supply chain council

|Copyright © Supply Chain Council. 2006. All rights reserved. Copyright © Supply Chain Council. 2006. All rights reserved. Copyright © Supply Chain Council. 2006. All rights reserved. Copyright © Supply Chain Council. 2006. All rights reserved.

Supply-Chain

Council

& SCOR®


The World of Supply Chain Management


CFO language

• Operating Cycle DII + DSO• The number of days it takes to convert inventory

& receivables to cash

• Cash-to-cash Cycle DII + DSO - DPO• The number of days expired between canceling a

payable and generating cash

• EVA NOPAT – (CoC*Capital)• The amount by which earnings exceed or fall

short of the required minimum rate of return that shareholders and lenders could get by investing in other securities of comparable


Return on assets

Return on assets

Capital turnoverCapital

turnover

$ Other Current Assets

$ Other Current Assets

$ Inventory$ Inventory

$ Accounts Receivable$ Accounts Receivable

$ CurrentAssets

$ CurrentAssets

$ Fixed Assets$ Fixed Assets

$ Total Assets$ Total Assets

$ Sales$ Sales

Profit margin %

Profit margin %

$ Sales$ Sales

$ COGS$ COGS

$ Variable Costs

$ Variable Costs

$ Fixed Costs

$ Fixed Costs

$ GrossMargin

$ GrossMargin

$ Total Cost

$ Total Cost

$ Operating Profit

$ Operating Profit

Supply Chain Management impacts all components

÷

-

+

-

÷

+

+

+

EVA Tree the CFO’s BOM

$ Sales$ Sales

Balance SheetBalance SheetBalance SheetBalance Sheet

P&LP&LP&LP&L


SCM Environment

• Costs (transportation, warehousing)

• Flexibility

• Delivery Quality/ Reliability/ Performance:

• Inventory levels (RM, WIP, FG)

• Forecast/ Planning Accuracy

• Fulfillment/ Replenishment times

• Lead time reduction

• SC Manager problems:

•To customers•From suppliers

•Only “cost cutter”•Seen as the “problem”•Board room “enemies” (Sales & MKT)


SCM The CFO’s perspective

• CFO beginning to understand that effective SCM plays an integral role in financial success, but:

• SCM is unsatisfactory to CFOs, because SC managers…• ... lack financial rigor

• ... lag in management efficiency

• ... do not provide clear visibility into SC financials

Therefore:

• 34% have taken more of a leadership role in SCM

• 49% think they will in 2 years


The Value of Metrics


A Bit of History: 1930-1950

o Bank Robber “Slick Willie” Sutton

o When asked why he robbed banks, Sutton simply replied

o "Because that's where the money is."

8


Where the Money Is

• Supply-Chain generally accounts between 60% and 90% of all company costs 1

• A 2% improvement in process efficiency in SCM processes has 30,000% - 50,000% the impact of a 2% improvement in efficiency for… IT… HR… Finance… Sales…

• Any surprise most Process Methodologies or techniques had their origin primarily in SCM?

• Six-Sigma Lean BPR ERP ISO MRP-II TQM…

Fortune-10 Company Supply-Chain Cost % Total Costs2

GM Ford Conoco Wal-Mart Chevron IBM Exxon GE Citi1 AIG1

94% 93% 90% 90% 88% 77% 75% 63% 0% 0%

1 Exclusive of Financial Services companies2 Source: Hoovers 2006 Financial Data, Supply-Chain Council 2006 SCM Benchmark data on SCM cost for discrete & process industries

9


Value of Using SCORArea Improvement

Raw materials purchase cost 25%

Cost of Distribution 35%

Total resource deployed 50%

Manufacturing space 50%

Investment in Tooling 50%

Order cycle time 60%

New product development cycle

60%

Inventory 70%

Paperwork and Documentation 80%

Quality Defects 100%10

1Hughes & Michels (1998) Transform your supply chain. Releasing value in business. London, UK


The Impact of SCOR®

• Companies with SCOR process management.

• Are over 780% more profitable on average than peers.

• Exhibit greater share growth than leading market indicators.


Supply Chain Council


Supply-Chain Council

Independent, not-for-profit, global corporation with membership open to all companies and organizations interested in applying and advancing state-of-the-art supply chain management systems and practices:

o Founded in 1996;

o Over 600 global Members;

o Cross-industry representation;

The Supply-Chain Council (SCC) has developed and endorsed the Supply Chain Operations Reference model (SCOR) as the cross-industry standard for supply chain management.


SCC – Global Reach


Latin America

All Chapters

SCC AffiliationsAAIA – Automobile Aftermarket Industry AssociationAPICS – Association for Operations ManagementRLA – Reverse Logistics AssociationWBENC – Women's Business Enterprise National Council


Group Description

Aerospace & Defense SIG

Special Interest Group to provide a source of knowledge, referral and research for members in the A&D industry

Automotive SIGSpecial Interest Group brings together practitioners in the automotive supply chain to share practices and experiences

CCOR Development

Project team established to develop the framework, training and tools for the customer chain (sales & support processes)

DCOR Development

Project team established to develop the framework, training and tools for the design chain (product/process engineering processes)

Steering Committee

Technical Development and Steering Committee and Training and Education Committee. Elected positions.

Energy, Oil & Gas SIG

Industry working group focuses on the development and integration of models specifically for the Energy, Oil and Gas industry

Reverse Logistics

Industry working group reviews the adaptability of SCOR for the reverse logistics industry. A joint effort of SCC and RLA.

Risk Management

Project team to enhance SCOR to help organizations avoid/minimize cost, mitigate disruptions and thus offer competitive edge

SCOR Convergence

Project team established to integrate SCOR with other tools and methods - such as Six Sigma and Lean

Talent Committee

Hosted by Supply Chain Council, the Committee is industry funded, with all research and program results of the Committee's work made public


Global Members...Global Members...


In Brasil...


... And in Latin America


SCC Models


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

Benchmarking

Characterize the management practices & 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

Business Process Reengineering

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 Reference Model?

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


Process Models

Supply

Chain

Supply

Chain

Supply

Chain

Supply

Chain

Markets

SCOR™

CCOR™

DCOR™

MCOR™

Marketing Sales

Design

HR IT

Finance

Process

Suppliers

Bu

sin

ess

Cu

sto

mers

2005 1996

20072008


SCORSupply Chain Operations

Reference model


SupplierCustomer Customer’s

CustomerSupplier’s Supplier

Internal or External Internal or External

Your Company

SCOR ModelSCOR ModelBuilding blocks

Processes Metrics

Best Practices Enablers

Plan

MakeDeliverSource Make DeliverMakeSourceDeliver SourceDeliverSource

Return Return Return

Return ReturnReturn

Return Return

Structured around 5 distinct management processes


Contains 3 levels of detailLevel Description Schematic Description

1 Top Level (Processes)

Defines scope and contents of SCOR application – here you define the basis of competitive performance objectives

2 Configuration Level (Process Categories)

The Supply Chain is “custom-configured” here – around 30 “process categories”. Companies implement their operating stragegies thru a single and unique Supply Chain configuration

3 Process Element Level (Decompose Processes)

Level 3 defines the Company ability to successfully compete within it’s chosen market. It consists of: •Process element definition •Process elements I/O info •Process performance metrics •Best practices if applicable •System ability to support best practicesCompanies “adjust” their operating strategies on Level 3

4 Implementation – process element decomposing

Implementation of specific SCM practices.Level 4 defines practices used to reach competitive advantages and adapt to constant business environment changes

Su

pp

ly C

hai

n O

per

atio

ns

Ref

eren

ce m

od

elO

ut

of

sco

pe

Plan

DeliverMakeSource

ReturnReturn

P3.1Identify, Prioritize and Aggregate Production

requirements P3.3Balance Production

Resources with Production

RequirementsP3.2

Identify, Assess and Aggregate Production

Resources

P3.4Establish Detailed Production Plans


5 Processes5 Processes

Cust

om

ers

Sup

plie

rs DeliverMakeSource

PlanPlan

Return Source Return Deliver

EnableEnable

ExecutionExecution

ManagementManagement

PlanningPlanning


Models Contents


Different Audiences


M2S2 D2 S1

European RM Supplier

European RM Supplier

Other RM Suppliers

Other RM Suppliers

Plant

ALPHALocal

Distributors

Local Distributors

M1S1 D1

D1

S1 D1

M2

S2

D2

S1

China Customs -

POE

China Customs -

POE China OEMChina OEM

Distribution nCenters

S1 D1

Brazil Customs -

POE

Brazil Customs -

POE

S2 M1 D1

Fiscal Inspection -

POE

Fiscal Inspection -

POE

DC’s in other states

S1 D1

S1 D1 S1 D1

S1 D1

M1.1 M1.2 M1.3 M1.4 M1.5

Production Planning

Production Planning

Production Orders

Production Orders

Production & Testing

Production & Testing

PackagingPackaging Unitization & protection

Unitization & protection

M1.6

Release to dispatch

Release to dispatch

SCOR Mapping

SR1DR1

SR1

SR1DR1

DR1

P4

P4

P3

P3P

2

P2

P1

P1

Production Rules

Mngmnt

Production Rules

Mngmnt

EM.1

Production Performance

Mngmnt

Production Performance

Mngmnt

EM.2

Production Reports Mngmnt

Production Reports Mngmnt

EM.3

WIP Mngmnt

WIP Mngmnt

EM.4

Equipment & Utilities Mngmnt

Equipment & Utilities Mngmnt

EM.5

Internal Transport Mngmnt

Internal Transport Mngmnt

EM.6

Production Relations Mngmnt

Production Relations Mngmnt

EM.7

Claims & Internal

Standards Mngmnt

Claims & Internal

Standards Mngmnt

EM.9

P4P4P3

P3P

2

P2

P1

P1


Integrated set of performance metrics

Supply Chain Operations Reference-model (SCOR)

Level Description Schematic Metrics

1 Top Level (Processes)

Level 1 metrics characterize performance of the supply chain as a whole, define the basis of competition, and enable the setting of business-wide performance targets

2 Configuration Level (Process Categories)

Level 2 metrics characterize performance of the configured processes

3 Process Element Level (Decompose Processes)

Level 3 metrics provide details on performance issues and highlight potential corrective actionsBalance Production Resources

with Production RequirementsEstablish Detailed Production Plans

Identify, Prioritize, and Aggregate Production

Requirements

Identify, Assess, and Aggregate Production

Resources

P3.1

P3.3 P3.4

P3.2

Plan

DeliverMakeSource

ReturnReturn


Level 1 Attributes & Metrics


Level 1 Attributes Definition

SCOR Beats the DOW |Copyright © Supply Chain Council. 2006. All rights reserved. Copyright © Supply Chain Council. 2006. All rights reserved. Copyright © Supply Chain Council. 2006. All rights reserved. Copyright © Supply Chain Council. 2006. All rights reserved.

Different metrics are important at each level

• Business requirements (share, cash flow, operating income)

• Customer, product and performance priorities• Operating performance measures, benchmarks and targets

Basis ofCompetition

SCOR Level 1

Configuration • Supply, manufacturing & distribution asset constraints / return considerations

• Product volume & complexity considerations

• Channel constraints & requirements • Technology constraints & enablers

Supply-ChainConfiguration

SCOR Level 2

OperationsStrategy

• Performance targets

• Process• Practices• Enabling software

Performance Levels,

Practices & Systems Selection

SCOR Level 3

• Time-phase targets• Phased implementation plans• Program governance• Detailed implementation

Supply-Chain Processes &

Systems Implementation

SCOR Level 4

IntraCompany

Supply-Chainimprovements

InterCompany

IntraCompany

Process, Practice &System Configuration

Elements

IntraCompany

InterCompany

InterCompany


Learning SCOR


The SCOR Practitioner Lifecycle

How do I use it?

Pilot

What is SCOR?

Learn

How do I grow it?

Deploy

How do I refine it?

Mature

What’sNext?

Renew


SCOR Curriculum

Learn Pilot Deploy Mature Renew

Basis Training

SCORFramework

SCORImplementation

SCORTeam

SCOR and Six-Sigma/Lean

DCOR

Executive Track

Executive SCOR

Framework

Executive SCOR Implementation

Executive SCOR Team

Executive SCORBusiness Benefit

Executive SCOR Business Trends

Advanced Track

SCOR AdviserAdvanced SCOR

ModelingSCOR for PBL

SCOR for Risk Management

Advanced SCOR Analysis

SCOR for ITSCOR PracticesBenchmarking

AdvancedSCOR Workshop

SCOR for HR SCOR for M&A

Rapid SCORSCOR for Industries

SCOR for ISO9000

SCOR PracticumSCOR forServices

SCOR for SOX404

SCOR FinancialsSCOR for

Management

Proposed/Future SCC offeringAvailable Late 2007/2008


Andres von Simson – LATAM Chapter Administration [email protected]

Elcio Grassia – LATAM Chapter Chair

[email protected]

Further info www.supply-chain.org

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