SCOR 10 Overview

2011 Supply Chain Council. ALL RIGHTS RESERVED.
| 2010 Executive | 1 | 25 July 2010

SCOR 10.0 Overview
Supply Chain Council
Executive Presentation
2011 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Executive | 2 | 25 July 2010
WHAT IS SCOR EXACTLY
Instructor Introduction
3
Dan Swartwood Vice President of Process and Technology
for Satellite Logistics Group
25 Years manufacturing management experience with 3M
Company and Imation Enterprises
7 years experience in management consulting in Aerospace,
Pharmaceutical, Industrial, Chemical, and Paper industries
focusing on Supply Chain Analysis, Lean, and Six Sigma
3 years forward and reverse logistics
Chairman Supply-Chain Council Technical Development
Steering Committee 2005-2007
SCC Board of Directors 2005-2007
Author of Fix Your Supply Chain (published May 2009)
Speaker on Supply Chain, Transformation, Continuous
Improvement
SCOR Master Instructor, Six Sigma, Lean, APICS CPIM
SCOR: A Process Framework
Process frameworks deliver the well-known concepts of
business process reengineering, benchmarking, and
best practices into a cross-functional framework
Standard processes: Plan, Source, Make, Deliver, Return,
Enable
Standard metrics: Perfect Order Fulfillment, Cash-to-Cash
Cycle Time, Cost of Goods Sold, Order Fulfillment Cycle Time,
etcetera
Standard practices: EDI, CPFR, Cross-Training, Sales &
Operations Planning, etcetera
Standard skills: Aptitudes, Experiences, Credentials, Tasks
Pre-defined relationships between processes, metrics
and practices and inputs and outputs
What is a Supply Chain?
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Product/Portfolio Management
Supply Chain
SCOR
Product Design
DCOR
Sales & Support
CCOR
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Product/Portfolio Management
Supply Chain
SCOR
Product Design
DCOR
Sales & Support
CCOR
SCOR Processes
Five distinct management processes link together (the
chain in supply-chain) seamlessly from supplier to
customer
Boeing - SCOR Executive Overview
Supplier
Plan
Customer
Customers
Customer
Suppliers
Supplier
Make
Deliver Source Make
Deliver Make Source Deliver Source Deliver
Internal or External Internal or External
Your Company
Source
Return Return Return
Return Return
Return
Return Return
SCOR Model
SCOR Hierarchy
Level 1 Level 2 Level 3 Level 4 Level 5
Scope Configuration Activity Workflow Transactions
Differentiates
Business
Differentiates
Complexity
Names Tasks Sequences Steps Links
Transactions
Defines Scope Differentiates
Capabilities
Links, Metrics,
Tasks and
Practices
Job Details Details of
Automation
Framework
Language
Framework
Language
Framework
Language
Industry or
Company
Specific
Language
Technology
Specific
Language
S1
Source
Stocked Product
Supply-Chain
Source
S1.2
Receive Product
Standard SCOR definitions Company/Industry definitions
EDI
XML
Execution Processes
Processes: Source, Make and Deliver
Objective: value-add, revenue generating
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Supply Chain
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Supply Chain
Deliver Make Source
Return Return
Plan
Stocked Product (sS1) Make-to-Order (sS2) Engineer-to-Order (sS3)
sS1.1 Schedule Product
Deliveries
Deliveries
sS3.1 Identify Sources of
Supply
sS3.2 Select Final Supplier(s)
and Negotiate
Deliveries
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
Payment
Payment
Source Level-3 Processes
S2.2
Receive
Product
S2.4
Transfer
Product
S2.5
Authorize
Supplier
Payment
S2.1
Schedule
Product
Deliveries
S2.2
Receive
Product
S2.3
Verify
Product
S2.4
Transfer
Product
S2.5
Authorize
Supplier
Payment
S2.1
Schedule
Product
Deliveries
S2.2
Receive
Product
S2.3
Verify
Product
S2.4
Transfer
Product
S2.5
Authorize
Supplier
Payment
S2.1
Schedule
Product
Deliveries
Question: Process Flows
Which of the following flows is/are correct?
Supply Chain Processes
Work and Information Flows
D1.3
Reserve Inv.
Calculate Date
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D2.2
Receive, Enter,
Validate Order
D2.3
Reserve Inv.
Calculate Date
S1.1
Schedule Prod.
Deliveries
Customer P.O. Delivery Commit
S2.1
Schedule Prod.
Deliveries
D1.2
Receive, Enter,
Validate Order
Inter-Company P.O.
C.O. = Customer Order, Inv. = Inventory,
P.O. = Purchase Order, Prod. = Product
C.O. C.O.
Maps to Organizations
Level 1 Level 2 Level 3 Level 4 Level 5
Scope Configuration Activity Workflow Transactions
CxO
EvP, SVP
SVP
VP
VP, Director
Line Manager
Manager
Team Lead
Team Lead
Individuals
Strategic
Decision-Making
Line of Business
Management
Activities
Management
Job Management Transaction
Management
Enterprise
Supply-Chain
Requirements
Operations
Strategy
Fine-Tuning
Operations
Adjusting
Process
Performance
Tuning
Technology
Performance
S1
Source
Stocked Product
Supply-Chain
Source
S1.2
Receive Product
Standard SCOR program Company/Industry implementation
EDI
XML
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
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SCOR Level-1 Metrics (KPIs)
Metric: Perfect Order Fulfillment
Definition: The percentage of orders delivered on-time, in full.
Components of perfect include all items and quantities on-time,
using the customers definition of on-time, complete
documentation and in the right condition
Calculation: [Total Perfect Orders] / [Total Number of Orders]
Diagnostic
Metrics:
(examples)
% Orders placed without error
% Orders scheduled to customer request date
% Orders received damage free
% Orders with correct shipping documents
Notes: An order is perfect only if all L2/L3 metrics are perfect; An
order must be: AND on-time AND in-full AND right condition
Strategic Reliability Metric
Best Practices
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.
Supply Chain Assets Human Capital
Supply Chain Skills
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: The state or quality of being qualified, having the
ability, to perform a specific role.
Skills Assessment
THE BUSINESS MONEY IS IN SUPPLY CHAIN!
WHEN IT COMES TO SUPPLY CHAINS, HAVING TWO IS BETTER THAN
ONE, AND THREE OR MORE MAY BE BEST OF ALL!
ISLANDS OF PROFIT IN A SEA OF RED INK BYRNES, J..L..S. SR. LECTURER MIT
Our Journey
Strategy
Determine Market requirements
Align Strategic Goals
Performance
Determine Supply Chain Requirements
Align Supply Chain Performance
Process
Determine Process Requirements
Align Process Definition
Resource
Determine Resource Capabilities
Align Resource Allocation
Align Strategy
Steps, tools and templates
Business plan
Supply chain definition
Supply chain prioritization
SWOT by supply chain
Chip analysis by supply chain (SAP)
SCORcard definition (select metrics for SCORcard)
Material flows map (geo map)
Capture actual performance (populate SCORcard)
Benchmark
Interpret benchmark, determine corrective actions
Prioritize corrective actions
Strategy
Determine Market requirements
Align Strategic Goals
The Matrix
We now place the customer list as column headings repeating
until finished
And then the products list as row headings repeating until
finished
For each product that flows to a customer, we put an X in
the cell
Its that simple.
20 SCOR Benchmarking -
Group 1 Group 2
Customer A Customer B Customer C Customer D
Group 1 Group 2
Customer A Customer B Customer C Customer D
Business 1
Product 1
Product 2
Business 2
Product 3
Product 4
X
X
X
X
X
X
X
Example: Air Conditioning Company
Columns are Retail/Commercial, and sub-segmented
Rows are the Major Product Lines
Your Company
Supply Chain Definition
Matrix
Customer/Market/Channels
Retail Commercial
Big Box
Internet
Direct
Mom &
Pop
Stores
Building
Major
Account
Distrib
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Big Airco
x x x
Small Airco
x x x
Custom
Industrial
x x
Standard
Industrial
x x
Supply Chain Prioritization
Each supply chain is given a rank in each category
The total of the values gives the final overall ranking
Weightings and other criteria may apply
In this example Big Air is the most important supply chain to
pursue, rank 11
You My choose to weigh the rankings by business plan focal
points
Revenue
Gross
Margin %
# of SKUs
Unit
Volume
Strategic
Value
Rank
Big Air 3 2 2 2 2 11
Small Air 2 1 3 3 1 10
Commercial 1 3 1 1 3 9
1=low, 3=high
Chip Analysis
We use a tool called the Chip Analysis Matrix to Identify
priority strategic features or attributes of Supply Chains.
Each supply chain strategy is indicated by a collection of
ranked features:
Reliability On time? Complete? Undamaged?
Responsiveness From Customer Request to final acceptance
Flexibility How long to scale up? How expensive to scale down?
Cost Cost of Processes? Cost of Goods Sold?
Assets Working Capital? Return on Investments?
Comparative Ranking
We advocate using a simple ranking system for industry
comparison
Each rank corresponds to a specific percentile in
industry performance
We do not use averages or other statistical tests
Our key ranks:
Performance Percentile Choices Interpretation
Superior 90
th
1 Top 10 performer
Advantage 75
th
2 Top Quadrant performer
Parity 50
th
2 Half better/Half worse
Supply Chain Chip Analysis
Supply Chain
Strategy Matrix
Big Airco
Small
Airco
Comml
E
x
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Reliability
S
Response
A
Flexibility
A
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Cost
P
Assets
P
Each unique combination of
ratings defines Your Supply
Chain Strategy for the channel
Ratings are a desired state,
NOT where you want to
improve the most
One S, Two A, Two P is the
rule, but you may also have
One S, One A, Three P
S
A
A
P
P
Supply Chain SCORcard
Definition
We use a tool called the SCORcard to define the metrics of most
interest to an organization, to arrange them by area of impact, by
strategic linkage, and to provide a container for later benchmarking
comparisons. Each SCORcard is built from a subset of hundreds
of SCOR metrics.
For Supply Chain benchmarking we generally use only Level 1 or
Level 2 Metrics
The SCOR Manual provides all necessary definitions
Hazards
Without clearly defined supply chains, SCORcards may contain
aggregate data of conflicting supply chain types e.g. BTO and BTS
together. Without strategy, metrics chosen are not clearly linked to
strategic priorities
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
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SCOR Level-1 Metrics (KPIs)
Competitive Benchmarking
Relies on external, usually anonymized data source
Demographics must match size, planning model, region,
and product scope of benchmarked supply chain
Generally requires submitting data to merge into master
benchmark data set
Attribute Metric (level 1) You Parity Adv Sup Gap Step
Reliability S Perfect Order Fulfillment 97% 85% 90% 98% 1% 1
Response A Order Fulfillment Cycle Time 14 days 23 days 15 days 5 days -1 Days 0
Flexibility P Ups. Supply Chain Flexibility 62 days 63 days 62 days 60 days 0 0
Cost P Supply Chain Mgmt Cost 12.2% 10.8% 10.4% 10.2% 1.4% 1
Assets A Cash-to-Cash Cycle Time 35 days 15 days 13 days 10 days 22 Days 2
Align Performance
Metrics decomposition, including linkage to process
Material Flow Diagram as is
Thread diagram as is
Prioritize L-2 process based on contribution to gap (pareto)
RACI diagram by metric and by process
Best practices assessment Level-2 process level
Brainstorm level-2
Affinity Diagram level-2
Create list of process changes with anticipated gap impact
Prioritize process changes
Materials Flow Diagram to be
Thread Diagram to be
Performance
Determine Supply Chain Requirements
Align Supply Chain Performance
Drive Supplier
D1, P1, P4
Battery Supplier
D1, P1, P4
Retail, Inc
S1, P2
MP3 Factory
P3, S1, M1, D1
HQ
P1, P2, D2, S2
The Geographic Map
Best Practices Analysis Worksheet
Function Process Practice Value Level
Western
Plant
S1 Joint Service Agreements (USA) true 1
Collaborative Planning Systems true 1
Select Suppliers with EMS false
Utilize green purchasing practices false
M1 Accurate and Approved Work Instructions/Process Plans true 1
Accurate and Low Cost Batch/Configuration Records for Warranty and Regulatory Tracking true 1
Cellular Manufacturing true 3
Demand-Pull Manufacturing, Including Active Reduction of Manufacturing Systems Time and WIP
Through the Use of Demand-Pull Mechanisms and Visual Controls
true 3
Lean Manufacturing true 3
Link Individual Performance to Organizational and Divisional Goals true 2
Organize to Enhance Flexibility: Few Job Classifications, Self-Directed Work Force, Flat Management
Structure, Cross-Functional Work Teams
true 3
Paperless Order Tracking and Customer Visibility of Orders true 2
Paperless Production Order and Inventory Tracking true 2
Performance Results that Are Compared to Benchmarks (i.e. Capacity, Scheduling) and Readily
Available to Employees
true 3
Posted Performance Results true 1
Postponement true 1
Production Level Loading true 2
Provide Continuous Formal Training to Employees true 2
Vendor Managed Inventory false
Migrate from Build to Stock to Configure to Order; Build Subassemblies to Forecast at the Highest
Generic Level in the Bill of Material/Recipe/Formula
false
Align Process
Capture Process Flows as is (TYTAO, process worksheets,
process workflow)
Best Practices Assessment level -3
PCE map
Value Stream Map
Brainstorm level-3
Affinity Diagram level-3
Documents Process Flows to be (TYTAO, process worksheets,
process workflow)
Simulation
Impact documentation business rules
Impact documentation organization
Impact documentation systems, business requirements document
Impact documentation Skills
Risk/Reward
Prioritized resource requirements
Process
Determine Process Requirements
Align Process Definition
D1.3
Reserve Inv.
Calculate Date
Result: The Workflow Diagram
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D2.2
Receive, Enter,
Validate Order
D2.3
Reserve Inv.
Calculate Date
S1.1
Schedule Prod.
Deliveries
Customer P.O. Delivery Commit
S2.1
Schedule Prod.
Deliveries
D1.2
Receive, Enter,
Validate Order
Inter-Company P.O.
C.O. = Customer Order, Inv. = Inventory, P.O. = Purchase Order, Prod. = Product
C.O. C.O.
Example Value Stream Map
sS1.1
Schedule
Orders
C/T = 5mn
Up = 79.17%
0.5 FTE
sS1.2
Receive
Material
C/T = 5mn
Up = 92.5%
0.5 FTE
sS1.3
Verify Material
C/T = 1mn
Up = 97.5%
0.5 FTE
sS1.4
Transfer
Material
C/T = 15mn
Up = 93.75%
0. 5 FTE
sS1.5
Authorize
Payment
C/T = 1mn
Up = 97.5%
0.25 FTE
sS1.3
Establish
Sourcing Plans
Supplier Make
5 mn 5 mn 1 mn 15 mn 1 mn
2 d 1 mn 5 mn 15 mn
Example PCE Analysis
0
5
10
15
20
25
30
35
Sched Delivery Receive Product Verify Product Transfer Product Payment
sS1.1 sS1.2 sS1.3 sS1.4 sS1.5
Idle Time
Transact Time
Transact
Time
Idle
Time
Transact per
Hour
FTE Rework/Day PCE Yield Waste
sS1.1 Sched Delivery 5 5 3 0.5 5 50.00% 79.17% 20.83%
sS1.2 Receive Product 5 1 5 0.5 3 83.33% 92.50% 7.50%
sS1.3 Verify Product 1 5 5 0.5 1 16.67% 97.50% 2.50%
sS1.4 Transfer Product 15 15 2 1 1 50.00% 93.75% 6.25%
sS1.5 Payment 1 2 5 0.25 1 33.33% 97.50% 2.50%
Example Process Yield Analysis
Transact
Time
Idle
Time
Transact per
Hour
FTE
Rework/Da
y
PCE Yield Waste
sS1.1 Sched Delivery 5 5 3 0.5 5 50.00% 79.17% 20.83%
sS1.2 Receive Product 5 1 5 0.5 3 83.33% 92.50% 7.50%
sS1.3 Verify Product 1 5 5 0.5 1 16.67% 97.50% 2.50%
sS1.4 Transfer Product 15 15 2 1 1 50.00% 93.75% 6.25%
sS1.5 Payment 1 2 5 0.25 1 33.33% 97.50% 2.50%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Sched Delivery Receive Product Verify Product Transfer Product Payment
sS1.1 sS1.2 sS1.3 sS1.4 sS1.5
Waste
Yield
Align Resources
Skills inventory
Skills Map (training & hiring needs)
Process standard operating procedure rewrite list (instruction
needs)
Technology needs list -> no standards
Assess organization charts
Program plan (change management plan)
Assets
Determine Resource Capabilities
Align Resource Allocation
Skills Analysis Worksheet
Area L2 L3 Skill Valid
Curr
Level
Curr
FTE
Target
Level
Target
FTE
Train
Gap
FTE|
Gap
Western
Plant
S1 S1.1
HS.0001 3-way Receiving Match
TRUE 3 2 2 3 1 1
HS.0009 Bar Code Handling/RFID (if available)
TRUE 3 2 2 3 1 1
HS.0027 Cross Docking
FALSE 0 0
HS.0033 Data management
TRUE 4 0.5 2 1 2 0.5
HS.0034
Defective/Missing
Product/Discrepancy Reporting and
Resolution
FALSE 0 0
HS.0046 ERP Systems
TRUE 3 0.5 2 1 1 0.5
HS.0049 ID & Damage Inspection
TRUE 3 2 3 2 0 0
HS.0058 Inventory Management
FALSE 0 0
HS.0066 Legislation and Standards
TRUE 3 0.25 1 0.5 2 0.25
HS.0069 Logistics Management
TRUE 1 0.5 1 1 0 0.5
HS.0071 Logistics/Freight
TRUE 2 0.5 1 1 1 0.5
HS.0080
MSDS/CoC/BoL/Environmental
Interpretation
FALSE 0 0
HS.0106 Property Control and Disposition
TRUE 3 1 2 1 1 0
HS.0119 Return Management
FALSE 0 0
HS.0139
Supplier Relationship Management
(SRM)
TRUE 1 0.5 1 1 0 0.5
Staff:9.7
5
Train:
9
Hire:4.7
5
Opportunity Analysis Aggregate
Opportunity Analysis
Project Named/Number Example Project
Description Example Booking
Year of Impact
Baseline 2006 2007 2008 2009 2010
Net Sales $705,600
Cost of Sales
Total Cost of Sales $527,600 0 182 147 147 25
Gross Profit $178,000 0 (182) (147) (147) (25)
Supply-Chain Management Expense
Order Management Cost $28,102 (45) (460) (455) (250) (150)
Material (Product Acquisition) Cost $10,796 - (796) (860) (750) (251)
Planning and Finance Cost $5,086 - (372) (240) (240) (145)
Inventory Carrying Cost $21,510 - (1,528) (1,145) (1,005) (920)
IT Cost for Supply-Chain -0-
Total Supply-Chain Management Expense $65,494 (45) (3,338) (2,847) (2,392) (1,491)
Operating Income $76,800 45 3,520 2,944 2,539 1,516
THE VALUE OF SCOR
SCM Asset Returns: Superior Valuation
Comparison of Fortune-1000 Council member company
share price aggregate growth from 2003 present to S&P
500 and DOW indices.
Growth inflected after 2 years, and the spread between
SCOR index companies and other industrials has grown to
almost 30 points.
Growth is increasing exponentially: Compound interest on
SC performance.
Correlates SCC Membership/SCOR investments with
Shareholder value.
Same pattern evident in FTSE-100, DAX, NIKKEI and other
indices.
More Value
1
Improvement of operating results of an average of 3% in
the initial SCOR implementation phase by means of cost
reduction and improvement in customer services
Increase in profitability (between 2x and 6x) with regards
to project investments costs within first 12 months of
implementation
Reduction in IT costs through minimizing system
customization and making better use of standard
functionality
Continuous actualization of process change portfolio by
continuous conversion of Supply Chain improvements
with the objective of increasing annual profits by 1% to
3%
1
Poluha (2007) Application of the SCOR Model in Supply Chain Management New York, USA
Typical Potential Improvements
1
Area 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%
1
Hughes & Michels (1998) Transform your supply chain. Releasing value in business. London, UK
About Supply Chain Council
SCC is an independent, not-for-profit, trade association
Membership open to all companies and organizations
Founded in 1996
Regional representation (chapters) worldwide: North America,
Europe, Japan, Southern Africa, Latin America, Australia/New
Zealand, Southeast Asia, Greater China, and Middle East
Focus on research, application and advancement and advancing
state-of-the-art supply chain management systems and practices
Developer and endorser of the Supply Chain Operations Reference
(SCOR) as a cross-industry standard for supply chain management
Offers Training, Certification, Benchmarking, Research, Team
Development, Coaching, and Cross-standard Integration focused on
the SCOR framework
Approaching 1000 Association Members within global chapters
Sample of Industry Membership Scope
MANY THANKS!
W: www.supply-chain.org
E: gcc@supply-chain.org
schan@supply-chain.org
jfrancis@supply-chain.org
info@supply-chain.org

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2011 Supply Chain Council. ALL RIGHTS RESERVED.

| 2010 Executive | 1 | 25 July 2010

Best practice: "A current, structured, proven and

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