scor framework

© 2011 Supply Chain Council. ALL RIGHTS RESERVED. | SCOR Framework | Slide 1

Copyright © Supply Chain Council. 2011. All rights reserved. The marks SCOR®, CCOR™, DCOR™ and SCOR Roadmap™ are the exclusive property of the Supply Chain Council.

SCOR FrameworkIntroducing all elements of the Supply Chain reference model: Standard processes, metrics, practices and skills


SCOR Framework Workshop

• Understand the history and context of SCOR• Learn the components of the SCOR framework

› Performance (metrics)› Process› Practices › People (skills)

• Learn how to describe a supply chain with SCOR• Understand how to characterize a supply chain

with SCOR metrics• Apply the SCOR framework using an example

SCOR project roadmap

new

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About Supply Chain Council

• Formed in 1996 to create and evolve a standard industry process reference model of the supply chain for the benefit of helping companies rapidly and dramatically improve supply chain operations

• SCC has established the supply chain world’s most widely accepted framework – the SCOR® process reference model – for evaluating and comparing supply chain activities and their performance

› It can be used to describe supply chains that are very simple or very complex using a common set of definitions and enabling a common understanding

› It lets companies quickly determine and compare the performance of supply chain and related operations within their company or against other companies

• SCC continually advances its tools and educates members about how companies are capitalizing on those tools

› With membership open to all interested organizations› Global presence, volunteer driven

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About SCOR: A Process Framework

• Process frameworks deliver the known concepts of business process reengineering, benchmarking, best practices and organizational design in a cross-functional framework› Standard processes; Plan, Source, Make, Deliver, Return› Standard metrics: Perfect Order Fulfillment, Cash-to-

Cash Cycle Time, Cost of Goods Sold,..› Standard practices: EDI, CPFR, S&OP, Cross-Training, ..› Standard job skills: Lean, Accounting, Solicitation, ..

• Pre-defined relationships between metrics, processes, practices and skills

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A Process Framework

• Combining 4 techniques into a single integrated approach

Business Process Re-engineering

Performance Benchmarking

Best Practices Analysis

Organizational Design

Capture the ‘as-is’ business activity and design the future ‘to-be’ state

Quantify relative performance of similar supply chains and establish internal targets

Identify the practices and software solutions that result in significantly better performance

Assess skills and performance needs and align staff and staffing needs to internal targets

Process Reference FrameworkProcesses Performance

(metrics)Practices People

(skills)

5


About SCOR: Supply Chain

• Viewing a company as processes (domains)C

ustomer processesSu

pplie

r pro

cess

es

Product/Portfolio Management

Supply ChainSCOR ®

Product DesignDCOR™

Sales & SupportCCOR™

Custom

er processesSupp

lier p

roce

sses

Product/PortfolioManagement

Supply ChainSCOR ®

Product & Process Design

DCOR™

Sales &SupportCCOR™

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Describing a supply chain…

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…is sometimes like describing an elephant with a blindfold.


What is a supply chain?

• Let’s consider a lemonade stand example.› What do you need to do to setup a lemonade stand?

8

Source DeliverMake

Plan

Return Return

SCOR® defines supply chain as:“ The processes that plan and execute the acquisition of materials, transformation of materials in sellable products, delivery and return of products and services in supportof customer orders ”


What is a supply chain?

• Let’s consider a lemonade stand example.› What do you need to do to setup a lemonade stand?

9

Incorporation

© 2011 Supply Chain Council. ALL RIGHTS RESERVED. | SCOR Framework | Slide 10ABC| 10

The Make Process: MTS vs. MTO

Quick Workshop

1. Order Cycle Time2. Product Variety

3. Unit Cost4. Inventory Investment

5. Critical Weakness (จุดอ่อน / จุดตาย)

6. Importance of Upstream vs. Downstream Partners

7. Management Tools for Successful Implementation

8. Others…

MTS MTO


Traditional Internal Supply Chain View11

Purchasing

• Lowest purchase price

• Inventory buffers

Production

• High utilization

• Long runs – minimize changeovers

• Low unit costs

• Safety stocks

Distribution

• Full truckload quantities

• Best shipping rate

• Safety stocks


Conflicts in Traditional Supply Systems

Marketing Operations FinanceTraditional Objective

Satisfycustomers and increase revenue

Reduce manufacturing costs

Increase profit and cash flow while reduce investment

Customer serviceProduction efficiencyInventory investment

12


Supply Chain: The Value Chain View

Develop Products and Services

Manage Procurement

Produce Products

Manage Distribution

Perform Marketing and Sales

13

Manage Customer Orders and Reserve Logistics

Manage Finance

Manage Human Resource

• The value chain consists of the value-adding processes that enable a company to take its products from conception to market

• The internal supply chain is a subset of the value chain• Support processes are important but are not considered value chain

processes


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Roles of (Internal) Supply Chain Management

Supply Chain Management is a vital coordinatingfunction. It balances the conflicting objectives ofmarketing, production, and finance by managing the flowof materials from raw materials to finished goods.

SCM makes the best use of resources to provide thedesired level of customer service.


Supply Chain

• SCOR defines supply chain as:“ The processes that plan and execute the acquisition of materials, transformation of materials in sellable products, delivery and return of products and services in supportof customer orders ”

Whether from Cow to Cone, Crude to Car or from Rock to Ring, SCOR is not limited by organizational boundaries

SCOR can be applied to supply chains in any industry and to any organization in the chain

Supplier CustomerSuppliers’Supplier

Source

Internal or ExternalYour Organization

ReturnDeliver MakeSource

Return

PlanDeliver

ReturnSourceReturn

MakeSourceReturn

PlanDeliver

Return

DeliverMake

Plan

Return ReturnCustomers’Customer

Internal or External

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End-to-End Supply Chain

Customer’s CustomerCustomerMy OrganizationSupplierSupplier’s Supplier

Sub assemblies Manufacturer Retailer ConsumerComponents

SourceDeliverSourceDeliverMakeSourceDeliverMakeSourceDeliverMakeSource

Process, arrow indicates material flow direction

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Supply Chain Processes


SCOR Processes

Process, arrow indicates material flow direction

Process, no material flow

Information, goods, financial flow

Custom

er processesSupp

lier p

roce

sses

Supply ChainC

ustomer processesSu

pplie

r pro

cess

esSupply Chain

DeliverMakeSource

ReturnReturn

Plan

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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, Practices

Job Details Details of Automation

Framework Language

Framework Language

Framework Language

Industry Language

Technology Specific Language

EDIXML

SCOR Process Hierarchy

sS1 Source Stocked

Product

sSSource

sS1.2Receive Product

Standard SCOR definitions Industry/company definitions

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Organization focused Activity focused

Organizational Hierarchy


Scope Configuration Activity Workflow Transactions

Differentiates Business

Differentiates Complexity

Names Tasks Sequences Steps Links Transactions

Defines Scope Differentiates Capabilities

Links Metrics, Tasks, Practices

Job Details Details of Automation

CxO (COO, CIO)EVPSVP

SVPVP

VPDirectorLine Manager

ManagerTeam Lead

Team Lead IndividualsProgrammer

EDIXML

sS1 Source Stocked

Product

sSSource

sS1.2Receive Product

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SCOR Process Codification

• SCOR processes have unique identifiers:1. Lower case s followed by capitalized letter are level-1 processes:

sP, sS, sM, sD and sR (5 in total)2. Lower case s plus capitalized letter plus a number are level-2:

sP1, sS2, sM3, sD2, sD4 (15 in total)Two groups of exceptions for level-2:

- Enable: sEP, sES, sEM, sED and sER (5 in total) and- Return: sSR1, sDR1, sSR2, sDR2, sSR3, sDR3 (6 in total)

3. Lower case s plus capitalized letter plus a number, a period and a number are level-3 processes:sP1.1, sP1.2, sS2.1, sM1.5, sD3.12 (111 processes in total)Two groups of exceptions for level-3:

- Enable: sEP.1, sES.3, sEM.4, sED.8, sER.1 (47 in total)- Return: sSR1.1, sDR1.3, sSR2.2, sDR2.4, sSR3.5, sDR3.1 (27 in total)

• sX = level-1, sXn = level-2, sXn.m = level-3• SCOR processes always start with a silent* lower case s.

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Reading SCOR process tables

process name

process definition

outputs

process ID

metrics

best practices

inputs

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Reading the SCOR graphics

process steps

process ID

inputs outputs

SCOR graphics should be considered as example process configurations

Different supply chains and practices may require different sequences and/ or workflow

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Execution Processes

› Processes: Source, Make and Deliver› Objective: value-add, revenue generating

Custom

er processesSupp

lier p

roce

sses

Supply ChainC

ustomer processesSu

pplie

r pro

cess

esSupply Chain

DeliverMakeSource

ReturnReturn

Plan

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Different capabilities, different characteristics

Stocked Product (sS1, sM1, sD1)• Replenishment, inventory/plan driven• Standard Materials• High fill-rate, inventory risk

Make-to-Order (sS2, sM2, sD2)• Customer order driven/tracing• Allows configurable materials• Longer lead times, lower inventory risk

Engineer-to-Order (sS3, sM3, sD3)• Customer requirements driven/tracing• Sourcing New Materials• Longest long lead-times, low fill rates,

lowest inventory risk, expensive process

D1R1 I1sM1sS1 sD1

I2

R1

D2R2 sD2

sS1

sM2sS2

I3

R1

D3R3

R1

R2

sD3

R1

sM3sS3

sS1

sS2

Level-2 Process Differentiation 27


• Customization Postponement “a business strategy to delay customization and/or finalization of a product or service until the last possible moment.”

sS1 sM2 sD2

Plan driven, not yet customized Order driven, customization

sS1

sM1

Level-2 Example Scenarios 28


Level-2 Example Scenarios

• Special Order Products in Retail “our catalog products are not kept as stocked items; if a customer wants to buy one of these we will place a purchase order on the manufacturer”

sS2 sS2 sD2

Central warehouse Retail store

sD2

purchase order

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Source (Process ID: sS)

• Objectives of this process:› The ordering, delivery, receipt and transfer of raw material

items, subassemblies, product, packaging and/or services.• Key processes comprehended:

› Schedule product deliveries› Receive, inspect, and store materials› Issue material to Make or Deliver processes› Supplier/Vendor Agreements› Vendor certification and feedback, sourcing quality› Manage Raw Materials inventories› Freight, import/export documentation

• Hint: Receiving processes? Probably Source in SCOR

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Source Level-2 Processes

• Source Stocked Product (Process ID: sS1)› The ordering and receiving (replenishment) of standard

products, components and services from existing contracts, based on material requirement plans.

• Source Make-to-Order Products (Process ID: sS2)› The ordering and receiving of standard or configurable

products, components and services for a unique and identifiable customer order (traceability).

• Source Engineer-to-Order Products (Process ID: sS3)› The vendor selection, ordering and receiving of products or

services that are designed, built or sourced based on the requirements or specifications of a identifiable customer order or contract.

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Stocked Product (sS1) Make-to-Order (sS2) Engineer-to-Order (sS3)

sS1.1 Schedule Product Deliveries


sS3.1 Identify Sources of Supply

sS3.2 Select Final Supplier(s) and Negotiate


sS1.2 Receive Product sS2.2 Receive Product sS3.4 Receive Product

sS1.3 Verify Product sS2.3 Verify Product sS3.5 Verify Product

sS1.4 Transfer Product sS2.4 Transfer Product sS3.6 Transfer Product

sS1.5 Authorize Supplier Payment



Source Level-3 Processes 32


sS2.2ReceiveProduct

sS2.4TransferProduct

sS2.5Authorize Supplier Payment

sS2.1Schedule Product

Deliveries

sS2.2ReceiveProduct

sS2.3Verify

Product




Deliveries

sS2.2ReceiveProduct

sS2.3Verify

Product




Deliveries

Question: Source Process Flows

• Which of the following flows is/are correct?

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Make (Process ID: sM)

• Objectives of this process:› The conversion process of adding value to products through

mixing, separating, forming, machining, and chemical processes, repair, refurbishment and/or decomposition.

• Key Processes Comprehended:› Schedule production, request and receive material from

Source and/or Make processes› Manufacture, assemble/disassemble and test product,

package, hold/release product› Managing product quality and engineering changes› Managing facilities and equipment, production status

workflow and capacity management› Manage Work-In-Process (WIP) inventories

• Hint: Item number change? Probably Make in SCOR

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Make Level-2 Processes

• Make-to-Stock (Process ID: sM1)› The making of standard products and services. Planning

processes determine what, how much and when to make in order to replenish inventory.

• Make-to-Order (Process ID: sM2)› The making of standard or configurable products and services

for identifiable customer orders. Customer orders determine what, how much and when to make. Customer orders can be traced throughout the Make process.

• Engineer-to-Order (Process ID: sM3)› The making of specialized products or services that are fully or

partially designed and made based on the unique requirements and specifications of a identifiable customer order or contract. Customer orders and specifications can be traced throughout the Make process.

36


Make-to-Stock (sM1) Make-to-Order (sM2) Engineer-to-Order (sM3)

sM1.1 Schedule Production Activities


sM3.1 Finalize Production Engineering


sM1.2 Issue Material sM2.2 Issue Sourced/In-Process Product

sM3.3 Issue Sourced/In-Process Product

sM1.3 Produce and Test sM2.3 Produce and Test sM3.4 Produce and Test

sM1.4 Package sM2.4 Package sM3.5 Package

sM1.5 Stage Product sM2.5 Stage Finished Product

sM3.6 Stage Finished Product

sM1.6 Release Product to Deliver

sM2.6 Release Finished Product to Deliver

sM3.7 Release Product to Deliver

sM1.7 Waste Disposal sM2.7 Waste Disposal sM3.8 Waste Disposal

Make Level-3 Processes 37


sM1.2Issue

Product

sM1.3Produceand Test

sM1.5Stage

Product

sM1.6Release

Product to Deliver

sM1.1Schedule

Production Activities

sM1.2Issue

Product


sM1.5Stage

Product

sM1.1Schedule

Production Activities

sM1.2Issue

Product


sM1.5Stage

Product

sM1.6Release

Product to Deliver

Question: Make Process Flows

• Which of the following flows is/are correct?

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Deliver (Process ID: sD)

• Objectives of this process:› Perform customer-facing order management, shipping and

order fulfillment activities including outbound logistics.• Key processes comprehended:

› Product, service and price quotations › Order entry and maintenance› Order consolidation, picking, packing, labeling and shipping› Finished goods storage› Import/export documentation› Customer delivery and installation› Logistics and Freight Management› Manage Finished Goods inventories

• Hint: Order taking or Shipping? Probably Deliver in SCOR

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Deliver Level-2 Processes

• Deliver Stocked Product (Process ID: sD1)› The order management and delivery of standard products (and

services) that are replenished based on actual and/or anticipated orders (forecast).

• Deliver Make-to-Order Product (Process ID: sD2)› The delivery of standard or configurable products and services that

are obtained (Source or Make) for an identifiable customer order.

• Deliver Engineer-to-Order Product (Process ID: sD3)› The delivery of specialized products and services that have been

fully or partially designed in negotiation and based on requirements from a customer order and customer provided specifications

• Deliver Retail Product (Process ID: sD4)› Simplified model for delivery of stocked goods in a retail store

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Deliver Level-3 Processes (1/3)

Stocked Products (sD1) Make-to-Order (sD2) Engineer-to-Order (sD3)

sD1.1 Process Inquiry & Quote

sD2.1 Process Inquiry & Quote sD3.1 Obtain & Respond to RFP/RFQ¹

sD1.2 Receive, Enter & Validate Order

sD2.2 Receive, Configure, Enter & Validate Order

sD3.2 Negotiate & Receive Contract

sD1.3 Reserve Inventory & Determine Delivery Date

sD2.3 Reserve Inventory & Determine Delivery Date

sD3.3 Enter Order, Commit Resources & Launch Program

sD1.4 Consolidate Orders sD2.4 Consolidate Orders sD3.4 Schedule Installation

sD1.5 Build Loads sD2.5 Build Loads sD3.5 Build Loads

sD1.6 Route Shipments sD2.6 Route Shipments sD3.6 Route Shipments

sD1.7 Select Carriers & Rate Shipments



¹ RFP = Request for Proposal, RFQ = Request for Quote› Order management processes (sDx.1 – sDx.7)

42


Deliver Process Elements (2/3)

Stocked Products (sD1) Make-to-Order (sD2) Engineer-to-Order (sD3)

sD1.8 Receive Product from Source or Make



sD1.9 Pick Product sD2.9 Pick Product sD3.9 Pick Product

sD1.10 Pack Product sD2.10 Pack Product sD3.10 Pack Product

sD1.11 Load Product & Create Documentation



sD1.12 Ship Product sD2.12 Ship Product sD3.12 Ship Product

sD1.13 Receive & Verify Product by Customer



sD1.14 Install Product sD2.14 Install Product sD3.14 Install Product

sD1.15 Invoice sD2.15 Invoice sD3.15 Invoice

› Material handling/shipping processes (sDx.8 – sDx.14)

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Deliver Process Elements (3/3)

• ‘The Retail supply chain model does not match up to the Manufacturing supply chain model, therefore processes are quite different’ or

• Alternative view:› sD4.1 = sS1.1› sD4.2 = sS1.2› sD4.3 = sS1.4› sD4.4 = sD1.8› sD4.5 = sD1.9› sD4.6 = sD1.2› sD4.7 = sD1.13 and sD1.14

Retail Products (sD4)

sD4.1 Generate Stocking Schedule

sD4.2 Receive Product at Store

sD4.3 Pick Product from Backroom

sD4.4 Stock Shelf

sD4.5 Fill Shopping Cart

sD4.6 Checkout

sD4.7 Deliver and/or Install

44


Question: Deliver Process Flows

• Which direction does the order flow? And materials?

sD1.7Select Carrier

& Rate Shipment

sD1.3Reserve Inv. &

Determine Delivery Date

sD1.2Receive, Enter &

Validate Order

sD1.1Process Inquiry &

Quote

sD1.8Receive

Product from Source/Make

sD1.9Pick Product

sD1.10Pack Product

sD1.15Invoice

sD1.12Ship Product

sD1.11Load &

Generate Documents

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Control processes: Plan, Enable

• Plan and Enable processes prepare the supply-chain to ensure smooth execution

• Planning processes balance the need for resources, materials, capacity, etc. with the availability of these resources. This includes prioritization if needed.

• Enable processes address 9-10 control aspects for the supply chain. They monitor compliance,deliver information from other processareas and highlight dependencies on these other process areas. They also support maintenance of relationshipswith suppliers.

48


Planning Processes

› Processes: Plan› Objective: Drive/coordinate execution processes

Custom

er processesSupp

lier p

roce

sses

Supply ChainC

ustomer processesSu

pplie

r pro

cess

esSupply Chain

DeliverMakeSource

ReturnReturn

Plan

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Plan (Process ID: sP)

• Objectives of this process:› The process of determining capacity, materials, staffing and

resource needed to achieve supply chain targets and the identification of corrective actions to address shortages in supply or demand.

• Key Processes Comprehended:› Supply chain revenue planning/forecasting› Materials requirement planning› Factory, repair, maintenance facilities capacity planning› Distribution requirements planning› Manage planning parameters

• Hint: Forecasting, S&OP, MRP? Probably Plan in SCOR

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Plan Level-2 Processes (1/2)

• Plan Supply Chain (Process ID: sP1)› Planning overall supply chain targets. Plan Supply Chain drives

and coordinates sP2, sP3, sP4 and sP5 plans (Compare to “Revenue plan”, or “Budget” in certain industries) – see also sEP.10

• Plan Source (Process ID: sP2)› Planning of material ordering and receiving activities. Plan Source

calculates which materials need to be available when to support the production plan (P3) and/or the delivery plan (P4). (Compare to “Materials Requirements Plan”)

• Plan Make (Process ID: sP3)› Planning of production and/or MRO activities. Plan Make ensures

the production resources (capacity) are in place as needed and may generate production orders. (Compare to “Production Plan” or “Master Production Schedule”)

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• Plan Deliver (Process ID: sP4)› Planning of order management, material handling and

transportation activities. Plan Deliver ensures resources are in place as needed and may generate or recalculate shipping dates based on material availability. (Compare to “Shipment Plan”, “Load Planning”)

• Plan Return (Process ID: sP5)› Planning of the reverse logistics shipping and material handling

capacity. Note: This does not include the maintenance, repair or overhaul activity planning as those are Make processes and therefore include in Plan Make.

52



Plan Supply Chain (sP1) Plan Source (sP2) Plan Make (sP3)

sP1.1 Gather Supply Chain Requirements

sP2.1 Gather Materials Requirements

sP3.1 Gather Production Requirements

sP1.2 Gather Supply Chain Resources

sP2.2 Gather Material Resources

sP3.2 Gather Production Resources

sP1.3 Balance Supply Chain Resources with Requirements

sP2.3 Balance Material Resources with Requirements

sP3.3 Balance Production Resources with Requirements

sP1.4 Establish & Communicate Supply Chain Plans

sP2.4 Establish Sourcing Plans

sP3.4 Establish Production Plans

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Plan Deliver (sP4) Plan Return (sP5)

sP4.1 Gather Delivery Requirements

sP5.1 Gather Return Requirements

sP4.2 Gather Delivery Resources

sP5.2 Gather Return Resources

sP4.3 Balance Delivery Resources with Requirements

sP5.3 Balance Return Resources with Requirements

sP4.4 Establish Delivery Plans sP5.4 Establish & Communicate Return Plans

54


Plan Processes Similarity

sP1.1Gather

Supply ChainRequirements

sP1.2Gather

Supply Chain Resources

sP1.3Balance

Resources w/Requirements

sP1.4Establish

Supply Chain Plans

Supply chain plansPlanning BOMsDelivery plansOrders (sD2 and sD3)Return requirements

Production schedulesInventory availabilityWIP inventorySourcing plans Maintenance plans

Revenue plans

Capacity gaps

Plan Supply Chain (sP1) example shown

• All planning processes operate 4 basic steps:1. Gathering requirements2. Gathering resources3. Balancing resources with requirements4. Establishing and communicating the plan

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Plan Make

Plan Source

Plan Supply ChainPlan Supply Chain

sP1.1

sP1.2

sP1.3 sP1.4

sP1.1

sP1.2

sP1.3 sP1.4

sP2.1

sP2.2

sP2.3 sP2.4

sP3.1

sP3.2

sP3.3 sP3.4 21

to sP3.2

end full cycle begin next cycle

An Integrated Planning Process

• Integrated planning is an iterative process (best practice):1. The output of Plan Supply Chain is the input for Plan Source, Plan

Make, Plan Deliver and Plan Return2. The output of Plan Source, Plan Make, Plan Deliver and Plan Return

are inputs for Plan Supply Chain; The output of one cycle is the input for the next cycle

56


Enable Processes

Customer processesSu

pplie

r pr

oces

ses

Supply Chain

› Processes: Enable Plan, Enable Source, Enable Make,Enable Deliver and Enable Return

Custom

er processesSupp

lier p

roce

sses

Supply ChainC

ustomer processesSu

pplie

r pro

cess

esSupply Chain

DeliverMakeSource

ReturnReturn

Plan

58


Enable Processes

• Objective of these processes: › The Enable processes are five groups of processes under Plan,

Source, Make, Deliver and Return with 3 distinct types of objectives:

- Manage process performance- Manage process control data- Manage process relationships

• Key processes comprehended: › Managing business rules and monitoring adherence› Measuring supply chain performance and determine corrective

action› Managing risk and environmental impact› Managing the supply chain network and facilities

• Hint: Equipment or plant maintenance? Probably Enable

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Enable Level-2 Processes

• Enable Plan (Process ID: sEP)› Performance, data and relationship management processes for all

types of planning processes: Plan Supply Chain, Plan Source, Plan Make, Plan Deliver and Plan Return. Examples: maintain planning cycles, monitor planning accuracy, manage supply chain risks.

• Enable Source (Process ID: sES)› Performance, data and relationship management processes for all

receiving activities and supplier related processes. Examples: Monitor supplier performance, maintain what is sourced where.

• Enable Make (Process ID: sEM)› Enable management processes for manufacturing, repair and

overhaul type processes. Examples: BOM maintenance, preventive equipment maintenance, monitoring capacity utilization/shortage.

60


Enable Level-2 Processes

• Enable Deliver (Process ID: sED)› Performance, data and relationship management processes for all

order management, warehouse and distribution activities and forwarder related processes. Examples: Monitor order management and forwarder performance, maintain a distribution network, managing risk.

• Enable Return (Process ID: sER)› Enable management processes for all types of reverse logistics

processes: MRO returns, defective product returns and excess inventory returns. Examples: Maintain return approval rules, Maintain issue tracking software, maintain a return distribution network.

61


Reverse Processes

› Processes: Return (Source Return, Deliver Return)› Objective: reverse material flows

Custom

er processesSupp

lier p

roce

sses

Supply ChainC

ustomer processesSu

pplie

r pro

cess

esSupply Chain

DeliverMakeSource

ReturnReturn

Plan

64


Return (Process ID: sR)

• Objective of this process:› Moving material from customer back through supply chain

to address defects in product, ordering, or manufacturing, or to perform upkeep activities.

• Key Processes Comprehended› Identification of the need to return a product or asset› Requesting and issuing return authorization › Inspection and disposition decision-making› Transfer/Disposition of product or asset› Managing return transportation capacity› Managing returned material inventories

• Hint: Reverse material flow? Probably Return in SCOR

65


Return Level-2 Processes

• Return Defective Products (Process IDs: sSR1 and sDR1)› The return of products because the product is defective, the wrong

product was ordered or shipped. The product or order is not (working) according to specifications.

• Return Maintenance, Repair & Overhaul (IDs: sSR2 & sDR2)› The return of products (assets) to perform preventative maintenance,

(end-of-life) overhaul or repairs due to breakage/aging with use. The product is inspected and updated due to normal wear and tear.

• Return Excess Products (Process IDs: sSR3 and sDR3)› The return of excess inventories and inventories of product. The product

is new and in original packaging. Examples are end-of-life excess inventory, re-distribution of decentralized inventory.

• sSR = Source Return (return to source), • sDR = Deliver Return (return delivered goods)

66


• Positioning Source Return and Deliver Return› Consider the flow of goods, the positions of Source and Deliver

› Now, notice the positions of Source Return and Deliver Return

Supplier CustomerMy Company

Deliver Return

Source Return

Source Return

Deliver Return

CustomerMy Company

Deliver Source SourceDeliver

Supplier

Return Configurations 67


Return Level-3 Processes (1/2)

Defective Products (sSR1) MRO Return (sSR2) Excess Products (sSR3)

sSR1.1 Identify Defective Product Condition

sSR2.1 Identify MRO Product Condition

sSR3.1 Identify Excess Product Condition

sSR1.2 Disposition Defective Product

sSR2.2 Disposition MRO Product

sSR3.2 Disposition Excess Product

sSR1.3 Request Defective Product Return Authorization

sSR2.3 Request MRO Return Authorization

sSR3.3 Request Excess Product Return Authorization

sSR1.4 Schedule Defective Product Shipment

sSR2.4 Schedule MRO Shipment

sSR3.4 Schedule Excess Product Shipment

sSR1.5 Return (Ship) Defective Product

sSR2.5 Return (Ship) MRO Product

sSR3.5 Return (Ship) Excess Product

› Decide what to do with the goods (‘disposition’) and return goods if applicable (sSRx.1 – sSRx.5)

68


Defective Products (sDR1) MRO Return (sDR2) Excess Products (sDR3)

sDR1.1 Authorize Defective Product Return

sDR2.1 Authorize MRO Product Return

sDR3.1 Authorize Excess Product Return

sDR1.2 Schedule Defective Product Receipt

sDR2.2 Schedule MRO Product Receipt

sDR3.2 Schedule Excess Product Receipt

sDR1.3 Receive & Verify Defective Product

sDR2.3 Receive & Verify MRO Product

sDR3.3 Receive & Verify Excess Product

sDR1.4 Transfer Defective Product

sDR2.4 Transfer MRO Product sDR3.4 Transfer Excess Product

Return Level-3 Processes (2/2)

› Evaluate return requests and receive returned goods

69


Process Modeling Using SCOR

Drivers for modeling (Why do you model?)• Business opportunities:

› Strategy Development› Merger, Acquisition or Divestiture (companies, supply chains)› Process optimization and Re-engineering› Standardization, Streamlining and Management alignment› New business start-up (company and supply chain start-ups)› Benchmarking› Process Outsourcing

• Technology services:› Software implementation (ERP, PLM, QC)› Workflow & Service Oriented Architecture

71


Process Modeling Using SCOR

• SCOR recognizes 4 types of models. Each model serves a different purpose:

› Business Scope Diagram: Document the scope of a project or organization. Communicate the boundaries

› Geographic Map (Geo Map): Describe material flows in a geographic context; Highlight node¹ complexity or redundancy

› Thread Diagram: Material and information flow diagram, focused on level-2 process connectivity; Describe process strategy, complexity or redundancy

› Workflow Model: Material, Information, and workflow diagram at level- 3 (or beyond); Highlight information, people and system interactions and issues

• When models are developed in listed sequence (‘top-down’), each model builds on the previous model and requires limited incremental information¹) A node is a logical or geographic entity in a supply chain. E.g: Warehouse, Factory, Store

72


Supplier My Organization CustomerSupplier My Organization Customer

Supplier My Organization Customer

Creating a Scope Diagram

Steps to create a Business Scope Diagram1. Create or open the business scope diagram template2. Identify and enter the customers of your project or

organization3. Identify and enter the key nodes within your project

or organization4. Identify and enter the suppliers of your project or

organization5. Optionally link the nodes to reflect material and/or

information flows (using different color/stroke)

Flash Inc.

Battery ltd.

CompsFactory DC Retail Inc.

mp3 HQ

234

Flash Inc.

Battery ltd.

CompsFactory DC Retail Inc.

mp3 HQ55

1

73


Suppliers mp3, Inc. Customers

Service Providers

The Result: Scope Diagram

Flash Inc.

Battery ltd.

Components

Factory

Warehouse

Retail, Inc.

mp3 HQ

74


Retail, IncsS1, sP2

b

France

Spain

UKGermany

2

China

India

Creating a Geographic Map

Steps to create the Geographic Map:1. Create geographic context (a.k.a. the map)2. Draw and name your customers on the map

a. Identify the level-2 processes b. List the level-2 processes in the customer node

3. Starting with your customers, repeat for each node:a. Identify all supplying nodesb. Draw and name these supplying nodesc. Identify the level-2 processesd. List the level-2 processes in each nodee. Draw the material flows (connecting arrows)

Repeat until you have included all your suppliers1

MP3 FactorysS1, sM1, sD1

3

b¹d¹

Drive SuppliersD1, sP1, sP4

b²d²

e²

e¹

75


Drive SuppliersD1, sP1, sP4Battery Supplier

sD1, sP1, sP4

Retail, IncsS1, sP2

MP3 FactorysP3, sS1, sM1, sD1

HQsP1, sP2, sD2, sS2

Result: The Geographic Map

Question: No flow from HQ; Why?

76


Creating a Thread Diagram

77

Suppliers My Organization Customers

1Steps to create a SCOR Thread Diagram1. Create or open the thread diagram template2. Repeat these steps for every relevant node on the

geographic map:a. Create a column (node) in the appropriate classb. Create process representations for each nodec. Link the processes in the column (node) to

represent the material flowsd. Link the processes to the previous node’s Repeat until all relevant nodes have bee created

3. Optionally add information flows (using different color/stroke)

a

2 b c

d

3

77


Result: The Thread Diagram

Suppliers mp3 Incorporated Customers

Battery Supplier Drive Supplier mp3 Inc

factorymp3 Inc HQ mp3 Inc warehouse Retail, Inc

sD1

D1

sS2

sP1

sP2sP3sP2sP4

sS1 sM1 sD1

sS1 sD1

sS1

78


Modeling with SCOR

Steps to establish SCOR process models (workflows)1. Obtain generic descriptions (this is what people describe)2. Map these generic descriptions to SCOR process IDs (normalize)3. Create swimming lanes to reflect organizational boundaries4. Create workflow with these SCOR processes5. Add description to workflows to reflect inputs/outputs of the processes6. Optionally add other relevant information

1. Orders are faxed in and entered in OMS2. Every night the orders are scheduled3. The orders are released to the factory

based on the delivery date offset4. Factory creates and schedules factory

work orders in SFCS

1

sD2.2 Receive, Enter, Validate OrdersD2.3 Reserve Inventory & Determine

Delivery Date


2

79


Modeling with SCOR

faxfaxfax

sD2.2 sD2.3

sM2.1

OMS OMS

W.O.

S.O.

SFCS

My

Com

pany

Cus

tom

erTh

e Fa

ctor

y

4

sM2.2

S.O.

SFCS

3

Steps to establish SCOR process models 1. Obtain generic descriptions 2. Map these generic descriptions to SCOR process

IDs (normalize)3. Create swimming lanes to reflect organizational

boundaries4. Create workflow with these SCOR processes5. Add description to workflows to reflect inputs and

outputs of the processes6. Optionally add other relevant information

5

6

80


sD1.3Reserve Inv.

Calculate Date

Result: The Workflow Diagramm

p3 H

Q(C

uper

tino)

mp3

Fac

tory

(S

henz

hen)

Ret

ail,

inc.

(Am

ster

dam

)

sD2.2Receive, Enter, Validate Order

sD2.3Reserve Inv.

Calculate Date

sS1.1Schedule Prod.

Deliveries

Customer P.O. Delivery Commit

sS2.1Schedule Prod.

Deliveries

sD1.2Receive, Enter, Validate Order

Inter-Company P.O.

C.O. = Customer Order, Inv. = Inventory, P.O. = Purchase Order, Prod. = Product

C.O. C.O.

81


Collecting Process Information

not in SCOR

organization

activity

business rules

technology

measurements

inputs outputs

people

metrics

best practices

geography

platform

interfaceskills

• Process is defined by more than just activity

82



Staple-Yourself-To-An-Order • Proven technique to obtain generic language process descriptions: • Follow the logical flow of an order through the process.

› Each level-1 process has an order (except Plan): Customer order for Deliver, Production order for Make, Purchase order for Source and Return Authorization for Return.

› For each order start with the process of order creation and follow the order and document each activity until the order is completed/closed.

› Similarly follow the steps of the planning cycles you encounter.• Finally cover any process you have missed so far; • Use your SCOR list of processes as a check-list.

› Hint: To obtain generic descriptions for an end-to-end supply chain: Start with Plan, then Deliver, Make, Source.

› Consider virtual (conference room) staple-yourself-to-an-order

83



• The purpose of capturing process is to understand it and remove, adjust or repair it where needed

• Recognize process characteristics:• 'Measurements': It takes 30 minutes to build…• 'Business rule': The plan is updated weekly…• 'People': This is handled by Joanna on Thursdays …• 'Business rule': This is done to provide .. with .. data..• 'Inputs' or 'triggers': When we receive the document..• 'Outputs': We send them the document..• 'Technology': We print the document from the .. system..• 'Business rules': We need two copies of the form ..

• Verify hearsay statements, to eliminate perception

84


Supply Chain Performance


Supply Chain Performance

• Definitions:› Performance Attribute: a characteristic to describe a

strategy. Performance attributes serve as classification formetrics and formulate strategic direction

› Key Performance Indicator (KPI): a metric to measure the overall performance or state-of-affairs. SCOR level-1 metrics are considered KPIs

› Metric: a standard for measurement› Measurement: an observation that reduces

the amount of uncertainty about the value ofa quantity

• SCOR metrics = Diagnostic metrics› Monitor and diagnose overall supply chain health› Diagnostic relationships (hierarchy) allows gap analysis

86


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 (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 chain’s assets in support of fulfillment

Cus

tom

erIn

tern

alSCOR Performance Attributes

Question: What is/are the most important attributes to achieve your supply chain strategy?

87


Attribute Level-1 Level-2 Level-3 Level-4Strategy Overall Health Diagnostic Root cause Transactional

Set scope, priority, and strategic direction

Measures ability to execute strategy

Explains why strategy is not achieved

Identifies root causes of strategy gaps

Measures (IT) transactional performance

Framework Language

Framework Language

Framework Language

Framework Language

Technology Specific Language

SCOR Performance Hierarchy

RL.1.1Perfect Order

Fulfillment

RLReliability

RL.2.4Perfect

Condition

Standard SCOR metrics

RL.3.19Orders Received

Defect Free

Standard SCORattribute

Technologydriven metrics

Transactions Processed Error Free

88


SCOR Performance 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 KPIs or

strategic (level-1) metrics: RL.1.1, RS.1.1, AG.1.1, CO.1.1, CO.1.2, AM.1.3 (11 in total)

3. Two capitals, a period, the number two (2) and a number are diagnostic level-2 metrics: RL.2.1, RS.2.1, AG.2.1, CO.2.1, CO.2.2, AM.2.7 (45 in total)

4. Two capitals, a period, the number three (3) and a number are diagnostic 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 metric, XX.2.n = level-2 metric, and so on

89


Attribute Strategic metric

Reliability 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

AG.1.4 Overall Value at Risk (VaR)

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

› Measuring strategy: KPIs are strategic (level-1) metrics

Cus

tom

erIn

tern

alSCOR Level-1 Metrics (KPIs) 90


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 customer’s definition of on-time, complete documentation and in the right condition

Calculation: [Total Perfect Orders] / [Total Number of Orders] * 100%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 only if ALL L2/L3 metrics are perfect; An order must be: on-time AND in-full AND right condition AND right documentation

Strategic Reliability Metric 91


Metric: RS.1.1 Order Fulfillment Cycle TimeDefinition: 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 may include dwell time and idle time. Dwell time is days the order was placed in advance by the customer. Idle time is the time the order is waiting because of inefficiencies of the supply chain.

Strategic Responsiveness Metric 92


Strategic Agility Metrics

Metric: AG.1.1 Upside Supply Chain FlexibilityDefinition: The number of days required to achieve an unplanned

sustainable 20% increase in quantities delivered. Seasonality is not considered unplanned/unforeseen. The unit of measureis calendar days.

Calculation: The larger of the number of days required to achieve sustainable increase for Source, Make and Deliver

Diagnostic Metrics:

• AG.2.1 Upside Source Flexibility• AG.2.2 Upside Make Flexibility• AG.2.3 Upside Deliver Flexibility

Notes: This metric may have more than one Source, Make and Deliver Flexibility component depending on the complexity of the supply chain.

93


Metric: AG.1.2 Supply Chain Upside Adaptability/AG.1.3 Supply Chain Downside Adaptability

Definition: The sustainable reduction and increase or decrease in product quantities that can be achieved in 30 days (without back-orders, cost penalties or excess inventory). Adaptability is expressed as a percentage of current run-rate.

Calculation: Upside: Percentage sustainable increaseDownside: Percentage sustainable reduction

Diagnostic Metrics:

• AG.2.1 Upside Source Adaptability• AG.2.12 Downside Make Adaptability• AG.3.47 Direct Labor Availability

Notes: This metric may have more than one Source, Make and Deliver Adaptability component depending on the complexity of the supply chain.

Strategic Agility Metrics 94


Strategic Agility Metrics

Metric: AG.1.4 Overall Value at RiskDefinition: The sum of the probability of risk events times the monetary

impact of the events which can impact any core supply chain functions (e.g. Plan, Source, Make, Deliver and Return) or key dependencies.

Calculation: Sum (Probability of a risk event x Monetary impact of the occurrence of the event)

Diagnostic Metrics:

• AG.2.15 Value at Risk (Source)• AG.2.18 Value at Risk (Deliver)• AG.2.19 Value at Risk (Return)

Notes: Risk/Agility not a perfect match: Agility focuses on ability to respond to unplanned influences. Value at risk calculates the total expose to certain types of unplanned events.

95


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] + [Cost to Return]

Diagnostic Metrics:

• CO.2.1 Cost to Plan• CO.2.2 Cost to Source• CO.2.3 Cost to Deliver• CO.2.4 Cost to Return

Notes: The Cost to Make is captured in Cost of Goods Sold (COGS), however there is some risk for overlap between COGS and Supply Chain Management Cost.

Strategic Cost Metrics 96


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 Metrics:

• CO.3.140 Direct Labor Cost• CO.3.141 Direct Material Cost

Notes: Overhead may contain elements of TSCMC that have been allocated to the COGS related processes. Do not double count!

Strategic Cost Metrics

Cost toPlan

Cost toSource

Cost to Make

Cost toDeliver

Cost toReturn

Total Supply Chain Management Cost (TCSMC) ComponentCost of Goods Sold component

97


Metric: AM.1.1 Cash-to-Cash Cycle Time

Definition: 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, this is the time between paying the resources assigned to a service and receiving payment for the service delivery.

Strategic Asset Metrics 98


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, sale of assets, etc..



Metric: AM.1.3 Return on Working Capital

Definition: Return on working capital assesses the magnitude of investment relative to a company’s working capital position verses the revenue generated from a supply chain. Components include accounts receivable, accounts payable, inventory, revenue, cost of goods sold and total supply chain management costs.

Calculation: ([Supply Chain Revenue] – [COGS] – [Total Supply Chain Management Costs]) / [Working Capital]

Diagnostic Metrics:

• AM.2.6 Payables Outstanding• AM.2.7 Sales Outstanding• AM.2.8 Inventory

Notes: Supply Chain Revenue is the operating revenue generated from a supply chain. This does not include non-operating revenue, such as investments, sale of assets, etc..



Performance Measurement Using SCOR

Drivers (Why do you measure?)• Managing a Business:

› Set realistic targets (benchmarking)› Understanding the condition or health of your supply chain› Identify and correct problems before they ‘occur’:

- Address issues before the customer experiences problems- Address issues before they hurt the bottom line (e.g. inventory)

› Mitigate risk• Managing a Project:

› Set realistic targets (benchmarking)› Monitor the ongoing business external to your project› Root cause analysis› Monitor improvement driven by change

102


Performance Measurement Using SCOR

Definitions• Scorecard: A visual display of the most important information

needed to achieve one or more objectives, consolidated and arranged in a single view

• Balanced Scorecard: A scorecard providing metrics related to four organizational strategies: financial, customer satisfaction, internal process excellence/efficiency, and employee learning and growth

• SCORcard: A scorecard providing metrics related to the five SCOR supply chain strategies: reliability, responsiveness, Agility, cost and assets

• Benchmarking: Comparing an organization’s performance, products, practices, and/or services with those of other organizations that operate in the same or comparable industry

103


SCORcards

SCORcard metric requirements:• Measurable and quantifiable

Avoid 'feel good' metrics like supplier satisfaction or customer satisfaction, unless they are an aggregation of well-defined detail metrics. Framework-based metrics simplify the selection process.

• Linkage to responsibilityAvoid metrics that have no impact on performance reviews (supplier or employee), ensure the metric is linked to the (right) process owner at the right level.

• Ensure metric is well-definedMultiple interpretations of a metric may lead to 'workarounds' and negation of the effort. SCOR metrics are pre-defined; limiting the discussion on metric definitions.

104


Creating a SCORcard™

Steps to create a SCORcard• Understand the supply chain (develop the scope diagram,

geographic map and thread diagram to fully comprehend the configuration of the supply chain

• Select metrics • Interpret metrics definition (determine how to calculate the

values based on your contracts and service level agreements)• Document where/how to collect the data• Document how to calculate and aggregate the metrics• Pilot the SCORcard; test the calculations with subset of orders

or transactions• Automate the SCORcard; simplify the process of collecting data

and calculating metric values• Organize periodic SCORcard review sessions

105


Metrics Interpretation

Understand the purpose of each metric• Customer facing metrics should be measured as close to the

customer experience as possible. › The moment of order submission instead of order entry › Delivered performance instead of shipping performance› Received quality instead of produced or shipped quality

• Measure what makes sense: Don’t have data? Approximate the missing component until you will be able to obtain the data

• Trend data is more important then a single measurement• It is not about how you think it should be measured, ask your

customer what is important to him/her

106


Metrics Data

• Each company will need to develop instructions or a tool to source the data for the SCOR metrics

• There are two types of data:› Recorded data; obtain from transactional systems such

as ERP (Enterprise Resource Planning), WMS (Warehouse Management System), financial systems, etc. For example: compare time-stamps in these systems to calculate cycle times.

› 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.

• There is no easy button

107


Attribute Strategic metric (level-1) Actual

Reliability Perfect Order Fulfillment 54%

Responsiveness Order Fulfillment Cycle Time 6 days

Agility Supply Chain Flexibility 24 days

Cost Total Supply Chain Management Cost 10.6%

Cost of Goods Sold 87%

Assets Cash-to-Cash Cycle Time 4 days

Example SCORcard

• Select 1 or 2 metrics that represent the best way to measure a strategy• Focus on a few metrics at a time, but don't lose sight of the others• New teams: choose dozens of metrics; mature Teams: 1-2 KPIs

• Questions: How many metrics does your company measure?Are listed performances: leading, good, mean or poor?

Cust

omer

Inte

rnal

108


Benchmarking

• Definitions› Benchmarking: Comparing an organization’s performance with

those of other organizations that operate in the same or comparable industry

› Parity: Being equal in performance; No real advantage over others› Advantage: Being in a favorable position; In a stronger position

than parity, but not yet achieving Superior performance› Superior: Being of high rank or quality; Leaders not outlier

• Usage› Establish Realistic Goals. Know where you are relative to others

(competitors or peers), and state where you're going. › Monitor Performance. Track relative progress you and others (your

competitors or peers) make.

109


Benchmark Requirements

Compare like for like • Use standard metrics

A numerical comparison of the performance of two companies in the same industry may not have value when the metric is different.

• Measure the same process/business modelAvoid comparing the performance of a make-to-stock process to an engineer-to-order process. The purpose of these processes is different, measure them accordingly.

• Understand the DemographicsMake sure you understand the other organizations in thebenchmark. Regional differences, and differences inproduct, or services may influence results.

110


Exercise: Benchmark (1/3)

› Step 1, Interpret the definitions, find the data sourcesand calculate metrics for each company

DSO IDOS DPO C2CCompany 1

Company 2

Company 3

Company 4

Company 5

Company 6

Company 7

DSO = Days Sales Outstanding, DPO = Days Payables Outstanding, IDOS = Inventory Days of Supply, C2C = Cash to Cash Cycle time

113



› Step 2, Copy and sort (for each metric) the results from the previous slide

DSO IDOS DPO C2C

Best

Median

Worst

Superior

Parity

1

2

DSO = Days Sales Outstanding, DPO = Days Payables Outstanding, IDOS = Inventory Days of Supply, C2C = Cash to Cash Cycle time

114



› Step 3, Copy the results from the previous table and calculate Advantage

Actual Parity Advantage Superior

Days Sales Outstanding

Inventory Days of Supply

Days Payables Outstanding

Cash-to-Cash Cycle Time

12 3

115


Exercise: Results & Analysis

› Compare company ‘GG’ actuals with desired Advantage› Discuss which metric to improve to achieve Advantage

Actual Parity Advantage Superior

Days Sales Outstanding 41 60 50 41

Inventory Days of Supply 67 45 25 4

Days Payables Outstanding 26 42 98 154

Cash-to-Cash Cycle Time 83 48 12 -25

Desired improvement: 71 days

116


Supply Chain Practices


Practices: Definitions

Definitions:• Best practice: "A current, structured, proven and repeatable method

for making a positive impact on desired operational results."• Current: Must not be emerging and can not be antiquated• Structured: Has clearly stated goal, scope, process, and procedure• Proven: Success has been demonstrated in a working environment

and can be linked to key metrics• Repeatable: The practice has been proven in multiple environments.Importance• Internalize SCOR by adding best practices for your industry• Alternatives to the way you do business• Equalize the competitive landscape

118



Supply chain Major process Some activities Transactional Infrastructure

• Many processes

• Multiple nodes• May extend

beyond company boundaries

• One or few Level-2 processes

• One or few Level-3 processes

• (Automation of) business transactions

• One specific activity. E.g. how to operate equipment used

• Infrastructural level of automation

• Activity details. E.g. System settings of equipment used

ERPSystem

CollaborativePlanning

EDI EngineeringCatalogues

Initiate & ReceiveEDI Catalogue

CatalogTransactions

Practices Hierarchy

Note: No formal hierarchy exists in SCOR practices. This diagram illustrates the span of practices; similar to span of processes and metrics.

Standard SCOR practices Industry/company practices

119


Types of Practices

• Leading practice: Few have it, proprietary restrictions may exist, not proven in many industries, changing the competitive landscape, major improvement in one or more performance attributes/metrics.

• Best practice: Widely accepted, (significant) improvement over common practices, applicable to majority of industries, plus ‘current, structured, proven and repeatable’.

• Common practice: Generally accepted as minimum standard, baseline of acceptable performance, clearly defined, accepted in all industries (few to no exceptions).

• Outdated practice: No longer accepted, widely identified as insufficient, compliance issues, lagging results.

• A practice should match several of the listed characteristics to qualify as a practice of that type.

120


How to determine fit?• Assign each best practice a pin• Determine risk, investment• Determine return• Push the pin in the resulting

quadrant• Some pins may not make the

table at all: Not appropriate for your supply chain, business or industry

Best Practice Selection

• Are all best practices equally important for you?› SCOR contains over 200 practices today - do you need all?› Implement a best practice IF it makes sense for your specific

processes, business, or industry.

Low Effort/Risk High Effort/Risk

quickwins

Sponsorissue

nice to have consider carefully

Low

Retu

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gh R

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n

121


Benchmarking Best Practices

• Definitions› Benchmarking: Comparing an organization’s performance, products,

practices, and/or services with those of other organizations that operate in the same or comparable industry

› Best practices benchmarking: Comparing the occurrence and maturity of best practices in an organization’s processes with those of other organizations

› Implementation Maturity: The quality or level of implementation of a practice within a supply chain

• Base-lines› In-company benchmarking; benchmarking supply chains within the

same company› Industry benchmarking; benchmarking same industry/competitors› SCOR benchmarking; companies in multiple industries using SCOR

as the base-line

124


Example Practices Benchmark

• Example: In-company benchmark› Through interviews and questionnaires information was

collected for 5 similar supply chains within one company. The questions included:

› Is this best practice relevant for your business?› If answered yes; in what stage of implementation is it?

• Mature; In place across all relevant products and services• In process; Deploying it; Not in place across all relevant

products/services yet. • Planned; Have budget/plans/people in place to implement this

practice. No relevant products/services are currently supported by this best practice

• Unplanned; Not recognized as important and/or no budget/resources allocated yet.

125


Example Practices Benchmark

• Benchmarking results for a benchmark of 5 supply chains (baseline = SCOR)

126


Best Practices and Technology

• Many Best Practices involve technology› ERP = Enterprise Resource Planning› EDI = Electronic Data Interchange › Barcode / RFID› Advanced Planning and Optimization

• Don’t overlook non-technology practices› Training Programs (Example: cross-training)› Collaborative Planning (Can be done without complex

systems)› Joint Service Agreements› Supplier Development Programs› Certification Programs

127


Supply Chain People


People: Standards for Skills

Typical SCOR projects involve • Performance (targets) changes• Process changes• Organizational changes = Organization Design

Organization design involves the definition of roles, processes, and formal reporting relationships in an organization• Strategic Organization Design – organizational units,

reporting structure – span of control• Operational Organization Design – detailed roles and

processes – SCOR

129


People: Definitions

• Skill: Capacity to deliver pre-determined results with minimal input of time and energy

• Experience: The knowledge or skill acquired by observation or active participation

• Aptitude: A natural, acquired, learned or developed ability to perform a certain kind of work at a certain level.

• Training: A particular skill or type of behavior learned through instruction over a period of time

• Competency level: The state or quality of being qualified, having the ability, to perform a specific role.

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Competency Levels

• The state or quality of being qualified, having the ability, to perform a specific role. Level CharacteristicsExpert Intuitive understanding of the situation and zooms in on the central

aspects. Experts understand what is possible and applies experience patterns in new situations

Proficient Sees the situation as a whole and acts from personal conviction. Proficients can prioritize importance based on situational aspects.

Competent Goal oriented. Understands activities and can determine priorities to reach goals.

Beginner Limited "situational perception", all aspects of work treated separately with equal importance.

Novice New to the field or activity. A Novice needs standard/written procedures or step-by-step detailed instructions. No ability to make judgments based on situation.

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Competency Levels

• The state or quality of being qualified, having the ability, to perform a specific role.

Novice Beginner Competent Proficient Expert

Instructions Written Familiar Familiar Familiar Familiar

Orientation Task Task Goal Goal Goal

Decision making Analytical Analytical Analytical Intuitive Intuitive

Problem recognition Measuring Measuring Measuring Measuring Intuitive

In SCOR terms, focus on: Processes Practices Metrics Projects Domains

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Experience

Aptitude

Training

Defining Skills

Process

Performance(metric)

People(skill)

Practice(best

practice)

• Each Skill is defined by it’s description

• And by association to: Experiences, Training and Aptitudes

• Experiences, training and aptitudes are not directly connected to any other framework element

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People: Codification

Codification: HX.yyyy• H : Human resource or people aspect• X : People aspect where Skill (S), Experience (E),

Aptitude (A) or Training (T)• .yyyy : Differentiating numeric ID.

Notes: • Numbering does not indicate priority, sequence or size.• No level information in numbering• No classification of skills

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