The effectiveness in managing the supply
chains assets in support of fulfillment
Customer
Inte
rnal
Performance Attributes
What is/are the most important attributes to achieve your supply chainstrategy?
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SCOR Metrics Codification
SCOR metrics have unique identifiers:
1.Two capitals are performance attributes: RL, RS, AG, CO and AM (5)
2.Two capitals, a period the number one (1) and a number are strategic
(a.k.a. level 1) metrics:
RL.1.1, RS.1.1, AG.1.1, CO.1.1, CO.1.2, AM.1.3 (10 in total)
3.Two capitals, a period the number two (2) and a number are diagnostic
(a.k.a. level 2) metrics:RL.2.1, RS.2.1, AG.2.1, CO.2.1, CO.2.2, AM.2.7 (36 in total)
4.Two capitals, a period the number three (3) and a number are
diagnostic (or level 3) metrics:
RL.3.1, RS.3.1, AG.3.1, CO.3.149, CO.3.151, AM.3.44 (>500)
XX = performance attribute,
XX.1.n = level 1, XX.2.n = level 2, and so on
(source : http://supply-chain.org/)
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Attribute Strategic metricReliability RL.1.1 Perfect Order Fulfillment
Responsiveness RS.1.1 Order Fulfillment Cycle Time
Agility AG.1.1 Upside Supply Chain Flexibility
AG.1.2 Supply Chain Upside Adaptability
AG.1.3 Supply Chain Downside Adaptability
Cost CO.1.1 Supply Chain Management Cost
CO.1.2 Cost of Goods Sold
Assets AM.1.1 Cash-to-Cash Cycle Time
AM.1.2 Return on Supply Chain Fixed Assets
AM.1.3 Return on Working Capital
C
ustomer
Internal
KPIs: Strategic Metrics
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Metric: RL.1.1 Perfect Order Fulfillment
Definition: The percentage of orders delivered on-time, in full.
Components of perfect include all items and quantities on-
time, using the customers definition of on-time, complete
documentation and in the right condition
Calculation: [Total Perfect Orders] / [Total Number of Orders]
Diagnostic
Metrics:
(examples)
RL.2.1 % Orders Delivered in Full
RL.2.4 Perfect Condition
RL.3.19 % Orders Received Defect Free
RL.3.24 % Orders Received Damage Free
Notes: An order is perfect : An order must be: on-time AND in-full
AND right condition AND right documentation
Strategic Reliability Metric
(source : http://supply-chain.org/)
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Metric: RS.1.1 Order Fulfillment Cycle Time
Definition: The average actual cycle time consistently achieved to fulfill
customer orders. The actual cycle time starts with the receipt
of the order and ends with the customer acceptance of the
delivery. The unit of measure is days.
Calculation: [Sum Actual Cycle Times For All Orders Delivered] / [Total
Number Of Orders Delivered]
Diagnostic
Metrics:
(examples)
RS.2.2 Make Cycle Time
RS.2.3 Deliver Cycle Time
RS.3.96 Pick Product Cycle Time
Notes: Order Fulfillment Cycle Time includes dwell time. Dwell time is
the time no value add activities are performed on the order or
product, imposed by customer requirements.
Strategic Responsiveness Metric
(source : http://supply-chain.org/)
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Strategic Cost Metrics
Metric: CO.1.1 Total Supply Chain Management Cost (TSCMC)
Definition: All direct and indirect expenses associated with the operation
of supply chain business processes across the supply chain.
Traditionally Total Supply Chain Management Cost is measured
as a percentage of revenue.
Calculation: [Cost to Plan] + [Cost to Source] + [Cost to Deliver] + [Costto Return]
Diagnostic
(Level 2)
Metrics:
CO.2.1 Cost to Plan
CO.2.2 Cost to Source
CO.2.4 Cost to Deliver
CO.3.5 Cost to Return
Notes: The Cost to Make is captured in Cost of Goods Sold (COGS),
however there is some overlap between COGS and Supply
Chain Management Cost.
(source : http://supply-chain.org/)
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Strategic Cost Metrics
Metric: CO.1.2 Cost of Goods Sold (COGS)
Definition: The cost associated with buying raw materials and producing
finished goods. This cost includes direct costs (labor, materials)
and overhead.
Overhead is interpreted between companies.
Calculation: Direct Material + Direct Labor + Overhead
Diagnostic
(Level 2) etrics:
CO.2.3 Cost to Make
Notes: Overhead may contain elements of TSCMC that have been
allocated to the COGS related processes. Do not double count!
Cost toPlan
Cost toSource
Cost toMake
Cost toDeliver
Cost toReturn
Total Supply Chain Management Cost (TCSMC) ComponentCost of Goods Sold component
(source : http://supply-chain.org/)
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Metric: AM.1.1 Cash-to-Cash Cycle TimeDefinition: The time it takes for cash invested in materials to flow back
into the company after finished goods have been delivered to
customers. The unit of measure for Cash-to-Cash Cycle Time
is calendar days
Calculation: [Inventory Days of Supply] + [Days Sales Outstanding]
[Days Payable Outstanding]
Diagnostic
Metrics:
AM.2.1 Days Sales Outstanding (DSO)
AM.2.2 Inventory Days of Supply (IDOS)
AM.2.3 Days Payable Outstanding (DPO)
Notes: For services, the time between paying the resources assigned
to a service and receiving payment for the service delivery.
Strategic Asset Metrics
(source : http://supply-chain.org/)
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Metric: AM.1.2 Return on Supply Chain Fixed Assets
Definition: The return an organization receives on its invested capital in
supply chain fixed assets. This includes the fixed assets used
to Plan, Source, Make, Deliver and Return. Examples of fixed
assets include land, buildings, machinery, trucks
Calculation: ([Supply Chain Revenue] [COGS] [Supply Chain
Management Costs]) / [Supply Chain Fixed Assets]
Diagnostic
Metrics:
AM.3.11 Deliver Fixed Assets Value
AM.3.18 Make Fixed Assets Value
AM.3.20 Plan Fixed Asset Value AM.3.27 Source Fixed Assets Value
Notes: Supply-Chain Revenue is the operating revenue generated
from a supply chain. This does not include non-operating
revenue, such as investments, etc..
Strategic Asset Metrics
(source : http://supply-chain.org/)
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Typical SCOR Model Results
SCORMeasures
Unit of
Measurement
Median
Class
Best in
Class
Delivery
performance
Percentage 81% 96%
Upsideperformanceflexibility
Number ofdays
42.0 8.3
Cash to cashcycle
Number ofdays
66.6 24.7
(source : http://supply-chain.org/)
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Supply ChainCost/Industry
Unit ofmeasurement
MedianClass
Best inClass
Consumerpackaged goods
SCM cost % toRevenue
11.2 5.3
Chemical andPharmaceuticals SCM cost % toRevenue 9.8 4.0TelecomEquipment
SCM cost % toRevenue
8.5 3.3
Defense and
industrial
SCM cost % to
Revenue
10.2 4.5
Computers and
Electronics
SCM cost % toRevenue
9.1 4.0
Typical SCOR Model Results
(source : http://supply-chain.org/)
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Metrics Data
Each company will need to develop a tool or instructions
where to source the data for the SCOR metrics
There are two types of data:
Recorded data; obtain from ERP (Enterprise ResourcePlanning), WMS (Warehouse Management System), financial
systems, etc.
Observed data; obtain through interviews, error logs, audits
and/or time-studies. For example the observed percentage of
orders requiring additional customer setup in a system,percentage of manual repackaging events on the shipping dock.
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