Supply Chain Operations (SCOR) Reference Model and the Integrated

Business Reference Framework

Scott StephensPresidentBusiness Forerunners, Inc.

Chief Technology OfficerSupply Chain Councilwww.supply-chain.org

Introduction• This presentation describes preliminary concepts in managing the

advancement of the state of the art of business operations by the Supply Chain Council– While SCOR development activities are relatively mature, the Council is

working to develop a consensus philosophy in the management of an integrated business reference framework

– This presentation should be considered a “working” paper

• The Integrated Business Framework (DCOR – SCOR – CCOR)• Common Process Structure• Common Metrics• Common Implementation Methodology• Component Model Linkage• Design Advantages• Common Tools

SCOR and Business Competitiveness

• Practitioners (business leaders) created the SCOR Model and the Supply Chain Council to improve competitiveness and cooperation between trading partners

• Competitiveness improved in three ways:– Reducing costs– Increasing revenue– Improving the efficiency of asset management

• Partner cooperation improved by establishing a cross-enterprise / cross-industry common language, set of common measurements, and a set of best practices

BusinessPlan

BusinessPlan

CustomerPlan

CustomerPlan

Supply ChainPlan

Supply ChainPlan

DesignPlan

DesignPlan

SourceSource MakeMake DeliverDeliver RelateRelate SellSell PricePriceResearchResearch DesignDesign IntegrateIntegrate

AssistAssistReturnReturnAmendAmend

Integrated Business Reference Framework

Version 8.0Spring 2006Version 8.0Spring 2006

Version 1.0Spring 2006Version 1.0Spring 2006

Version 1.0Spring 2007Version 1.0Spring 2007

The Components of a Business Framework

• DCOR spans the activities between customer requirements and the design or specification of a product to meet customer demand.

• SCOR spans the activities between recognition of demand through product delivery

• CCOR spans the activities associated with establishing and maintaining a customer relationship, identifying customer requirements and product support.

CustomerPlan

CustomerPlan

RelateRelate SellSell PricePrice

AssistAssist

Supply ChainPlan

Supply ChainPlan

SourceSource MakeMake DeliverDeliver

ReturnReturn

DesignPlan

DesignPlan

ResearchResearch DesignDesign IntegrateIntegrate

AmendAmend

Integrated Business Reference Framework and the Product Life Cycle

SC

OR

CC

OR

CC

OR

Common Structure for Component Models (DCOR/SCOR/CCOR)

DCOR/SCOR and CCOR Built with Common Objectives and a Common Structure

• Objective - The performance of key processes must link directly to financial objectives.

• Objective – The primary purpose of the framework and the component models is to achieve business advantage through implementation.

• Structure - Measurements must be hierarchical to support cross-enterprise optimization while supporting the management of specific improvement activities.

• Structure - For measurement purposes, there must be clear boundaries between activities and organizations.

• Structure - Measurement must be tied to the activities they are designed to monitor.• Structure - Processes must be hierarchical to allow cross-enterprise analysis and

cross-industry generalization, while allowing organizations to describe the particular nuances in their businesses.

• Structure - Best practice must be linked to the processes that they support and the measurements which are used to determine the success of their implementation.

• Structure - Inputs and outputs describe the transactions between processes,documenting the origin and destinations of material, information, and finances. Inputs and outputs provide the mechanism for integrating and de-coupling the models within the framework.

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

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

Benchmarking

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

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

Best Practices Analysis

Process Reference Model

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

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

Business Process Reengineering

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

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

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

What is a process reference model?• Process reference models integrate the well-known concepts of

business process reengineering, benchmarking, and process measurement into a cross-functional framework

SCOR Boundaries• SCOR Spans:

– Order entry through paid invoice– Physical material transactions, financials, information flow– Market interactions

• From the understanding of aggregate demand to the fulfillment of each order

– Returns• SCOR Considers but does not include process descriptions and

measurement for related activities including:– Sales and Marketing– Research and Development / Product Design– QA– It

Supplier

Plan

Customer Customer’sCustomerSuppliers’

Supplier

Make DeliverSource Make DeliverMakeSourceDeliver SourceDeliver

Internal or External Internal or External

Your Company

Source

SCOR is structured around five distinct management processes

SCOR Model SCOR Model

Return Return Return Return Return Return Return Return

Building Block Approach

Processes Metrics

Best Practice Technology

Cus

tom

ers

Cus

tom

ers

Supp

liers

Supp

liers

P1 Plan Supply ChainP1 Plan Supply ChainPlanPlan

P2 Plan SourceP2 Plan Source P3 Plan MakeP3 Plan Make P4 Plan DeliverP4 Plan Deliver

SourceSource MakeMake DeliverDeliverS1 Source Stocked ProductsS1 Source Stocked Products M1 MakeM1 Make--toto--StockStock

M2 MakeM2 Make--toto--OrderOrder

M3 EngineerM3 Engineer--toto--OrderOrder

D1 Deliver Stocked ProductsD1 Deliver Stocked Products

D2 Deliver MTO ProductsD2 Deliver MTO Products

D3 Deliver ETO ProductsD3 Deliver ETO Products

S2 Source MTO ProductsS2 Source MTO Products

S3 Source ETO ProductsS3 Source ETO Products

SCOR 7.0 SCOR 7.0 –– ProcessesProcessesLevel 2Level 2

Return Return SourceSource

P5 Plan ReturnsP5 Plan Returns

Return Return DeliverDeliver

EnableEnable

D4 Deliver Retail ProductsD4 Deliver Retail Products

SCOR Process TablesProcess Element: Receive, Enter & Validate Order Process Element Number: D1.2 Process Element Definition Receive orders from the customer and enter them into a company’s order processing system. Orders can be received through phone, fax, or electronic media. “Technically” examine orders to ensure an orderable configuration and provide accurate price. Check the customer’s credit. Optionally accept payment. Performance Attributes Metric Reliability None Identified Responsiveness Receive, Enter and Validate Order Cycle Time Flexibility Upside Deliver Flexibility

Downside Deliver Adaptability Upside Deliver Adaptability

Cost Order cost / type of order Order Entry and Maintenance Costs as % of (S+M+D) cost

Assets Return on Supply Chain Assets Best Practices Features Electronic Commerce (customer visibility of stock availability, use of hand-held terminals for direct order entry, confirmation, credit approval), On-line stock check and reservation of inventory

EDI applications and integrated order management

Enable real-time visibility into backlog, order status, shipments, scheduled material receipts, customer credit history, and current inventory positions

None Identified

Continuous Replenishment Programs; Vendor Managed Inventory, Telemetry to automatically communicate replenishment of chemicals

Integrated demand/deployment planning to customer location driven by POS; Customer movement data

Remote (sales, customers) order entry capability

None Identified

Automatic Multi-level Credit Checking: Dollar Limits; Days Sales Outstanding; Margin Testing

Integrated Order/Financial Management

Value Pricing based on “Cost to Serve”; EDLP; Cost Plus Pricing

Activity Based Costing; Integrated Order Management by Customer by Line Item

Inputs Plan Source Make Deliver Return (Customer) Customer Order (Customer) Deliver Contract Terms (Customer) Customer Replenish Signal Outputs Plan Source Make Deliver Return

SCOR Graphics

RouteShipments

D1.6

Plan and BuildLoads

D1.5

Reserve Inventory and

DetermineDelivery Date

D1.3

Receive, Enter & Validate Order

D1.2

Process Inquiry &

Quote

D1.1

Receive Product

D1.8

Pick Product

D1.9

Load Vehicle

Generate Ship Docs

D1.11

Ship Product

D1.12

Receive & Verify

at Customer

Site

D1.13

InstallProduct

D1.14

• Scheduled Deliveries (P)

• (P2) Supply Plans• (P3) Production

Plans• (P4) Deliver Plans • (S) (M) (D) Inventory• (M) Scheduled

Output

• (Customer) Customer Order

• (Customer) Deliver Contract Terms

• (Customer) Customer Replenish Signal

• (S) (M) Scheduled Receipts

• Shipping Documents (carrier, cust, gov.)

• Delivered End Items (cust)

• (Customer) Inquiry

• Validated Order• Delivery Commit Date

Consolidate Orders

D1.4

• Daily Shipment Volume

Select Carriers and

Rate Shipments

D1.7

From Make or Source

• (D) Inventory

• (D) Inventory

• (D) Consolidated Product

• (D) Advanced Ship Notice

• Payment

Pack Product

D1.10

Invoice

D1.15

• Routing Guide (carrier)

• Rated Carrier Data (Carrier)

Common Metrics Structure for Component Models

(DCOR/SCOR/CCOR)

Linking Supply Chain Performance Attributes and Level 1 Metrics

Performance Attribute

Performance Attribute Definition Level 1 Metric

Supply Chain Reliability

The performance of the supply chain in delivering: the correct product, to the correct place, at the correct time, in the correct condition and packaging, in the correct quantity, with the correct documentation, to the correct customer.

Perfect Order Fulfillment

Supply Chain Responsiveness

The speed at which a supply chain provides products to the customer.

Order Fulfillment Cycle Time Upside Supply Chain Flexibility Upside Supply Chain Adaptability

Supply Chain Flexibility

The agility of a supply chain in responding to marketplace changes to gain or maintain competitive advantage. Downside Supply Chain

Adaptability Supply Chain Management Cost

Supply Chain Costs

The costs associated with operating the supply chain.

Cost of Goods Sold Cash-to-Cash Cycle Time Supply Chain

Asset Management

The effectiveness of an organization in managing assets to support demand satisfaction. This includes the management of all assets: fixed and working capital.

Return on Supply Chain Fixed Assets

Supply Chain Scorecard & Gap Analysis

50%

$30M Revenue

$30M Indirect Cost

35 days

97 days

0%

63%

Supply Chain SCORcard Performance Versus Competitive Population

Overview Metrics SCOR Level 1 Metrics Actual Parity Advantage Superior Value from ImprovementsDelivery Performance to Commit Date 85% 90% 95%

Fill Rates 94% 96% 98%

EXTE

RN

AL

SupplySupplyChainChainReliabilityReliability

Perfect Order Fulfillment 80% 85% 90%

Order Fulfillment Lead times 7 days 5 days 3 days

Flexibility

Responsiveness

Production Flexibility 30 days 25 days 20 days

Total SCM Management Cost 19% 13% 8% 3%

INTE

RN

AL Cost Warranty Cost NA NA NA NA NA

Value Added Employee Productivity NA $156K $306K $460K NA

Inventory Days of Supply 119 days 55 days 38 days 22 days NA

Assets Cash-to-Cash Cycle Time 196 days 80 days 46 days 28 daysNet Asset Turns (Working Capital) 2.2 turns 8 turns 12 turns 19 turns NA

Supply Chain Response Time 82 days 55 days 13 days

45 days

$7 M Capital Charge

Key enabler to cost and asset improvements

$30M Revenue

Common Implementation Methodologies for Component Models (DCOR/SCOR/CCOR)

SCOR/DCOR/CCOR Implementation• SCOR Implementations (Practitioner)

– Vary in scope and objective• Green Field – Establishing a new supply chain• Distribution analysis – Implementing distribution strategy• Planning – Improving planning processes• Supply Chain Failure Analysis• Change Management / COTS-Consultant Selection• Information Technology

• SCOR Implementation (Academia)– Curriculum– Research Projects

• SCOR Implementation (Consultants)• SCOR Implementation (Government)

Mapping material flow

Latin AmericanLatin AmericanSuppliersSuppliers

WarehouseWarehouse

ManufacturingManufacturing

European SupplierEuropean SupplierCustomer

Customer

Customer

CustomerWarehouseWarehouse

WarehouseWarehouse

(S1, S2, M1, D1)(SR1,,DR1)

Other SuppliersOther Suppliers(D1)

WarehouseWarehouse

(D1)

(S1)(SR1,SR3)

(D2)(DR1)

(S1, D1)(SR1,DR1,DR3)

(S1, D1)(SR1, DR3)

(S1, D1)(SR1,DR1,DR3)

(S1, D1)(SR1,DR1,DR3)

(S1)(SR1,SR3)

(S1)(SR1,SR3)

(S1)(SR1,SR3

Mapping the execution processes

S1S1

D1D1 S1S1

M2M2S2S2 D2D2

M1M1 D1D1 S1S1S2S2

D1D1M1M1

European RM SupplierEuropean European

RM SupplierRM Supplier

Key Other RM

Suppliers

Key Other Key Other RM RM

SuppliersSuppliers

Alpha Regional

Warehouses

Alpha Alpha RegionalRegional

WarehousesWarehouses

S1S1

DR1DR1 SR1SR1DR1DR1 SR1SR1 DR1DR1 SR1SR1

DR3DR3 SR3SR3

RM SuppliersRM Suppliers DistributorsDistributorsALPHAALPHA

DR3DR3 SR3SR3

S1S1

AmericasDistributorsAmericas

Distributors

SR1SR1

SR3SR3

S1S1 D1D1 S1S1

M2M2S2S2 D2D2

M1M1 D1D1 S1S1S2S2

D1D1M1M1

S1S1

Cycle TimeCycle Time

ScheduleScheduleAchievementAchievement

Perfect OrderPerfect OrderFulfillmentFulfillment

DeliveryDeliveryPerformancePerformance

SupplierSupplieron time deliveryon time delivery

Perfect OrderPerfect OrderFulfillmentFulfillment

SupplierSupplieron time deliveryon time delivery

Perfect OrderPerfect OrderFulfillmentFulfillment

On TimeOn Time

In FullIn Full

DocsDocs

DamageDamage

On TimeOn Time

In FullIn Full

DocsDocs

DamageDamage

RevenueRevenueAccounts ReceivableAccounts Receivable

Cash FlowCash Flow

Decomposing Metrics

European RM SupplierEuropean European

RM SupplierRM Supplier

Key Other RM

Suppliers

Key Other Key Other RM RM

SuppliersSuppliers

ConsumerConsumerAlpha Alpha RegionalRegional

WarehousesWarehousesRM SuppliersRM Suppliers ConsumerConsumerALPHAALPHA

ConsumeConsumerr

RM RM SuppliersSuppliers

S1S1 D1D1 S1S1

M2M2S2S2 D2D2

M1M1 D1D1 S1S1S2S2

D1D1M1M1

S1S1

Cycle TimeCycle Time

ScheduleScheduleAchievementAchievement

Perfect OrderPerfect OrderFulfillmentFulfillment

DeliveryDeliveryPerformancePerformance

SupplierSupplieron time deliveryon time delivery

Perfect OrderPerfect OrderFulfillmentFulfillment

SupplierSupplieron time deliveryon time delivery

Perfect OrderPerfect OrderFulfillmentFulfillment

On TimeOn Time

In FullIn Full

DocsDocs

DamageDamage

On TimeOn Time

In FullIn Full

DocsDocs

DamageDamage

RevenueRevenueAccounts ReceivableAccounts Receivable

Cash FlowCash Flow

Perfect OrderPerfect OrderFulfillment Fulfillment

Actual Actual -- 85%85%

Perfect OrderPerfect OrderFulfillmentFulfillmentGoal Goal –– 95%95%

ScheduleScheduleAchievementAchievementActual Actual –– 95%95%

Perfect OrderPerfect OrderFulfillment Fulfillment

Actual Actual –– 90%90%

DeliveryDeliveryPerformance Performance Actual Actual –– 99%99%

SupplierSupplieron time deliveryon time delivery

Actual Actual –– 85%85%

MetricsMetricsConflictConflict

InventoryInventory

UnderUnder--performanceperformance••ProcessProcess••SystemsSystems

UnderUnder--performanceperformance••ProcessProcess••SystemsSystems

Performance Measurement

ConsumerConsumerAlpha Alpha RegionalRegional

WarehousesWarehousesRM SuppliersRM Suppliers ConsumerConsumerALPHAALPHA

European RM SupplierEuropean European

RM SupplierRM Supplier

Key Other RM

Suppliers

Key Other Key Other RM RM

SuppliersSuppliers

Component Models (DCOR/SCOR/CCOR) Linked by

Inputs / Outputs, Best Practice, and Metrics

BusinessPlan

BusinessPlan

CustomerPlan

CustomerPlan

Supply ChainPlan

Supply ChainPlan

DesignPlan

DesignPlan

SourceSource MakeMake DeliverDeliver RelateRelate SellSell PricePriceResearchResearch DesignDesign IntegrateIntegrate

AssistAssistReturnReturnAmendAmend

Integrated Business Reference Framework -Linkages

Customer Requirements

Producability,Supportability, Transportability

BOM, Recipe, Specification

Product

Component Models (DCOR/SCOR/CCOR) Loosely

Integrated – Tightly Bundled

Design Philosophy

• Tight Bundle – Component Models work together to support analysis,

measurement, and improvement of the end-to-end product life cycle

– Models used together will better support analysis and measurement of complex activities

• Time to Market• Time to Volume

• Loose Integration– Component Models are separable so organizations can use

individual Models of interest without the others– Component Models can be separately improved based on

advances in specific disciplines

SCOR Release History

1997

1998Version 2.0Model modified to reconcile distinctions between discrete and process industries

Version 1.0First version of the Model, Plan, Source, Make, Deliver, metrics, best practice, and technology

Version 3.0Model modified to enhance inputs and outputs and infrastructure elements. Specific reference to software products removed. Version 3.1Restructured infrastructure / enable elements. Restructuring of metrics begun – definitions of performance attributes developed. Language to support services as well as tangible goods providedVersion 4.0Restructuring of infrastructure enable elements completed. Returns introduced. Version 5.0Returns processes introduced. E-business practices updated Metrics re-structuring continued

Version 6.0 Retail D4, revamped MRO, Make e-biz best practices

Version 7.0 New Level 1 Metrics, New Best Practices, Addition of 2 appendices

Version 6.1 Updated Return, Best Practices

2003

1999

2001

2000

2002

2004

2005

Current Technical Projects

• SCOR Rehost– Release 8.0

• XML / HTML• Access• Word• Excel

• DCOR– Version 1.0

• Best Practice• Metrics• ISA 95

SCOR Version 8.0Best Practice UpdateMetrics UpdateISA 95Restructure – dB Host

Integrated Business Reference Framework Release Plan

2001

2008

2006

2007

SCOR Version 4.1 DCOR Strawman (Version 0)Posted

CCOR Strawman (Version 0)Posted

DCOR Version 1.0Best Practice UpdateMetrics UpdateInput/Output UpdateBusiness Validation

CCOR Strawman (Version 0)Validation

SCOR Version 9.0Best Practice UpdateMetrics UpdateInput/Output UpdateRisk ManagementIntegration

DCOR Version 2.0Best Practice UpdateMetrics UpdateInput/Output UpdateIntegration

CCOR Version 1.0Best Practice UpdateMetrics UpdateInput/Output UpdateBusiness ValidationIntegration

SCOR Version 10.0Best Practice UpdateMetrics UpdateISA 95Restructure – dB Host

DCOR Version 3.0Best Practice UpdateMetrics UpdateInput/Output UpdateBusiness Validation

CCOR Version 2.0Best Practice UpdateMetrics UpdateInput/Output UpdateBusiness Validation

Integrated Business Framework Version 1.0Metrics Best Practice Inputs / Outputs

Component Models (DCOR/SCOR/CCOR) Design

Philosophy Supports Common Tools and IT

Common Tools

www.supply-chain.org

info@supply-chain.org