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Supply Chain

A supply chain is a system of organizations, people, activities, information,

and resources involved in moving a product or service
from supplier to customer
The Supply Chain Management Processes
Supply chain management is the management of relationships in the
network of organizations, from end customers through original suppliers,
using key cross-functional business processes to create value for customers
and other stakeholders.
Customer relationship management: provides the structure for how the
relationships with customers will be developed and maintained. Management
identifies key customers and customer groups to be targeted as part of the
firms business mission. The goal is to segment customers based on their
value over time and increase customer loyalty by providing customized
products and services. Cross-functional customer teams tailor Product and
Service Agreements (PSA) to meet the needs of key accounts and for
segments of other customers. The PSAs specify levels of performance. The
teams work with key customers to improve processes and eliminate demand
variability and non-value added activities. Performance reports are designed
to measure the profitability of individual customers as well as the financial
impact on the customer.

Supplier relationship management: is the process that defines how a

company interacts with its suppliers. As the name suggests, this is a mirror
image of customer relationship management. Just as a company needs to
develop relationships with its customers, it also needs to foster relationships
with its suppliers. As in the case of customer relationship management, a
company will forge close relationships with a small subset of its suppliers,
and manage arm-length relationships with others. A PSA is negotiated with
each key supplier that defines the terms of the relationship. For segments of
less critical suppliers, the PSA is not negotiable. Supplier relationship
management is about defining and managing these PSAs. Long-term
relationships are developed with a small core group of suppliers. The desired
come is a win-win relationship where both parties benefit.
Customer service management: is the firms face to the customer. It
provides the key point of contact for administering the PSA. Customer
service provides the customer with real-time information on promised
shipping dates and product availability through interfaces with the firms
functions such as manufacturing and logistics. The customer service process
may also include assisting the customer with product applications.
Demand management: is the supply chain management process that
balances the customers requirements with the capabilities of the supply
chain. With the right process in place, management can match supply with
demand proactively and execute the plan with minimal disruptions. The
process is not limited to forecasting. It includes synchronizing supply and
demand, increasing flexibility, and reducing demand variability. A good
demand management process can enable a company to be more proactive
to anticipated demand, and more reactive to unanticipated demand.
The order fulfillment: process involves more than just filling orders. It
includes all activities necessary to define customer requirement and to
design a network and a process that permits a firm to meet customer
requests while minimizing the total delivered cost as well as filling customer
orders. This is not just the logistics function, but instead needs to be
implemented cross-functionally and with the coordination of key suppliers
and customers. The objective is to develop a seamless process from the
supplier to the organization and to its various customer segments.
Manufacturing flow management: is the supply chain management
process that includes all activities necessary to move products through the
plants and to obtain, implement and manage manufacturing flexibility in the
supply chain. Manufacturing flexibility reflects the ability to make a wide
variety of products in a timely manner at the lowest possible cost. To achieve
the desired level of manufacturing flexibility, planning and execution must
extend beyond the four walls of the manufacturer in the supply chain.
Simulation techniques
Towill and Towill et al.used simulation techniques to evaluate the effects of
various supply chain strategies on demand implication. strategies
investigated are as follows:
1. Eliminating the distribution echelon of the supply chain, by including the
distribution function in the manufacturing echelon.
2. Integrating the row of information throughout the chain.
3. Implementing a just-in-time (JIT) inventory policy to reduce time delays.
4. Improving the movement of intermediate products and materials by
modifying the order quantity procedures.
5. Modifying the parameters of the existing order quantity procedures

Firms are increasingly thinking in terms of competing as a part of a supply

chain against other supply chains offering more or less the same product
assortment (Christopher, 1998). Important drivers of this development are
the intensified global competition enabled by more liberal and transparent
markets as well as the advances in information technology. Consequently,
there is a need and an opportunity for a joint coordinated approach of
industrial partners to the establishment of more effective and efficient supply
chains (i.e., supply chain management).
Model elements and relationships:Supply chains assume an integral
approach to physical transformation, data processing, and decision
making.Especially, the allocation of control policies to specific supply chain
members and relationships, such as hierarchy and coordination, deserve
explicit attention as decision variables. This requires the explicit notion of
actors, roles, control policies, processes, and flows in the model.
Model dynamics:Given the many parties involved, the control of dynamic
effects within the supply chain, as reflected in, for example, stock levels and
lead times, is an important issue. Therefore, the logistics of control, that is,
the timing and execution of decision activities, should be explicit. This
requires the ability to determine system state, to calculate the values of
multiple performance indicators at all times and, even more important, to
allocate performance indicators to the relevant supply chain stages.
Measures based on cost
Cost minimization: The most widely used objective.Cost is typically
minimized for an entire supply chain (total cost), or is minimized for business
units or stages.
Sales maximization: Maximize the number of sales dollars or units sold.
Profit maximization: Maximize revenues less costs.
Inventory investment minimization: Minimize the amount of inventory
costs (including product costs and holding costs).
Return on investment maximization: Maximize the ratio of net profit to
capital that was employed to produce that profit.
Measures based on customer responsiveness
Fill rate maximization: Maximize the fraction of customer orders pulled on
time.Product lateness minimization: Minimize the amount of time
between the promised product delivery date and the actual product delivery

Decision variables in supply chain modeling

In supply chain modeling, the performance measures are expressed as
functions of one or more decision variables. These decision variables are
then chosen in such a way as to optimize one or more performance
measures. The decision variables usually used are described below.
Production/distribution scheduling: Scheduling the manufacturing and/or
Inventory levels: Determining the amount and location of every raw material,
sub-assembly, and final assembly storage.
Number of stages (echelons): Determining the number of stages (or
echelons) that will comprise
the supply chain. This involves either increasing or decreasing the chains
level of vertical integration by combining (or eliminating) stages or
separating (or adding) stages, respectively.
Distribution Center (DC) customer assignment:
Determining which DC will serve which customer
Plant product assignment: Determining which plants will manufacture
which product. Buyer supplier relationships: Determining and developing
critical aspects of the buyer-supplier relationship.
Product differentiation step specification: Determining the step within
the process of product manufacturing at which the product should be
Number of product types held in inventory: Determining the number of
different product types that will be held in finished goods inventory.
Customer response time minimization: Minimize the amount of time
required from the time an order is placed until the time the order is received
by the customer. Usually refers to external customers only.
Lead time minimization: Minimize the amount of time required from the
time a product has begun its manufacture until the time it is completely
Function duplication minimization: Minimize the number of business
functions that are provided by more than one business entity.
Performance measures used in supply chain modeling as mentioned above,
an important element insupply chain modeling is the establishment of
appropriate performance measures.


Two predominant systems in supply chain operations are the "push" and
"pull" models. With increasing global operations and expanding supply
chains, companies are increasingly turning to "pull" methods, yet it is
important to view both systems and the important role each plays. The
fundamental difference between a "push" and "pull" model is an important
one to understand.
The key differentiator between the two systems involves inventory
management. In a true "push" model, stock is pushed up the supply chain
generally held at the retail level or an offsite warehouse location to ensure
customer demand is satisfied. This limits the occurrence of stock-out. The
"pull" system turns this around and moves inventory further down the supply
chain, to the manufacturer, supplier or even the raw material processor
Push Model
The "push" model is a classic supply chain model, which places product
upstream in the supply chain where it is required. Importantly, this
commonly occurs before it is needed to ensure demand is fulfilled. What we
often see is demand forecasting predictions for the end customer, and
appropriate levels of inventory to satisfy those requirements. The model
commonly follows a similar pattern throughout the supply chain so that
inventory is maintained at each step-in material flow process to ensure
future demand will be met. Multiple Resource Planning (MRP) is the common
scheduling procedure companies implement to forecast demand and
production planning. Here is a basic diagram of the operational flow. In this
case, we assume 100 products is the average demand:

Suppliers Warehouse Manufacturer Warehouse Holds Retailer Holds Customer

Manufactur Holds Produces100 Demand 100 100Finished products l00 Finished
e 100 100 Products Products Products
Products Components

In the most general sense, the "push" model literally pushes product
upstream to ensure each customer in the supply chain has the product they
need. Some common product segments we see the "push" model used in are
household goods like toilet paper, laundry soap, or commodity products such
as oil or electricity. They are products, which in most cases we today cannot
live without advantage of the "push" model is control and predictability for
the supply chain. Many companies have historically relied on the model
for this reason. If demand for products such as bath soap is stable,
then the manufacturing and transportation process can be structured
to closely control material movement and holding. Inventory is also
much easier to manage, maintain and control as all that is needed is an
optimal reorder point at which replenishment occurs. The downstream
produces the product to fulfill the replenishment requirements, and the
model can be stabilized. The disadvantages of the "push" model are high
penalties in terms of lost profits, and higher inventory holding costs
throughout the supply chain. For example, with a "push" model, when a
product becomes obsolete, the entire inventory must be sold at a large
discount or taken as a loss. Commonly retailers face this problem at the
end of a season, holiday peaks, or fashion season.
Pull Model
As customer preferences are increasingly pressuring manufacturing
operations, companies are now moving more to "pull" models in
supply chain material movement. In the "pull" model, the system is
fundamentally changed where production only occurs once an order
is placed, instead of maintaining inventory to satisfy the order
immediately. This means the downstream operations are triggered
by upstream requirements, and hence material flow occurs much
differently. Here is the basic design of a "pull" model:

Supplier Manufacturer Distribution center moves Retailer Places


Produces Produces 100 products from Order for 100

Demand 100

100 100 Products Manufacturer Products



As we can clearly see from the model, inventory in the "pull" system
can be greatly reduced. No longer are there warehousing and storage
locations between the supplier and manufacturer, and manufacturer
and retailer. Instead, product moves upstream only when required by
the final customer demand order, so inventory in all cases, raw
material, work-in-process and final product inventory, is minimized
between the different stakeholders in the supply chain. This is a very
basic overview, where different models may provide different
outlooks on how inventory is managed.

As we begin to understand the "pull" model in this context, we can

start to see the advantages created. First, as we have stated,
inventory throughout the system is reduced. What we commonly see
in "pull" models are smaller batch size orders and an increased
delivery frequency. Think about Just-In-Time (JIT). JIT was built around
a "pull" model to ensure inventory was minimized, yet replenishment
occurs at satisfactory levels so that production operations are not
slowed or delayed. With lower inventory, this holding costs,
increased resource availability in terms of manufacturing space, and
greater capital flexibility. With reduced inventory, companies
generally have more cash on hand for operational investments,
process improvement projects and expansionary development.
Another advantage of the "pull" model is an increase in flexibility. As
production is dictated directly by end customer orders, "pull" systems
commonly allow a company the ability to adjust to demand changes
and purchasing requirements. For example, if customers prefer one
color of car over another, the "pull" model is built to produce to the
color demands of a specific customer. In the "push" system, various
colors are all produced at once and inventory is immediately moved
to the dealer's location. In this case, the risk associated with unsold
cars is greatly reduced by the flexibility created in the "pull" model.
What we can also see are the disadvantages, primarily a higher
probability of stock-out and lower level of control. When considering
a "pull" model, a company should always understand that if
production is triggered by customer orders, then to minimize the lead
time, in-transit inventory must satisfy the customer's immediate
needs. This means finished product should already be on its way to
the customer, when the customer order is placed.
Both "push" and "pull" models have their place in current supply
chain operations. As we stated early on, each model truly depends on
the product characteristics, flexibility required, demand variability,
stock-out penalty, lead time, customer drivers and a whole range of
other considerations. If appropriately used, these models can create
incredibly effective operational material flow systems to minimize
costs and maintain increasing revenue and profit generation.
Ifhowever, transitions occur from one model to the other without
understanding the direct implications and potential challenges, many
systematic problems can occur increasing lead times and supply
chain costs.

Above figure represents the processes in a supply chain that are divided into
a series of cycles, each performed at the interface between two successive
stages of a supply chain. This means that each cycle is decoupled from other
cycles via an inventory so it can function independently, optimize its own
processes and is not hindered by problems in other cycles. For example, a
cycle that replenishes retailer inventories by delivering products from the
manufacturers end-product inventory and a cycle that takes care of
replenishing the manufacturers inventory by producing new end-products. A
cycle view of the supply chain clearly defines the processes involved and the
owners of each process (hence roles and responsibilities).

Generic Supply Chain Models

Model is supported in two main pillars (1) a method for characterizing any
industrial supply chain under several factors, and (2) characterization of five
generic supply chains, which are used as reference of common practices.
Factors were defined after a crossed analysis of several authors as Hill,
Fisher, Lee, Gattorna, Seuring, Stavrulaki & Davis, Porter, Kaplan & Norton
and Liebeck, Meyer & Abele, among others. Five generic supply chains were
defined after a crossed analysis of several cases, my own experience and
authors as Fisher, Lee, Gattorna, Christopher, among others.
Efficient Supply Chain
Our first model is Efficient Supply Chain, this Supply Chain Generic Model
(SCGM) is widely mentioned by several authors, some of them called this
model as lean, which is a very recognized term in the industry, but
misused, because the real lean model was developed by Toyota in 1950s
and is a mix between an agile and efficient models, while an efficient model
uses a make to forecast order penetration point, Toyota Production System
uses a Assembly to order order penetration point. Misunderstanding could
be originated because both models are oriented to lowest total cost.
Efficient SCGM is built based on efficient models of Fisher and Lee, and
Lean models of Gattorna and Christopher. Main characteristics of a
business framework in an efficient SCGM are predictable demands, long
life cycle products, products/services highly representative in customers
cost, assets utilization strongly impacts the total cost, highly competitive
market with several companies fighting by the same group of markets, and
principally customers oriented to low cost.
For this business framework, the focus of the supply chain profile is
efficiency, which is supported in a high utilization rate of assets based on a
Make to forecast model, in order to maintain production continuity and
assure the best production sequence, reducing set up time.
In few words, in a make to forecast production is performed before orders
are received based on a detailed planning of production activities in order to
assure focus on efficiency.
Fast Supply Chain
A Fast supply chain is oriented to create trends, based on a continuous and
fast renewal of products portfolio, based on a Make to forecast model and
short time to market. In a few words, a Fast Supply Chain has many of the
features of an efficient supply chain, but supported in three additional
competences: Fast concept to production process, could be supported in a
pooling of suppliers in order to balance demand changes and a large
quantity of SKUs, where many of them are renewed in each collection. Many
people confuse a Fast supply chain with an agile supply chain.

Continuous replenishment Supply Chain

Continuous replenishment SCGM is built based on continuous
replenishment models of Gattorna and Christopher. Main characteristics of a
business framework in a continuous replenishment SCGM are predictable
and stable demands, long life cycle products, low supply disruption risk, low
market mediation cost, and principally customers oriented to process
efficiency, especially low working capital.
For this business framework, the focus of the supply chain profile is
collaboration, which is supported in two main features: information sharing
and electronic transactions. Order penetration point is Make to stock, in
order to assure medium-high utilization rates at high levels of perfect orders.
Make to stock and Make to forecast could be understood as the same
model, but the main difference between them is that in a MTF production is
made according to sales expectations (forecast), in a MTS production is made
for replenishing predefined stock levels. In both models, high rate of assets
utilizations is a key factor. In few words, a Continuous replenishment SCGM
is a most mature model than efficient SCGM, and the main difference is the
predictability of demand, which is highly dependent on customers
Agile Supply Chain
Agile SCGM is built based on responsive/agile models of Fisher, Lee,
Gattorna and Christopher. Main characteristics of a business framework in an
Agile SCGM are unpredictable demands, short life cycle products, supply
disruption risk, high market mediation cost, and principally demanding
customers oriented to fulfill unpredictable demand in short time.
For this business framework, the focus of the supply chain profile is agility,
which is supported in two main features: extra capacity in production and
products oriented to postponement design, as consequence of this, an Make
to order order after divergence/postponement point- order penetration
point is used, looking for reducing order cycle time, but holding opportunity
to customize products in the pending processes according to customers
specific requirements.
In few words, production is partially performed before orders are received
based on a detailed planning of production activities in order to maintain
minimum levels of efficiency, but end processes (processes after divergence
point) are made according to customer orders are received. In some cases, is
possible that processes cant be done before customer orders arrival, due to
technological limitations of the production process or because postponement
design is not possible. Delivery speed is supported in extra-capacity in
processes after divergence point.
Leagile Supply Chain
Our LeAgile SCGM is based on LeAgile SCGM of Christopher, which is the
nearest model to Toyota Production Model, which is the real Lean model
and is confused with an Efficient model by several authors. Main
characteristics of a business framework in a LeAgile SCGM are
unpredictable demands, medium level of supply disruption risk, long life
cycle products, products/services highly representative in customers cost,
assets utilization strongly impacts the total cost, highly competitive market
with several companies fighting by the same group of markets and
principally customers oriented to low cost and fulfill unpredictable demand in
short time. It is the most demanding model, because requires agility with low
cost. The most important differences between an Agile SCGM and a
LeAgile SCGM are: Agile SCGM is MTO and extra-capacity is assigned
before and after divergence point, and in some cases dont apply
postponement design, but always are used common components/materials,
in the other hand, LeAgile model is ATO, extra-capacity is located only after
divergence point, processes after divergence point are oriented to
assembly and operations before divergence point operate under a
efficient SCGM.
For this business framework, the focus of the supply chain profile are
efficiency and order accuracy, the first one is supported in a mixed model: a
MTF model before divergence point and a ATO model after divergence point,
the first one driven by forecast and the second one driven by customized
customers orders. Order accuracy is a relevant factor in order to assure
fulfillment of customized orders. This model is applied in several industries
as apparel, computers and automobile, where customers orders are received
before assembly processes and components for assembly where
manufactured based on a forecast, due to their long production time.
Flexible SCGM
Our Flexible SCGM is totally based on Flexible SCGM of Gattorna. Main
characteristics of a business framework in a flexible SCGM are
unpredictable customer needs both in quantity and features, high supply
disruption risk, solutions oriented, and principally customers oriented to pay
whatever if their need is solved quickly.
For this business framework, the focus of the supply chain profile is
capacity/inventory pooling and/or outsourced capacity, which is supported in
sharing information of capacity and inventory with suppliers, customers and
inclusive, competitors. Order penetration point is variable, according to each
specific case. In few words, a Flexible SCGM is oriented to solve
unexpected events, nearly to urgencies or emergencies. A typical example of
these supply chains are companies oriented to corrective maintenance as
flood control, in which own equipment could be insufficient and companies
must share equipment with suppliers, customers or inclusive competitors.

Supply Chain Operations Reference Model (SCOR)

The Supply Chain Operations Reference model (SCOR) is the product of
Supply Chain Council,
Inc. (SCC) a global non-profit consortium whose methodology, diagnostic and
benchmarking tools help organizations make dramatic and rapid
improvements in supply chain processes.
SCC established the SCOR process reference model for evaluating and
comparing supply chain activities and performance
Scope of SCOR
The SCOR-model has been developed to describe the business activities
associated with all phases of satisfying a customer's demand. The model
itself contains several sections and is organized around the six primary
management processes of Plan, Source, Make, Deliver, Return and Enable
(shown in Figure 1). By describing supply chains using these processes
building blocks, the model can be used to describe supply chains that are
very simple or very complex using a common set of definitions. Thus,
disparate industries can be linked to describe the depth and breadth of
virtually any supply chain. The model has been able to successfully describe
and provide a basis for supply chain improvement for global projects as well
as site-specific projects.

It spans: all customer interactions (order entry through paid invoice), all
physical material transactions (supplier's supplier to customer's customer,
including equipment, supplies, spare parts, bulk product, software, etc.) and
all market interactions (from the understanding of aggregate demand to the
fulfillment of each order). It does not attempt to describe every business
process or activity. Specifically, the model does not address: sales and
marketing (demand generation), product development, research and
development, and some elements of post-delivery customer support.
This model is designed to support supply chain analysis at multiple
levels.SCC has focused on the top three process levels, which are industry
neutral. SCOR does not attempt to prescribe how a organization should
conduct its business or tailor its systems/information flow. Every organization
that implements supply chain improvements using the SCOR model will need
to extend the model, at least to Level-4, using industry-, organization- and/or
location-specific processes, systems, and practices.

SCOR is a hierarchical process model

SCOR Structure
SCOR is a reference model. The purpose of a process reference model, or
business process framework, is to describe your process architecture in a
way that makes sense to key business partners. Architecture here means the
way processes interact, how they perform, how they are configured and the
requirements (skills) on staff operating the process.
The SCOR reference model consists of 4 major sections:
Performance: Standard metrics to describe process performance and define
strategic goals
Processes: Standard descriptions of management processes and process
Practices: Management practices that produce significant better process
People: Standard definitions for skills required to perform supply chain

The performance section of SCOR consists of two types of elements:
Performance Attributes and Metrics. A performance attribute is a grouping of
metrics used to express a strategy. An attribute itself cannot be measured; it
is used to set strategic direction. Examples of business strategies applied to
supply chain are: 'Superior performance for Supply Chain Reliability' or
'Advanced performance for Agility'. Metrics measure the ability of a supply
chain to achieve these strategic attributes. Superior performance for
Reliability can thus be expressed in a performance objective:
Perfect Order Fulfillment: X%.
Reliability is the performance attribute; Perfect Order Fulfillment is the
metric. Benchmarking is a commonly used method to calculate the value of
X in the Reliability example.Reliability, Responsiveness and Agility are
considered customer-focused. Cost and Asset Management Efficiency are
considered internal-focused. All SCOR metrics are grouped within one of the
performance attributes. Each Performance Attribute has one or more level-
1/strategic metrics. These level-1 metrics are the calculations by which an
organization can measure how successful it is in achieving its
desired\positioning within the competitive market space.
Performance Attribute Level-1 Strategic Metric
Perfect Order Fulfillment
Order Fulfillment Cycle Time
Upside Supply Chain Flexibility
Upside Supply Chain Adaptability
Downside Supply Chain Adaptability
Overall Value at Risk
Total Cost to Serve
Asset Management Efficiency
Cash-to-Cash Cycle Time
Return on Supply Chain Fixed Assets
Return on Working Capital

The SCOR metrics are organized in a hierarchical structure. SCOR describes

level-1, level-2 and level-3 metrics. The relationships between these levels
are diagnostic. Level-2 metrics serve as diagnostics for level-1 metrics. This
means that by looking at the performances of the level-2 metrics it can
explain performance gaps or improvements for level-1 metrics. This type of
analysis of the performance of a supply chain is referred to as metric
decomposition or root-causing. Similarly, level-3 metrics serve as diagnostics
for level-2 metrics. The level of a metric is included in the codification of the
metric itself. Metrics codification has been introduced in SCOR. The coding
starts with the performance attributes: Reliability - RL, Responsiveness - RS,
Agility - AG, Cost - CO, and Asset Management - AM. Each metric starts with
this two-letter code, followed by a number to indicate the level, followed by a
unique identifier. For example: Perfect Order Fulfillment is RL.1.1 - a level-1
metric within the Reliability attribute. Perfect Condition is RL.2.4, a Reliability
metric at level-2. And Transportation Cost is CO.3.022.
The Process section in SCOR provides a set of pre-defined descriptions for
activities most companies perform to effectively execute their supply chains.
The six macro-level SCOR processes Plan, Source, Make, Deliver, Return and
Enable are well-known and widely adopted. SCOR identifies 2 more levels of
process. Level here indicates the span of the process: A level-3
process is focused on a more detailed activity. A level-1 process spans
multiple level-3 processes.

Level-2 process categories determine the capabilities within the level-1

processes. The key level 2 processes are Make-to-Stock vs. Make-to-Order vs.
Engineer-to-Order for Source, Make and Deliver processes and Defective vs.
MRO vs. Excess for the Return process. Level-3 processes are process steps
that are performed in a certain sequence in order to plan supply chain
activities, source materials, make products, deliver goods and services and
handle product returns.

Companies may develop standard process descriptions of activities within

the level-3 processes so called level-4 processes. Level-4 processes are
generally industry, product, location and/ or technology specific. For
example: Most if not all companies need to perform a task known as
"receive, enter and validate a customer order". This is a level-3 process (for
example sD1.2). The level-4 processes would describe the steps how the
order was received. Examples would be EDI, fax, telephone, and walk-in.
The practices section, formerly known as 'best practices', provides a
collection of industry-neutral practices companies have recognized for their
value. A practice is a unique way to configure a process or a set of processes.
The uniqueness can be related to the automation of the process, a
technology applied in the process, special skills applied to the process, a
unique sequence for performing the process, or a unique method for
distributing and connecting processes between organizations.
The People section of SCOR was introduced in SCOR 10 and provides a
standard for describing skills required to perform tasks and manage
processes. Generally, these skills are supply chain specific.
SCOR recognizes 5 commonly accepted competency levels
Novice: Untrained beginner, no experience, requires and follows detailed
Beginner: Performs the work, with limited situational perception.
Competent: Understands the work and can determine priorities to reach
Proficient: Oversees all aspects of the work and can prioritize based on
situational aspects.
Expert: Intuitive understanding. Experts can apply experience patterns to
new situations.

Level 1
The model is based on five different management processes. The processes
Source, Make and Deliver of the company, together with those of clients and
suppliers, form a "supply chain" planned as a whole by the different actors in
the process Plan. Additionally, in all the "contact links" Deliver-Source is
included the process Return, for the management of returns.
PLAN: Processes that balance aggregate demand and supply to develop a
course of action which best meets the established business rules.
To plan the acquisition of prime matters in Source, to plan adequately the
production in Make and to fulfill the clients requirements in the delivery in
Deliver, it is necessary to be conscious of the demands variability along the
whole chain to avoid the unwanted effect Bullwhip (Accumulation of high
inventory levels in the stages of the supply chain that are farer from the final
client, which face great variability of demand in comparison with the
distributors or retailers). For this is necessary to establish narrow relations
with suppliers and clients to plan production in agreement to the demand of
the final product. When the product is perishable, it is necessary to have a
constant supply system. Every day it is necessary to have fresh inputs,
necessary for the production of the day or the week. Likewise, the capacity
of the productive process must assure a volume adapted to satisfy the
internal demand and that of exportation; as for the distribution, the
deliveries must be focused to satisfy the delivery times, preserving the
quality. Under these considerations arises the need to plan the production
according to the different types of demand, for which is indispensable to
share information in benefit of all the parts involved (from the suppliers
supplier up to the clients client).
However, for selected companies that produce raw ingredients and sell
processed consumer products, such as dairy co-operatives, problems exist.
Inventory planning assumes control of at least one end of the chain either
demand or supply. Inventory planning for agricultural businesses is very
difficult. If a business can know exactly the quantity and quality of the
harvest, the business can then plan the inventory that balances supply and
demand. If not, the company quickly loses its ability to manage the chain
optimally. The best it can achieve is sub-optimal performance.
SOURCE: Processes that procure goods and services to meet planned or
actual demand. The prime matters are an essential part to assure the quality
of the final products. Thats why quality standards must be established by
the suppliers, to satisfy the final clients. However, the chain must recognize
that uncontrollable events will affect the product procured. In the case of
agricultural products, input quality variation can depend on environmental
and biological factors (rain, disease, etc.). A vendor may have a contract, to
clearly identify standards and be a certified supplier, but factors completely
outside of the vendors ability to control, could result in a product delivered
that doesnt match established parameters.
The inputs can be divided in perishable products (ex: agricultural products)
and not perishable (ex: packages). For the case of the perishable inputs, it is
necessary that the supply interval is short to support a minimal inventory,
the necessary quantity for the daily production. In this point it is very
important to support a good coordination in the supply chain, with the
purpose of avoiding from high costs of storage for concepts of refrigeration,
or for caducity of prime matters.
MAKE: Processes that transform goods to a finished state to meet planned
or actual demand. In this process, it is necessary to take into account all the
activities of the transformation process from the raw material to the final
product, as well as the flows of material and information of the productive
process. When programming the activities of production process, it is
necessary to have in mind that production is done according to request.
Besides, to continuously improve the process, the preferences of the
consumers must be considered. To satisfy these needs of the final client,
methods and quality standards will be proposed in order to support the
control of the productive process stepwise.
DELIVER: Processes that provide finished goods and services to meet
planned or actual demand, typically including order management,
transportation management and distribution management.
To deliver the products, the volume that the client needs will be assured
avoiding excessive deliveries, unnecessary costs of transport, etc. The
clients' portfolio will be defined. In this process it is managed from the
questions and requirements of the clients up to the shipments of the product
and the selection of logistic companies.
RETURN: Processes associated with returning or receiving returned products
for any reason. These processes extend into post-delivery customer support.
To do a good returns management and returns of raw material can be an
important source of competitive advantages. It is necessary to assume that,
in spite of the good practices to deliver a quality product, there can always
be motives for which our products, or our prime matters, will be returned by
the clients or to our suppliers respectively. Because of this, it is proposed to
offer to the client an efficient service of management of returns, which allows
to answer in time to this type of situations, minimizing a potential
deterioration in the relation with the clients, and also to manage the process
of returns with suppliers in case of receiving defective, expired or excessive
inputs. There must be channels of communication and procedures properly
studied to do this process, in such a way that this situation does not turn into
an unexpected complaint, but it works as a good system of feedback in the
post-sale, with the objective of minimizing the costs of the return and at the
same time, to be in good relations with clients and suppliers.
Level 2In this level, companies configure their supply chain. A companys
supply chain can be configured-to-order at Level 2 from 30 core process
categories. The Process Categories are defined by the relationship between
a SCOR Process and a Process Type. The Process Categories are selected
from the SCOR configuration toolkit, in agreement to the type of products
and to the market, to represent the supply chain configuration. Each product
or product type may have its own supply-chain.
The type of process Planning consists of periodically aligning the necessary
resources to get the requirements of demand: in this one the demand,
internal or for exportation, is agreed with the necessary supply for the
production. The type Execution is unleashed by the current or planned
demand; here the state of the materials is changed, and implies the
transformation of the product, programming and sequencing the production.
The type Enable corresponds to processes that prepares, support or handle
information or relations on which depend the processes of Planning and

Level 3 defines a companys ability to compete successfully in its chosen

markets, and consists of:
Process element definitions
Process element information inputs, and outputs
Process performance metrics
Best practices, where applicable
System capabilities required to support best practices
It is at this point where a company using SCOR will learn what information
Inputs are needed for each of the Process Elements, and what Outputs to
It is recommended to have a differentiated treatment for the inputs and
prime matters, according to their caducity. Hereby, agricultural products
must have a political of inventory different from the packages, which can be
stocked for more time. In this link of the chain, it is of great utility to use
tools that allow the analysis of the provider companies, in order to identify
their strengths and weaknesses, to establish the interrelationships between
the links Source and Deliver in the best possible way. It is recommended the
use of tools of strategic analysis of provider companies. Another important
matter in this process, is the maintenance of the quality of the inputs and
products along the whole chain, since for being foodstuffs, an efficient
system of monitoring and control is needed.
In this level the information of the process elements from levels 1 and 2 is
presented in a more detailed way. For example, here would appear the flows
of material of the process (Make), the sources of the income (Source) and the
destinies of the products (Deliver). Here the phases of the process of
production are taken into account: stew, cooled, packed, etc. As well as the
later phases: storage, freezing up to the distribution.
It can also be taken in account if the management of the orders from
different clients needs a different treatment: for example orders from normal
clients or orders from retailers. With the last ones, the orders could be
bigger, and as the capacity of production is limited and the times of delivery
must be short, in that case, these orders should be reported with major
fluency and anticipation. Also, it is necessary to know if the cool chain must
be kept during the transport or not, to keep the quality of the final product, etc.

SCOR Model defines basic processes of the supply chain and groups them
into five categories as Plan, Source, Make, Delivery and Return. SCOR exactly
names the main process in each of these groups. The operations which are in
the range of SCOR model are:

- All supplier / Customer interactions order entry through paid invoice

- All physical material transactions from your suppliers supplier to your
customers customer, including equipment, suppliers, spare parts, bulk
products, software etc.
- All market interactions from the understanding of aggregate demand to the
fulfillment of each order
- Returns
SCOR does not include:
- Sales administration processes
- Technology development processes
- Product and process design and development processes
- Some post-delivery technical support processes

Supply Chain Roadmap

Supply Chain Roadmap is not a new type of supply chain strategy, Supply
Chain Roadmap is a method supported in the most important and recognized
theories and practices about supply chain strategy, its contribution resides in
the development of a simple and easy method to characterize and identify
the relevance of the supply chain strategy with business framework of an
organization by a three-step method: Understand, Describe and Review.
Supply Chain Roadmap, method is supported in two main pillars, the
characterization method and the gap analysis, which compares any supply
chain strategy with five reference supply chain models.
Supply Chain Roadmap is not a quantitative method with a unique or
predefined solution, Supply Chain Roadmap is a method where supply chain
strategy could be gathered and reviewed in a systematic and organized
approach supported by several team discussions where is analyzed current
supply chain strategy compared against reference supply chain models, in
order to define gaps and/or inadequate alignment between supply chain
strategy and business strategy.

Supply Chain Roadmap fundamentals

An overview of Supply Chain Strategy
Competition in diverse industrial and service sectors has increased to
unimaginable levels in the past years. Factors such as product technological
maturity, a greater number of suppliers in the market, free trade agreements
and the advantage of scale that competitors with global reach have, are
approximating diverse industrial sectors to product commoditization (loss
of differentiation).
In order to face this challenging competitive environment, organizations are
developing several approaches for the business strategy, such as innovation,
advantages in costs, the development of value-added services or a mix
thereof, among others. At the same time, in the last ten years, the Supply
Chain function has become a key element for competing and differentiating
itself in the markets given that within its functional role it is in charge of
coordinating the flow of information, products and money from the suppliers,
passing through the manufacturing and transformation processes to then
reaching the Customers, thus strongly affecting the organizations
competitiveness factors such as product cost, working capital, the speed with
which it reaches the market and service perception, among others. The
importance of these competitiveness factors has garnered the attention of
many authors in respect of how one can approach organizations supply
chain strategy so as to adequately support the business strategy and
propose generic supply chain models, in accordance with several criteria.
The first approach to these supply chain strategy design models was
developed by Hill (1995), who focuses on the manufacturing field and
introduces concepts such as order qualifiers and order winners and on which
the proposal to define an organizations manufacturing strategy is based, a
work which he later perfected and evolved, but maintaining his approach
towards manufacturing (Hill & Hill 2009). The first widely recognized proposal
of a segmented model for a supply chain strategy arises from Fisher (1997),
who in his classic article What is the right supply chain for your product?
suggests that the design of the supply chain must be being defined with
respect to the product type: for functional products, he recommends efficient
chains and for innovative products he recommends agile chains. Martin
Christopher (2000, 2002), adds the lead-time criteria to Fishers product type
criteria for the selection of the supply chain model by developing a 2x2
matrix and introduces agile, lean and lean agile supply chain concepts.
Alongside, Lee (2002) develops the uncertainty framework concept, in
which starting from the interaction between the uncertainty of demand and
the uncertainty of sourcing; he introduces four types of supply chains as
follows: Efficient, Agile, Rapid Response and Risk Coverage. Later,
Christopher and Gattorna (p 119 2005) define the concept of alignment of
supply chains with the Customers needs and introduce four generic supply
chains: Collaborative, Efficient, Rapid Response and Innovative. Gattorna
(2006) subsequently evolved this concept to dynamic supply chains, where
he presents four types of supply chains: Agile, Efficient, Continuous
Replenishment and Flexible. In the interim, the Best Value Supply Chain
(Ketchen & Hult 2007) arises, which a hybrid approach combining elements
of the generic chains is proposed previously by other authors.
It is important to highlight that the authors use similar terminology for
naming the generic supply chains, but develop different concepts in the
modus operandi and in these generic chains applicability criteria,
constituting a first element of confusion, thus making it difficult for supply
chain professionals to understand concepts so they can correctly select and
align the adequate supply chain model to their own business reality.

Several approaches to business strategy

There are different approaches about the strategy, some of them focused on
the competitive positioning based on the understanding of power of external
forces governing competition in an industry, as Porters approach, which is
classified in the positioning based view model PBV-. Others focused on
competences and capabilities of the organization, as Resources-based view
-RBV- approach, where company capabilities are intangibles as reputation,
know how, culture, innovation process, among others, are capabilities very
hard to imitate for competitors, and based on them, companies could create
competitive advantage.

A newest oncoming about collaborative relationships and networking as a

basis for business strategy has been introduced in more recent years, where
synergy among partners in the value network could create competitive
advantage that is inimitable for other value networks.

Supply Chain Roadmap approach

Supply Chain Roadmap is positioned in the middle of positioning-based

view and resource-based view approaches and defines an additional
element as a result of the interaction among external forces an internal
capability: the unique value proposal, which constitutes in the competitive
positioning of the company in the marketplace, supporting strategy in the
understanding of external forces and internal capabilities. In addition to that,
Supply Chain Roadmap introduces collaborative relationships as a factor of
the internal capabilities. Supply Chain Roadmap approach considers than
strategy is the result of the interaction of several factors covered by the
three approaches: RBV, PBV and collaborative strategy.
Supply Chain Framework
The environment of the business where an organization competes has
multiple components, but which of them influence the design and
performance of the supply chain?
Porters model speaks of five forces that regulate competition in any
industrial sector. Two of these forces, the power of Customers and the power
of supplier, are related to the natural members of the supply chain of any
company, reason why they must be considered as key elements in the
supply chain design, and in addition, we must go beyond what Porter
proposes and introduce some new elements inside these forces, which are
the key to supply chain management, such as, product and information
flows, the relation of logistics costs on total costs and the variability of
demand, among others. Substitute products or services, the struggle among
current competitors and the entrance of new competitors, rather than
independent forces, must be considered as components of the Customers
power and of the suppliers power, given that these are elements that modify
the power relationship and the desire for collaboration among the parties.
This extensive vision regarding the effect of suppliers and Customers leads
us to the redefinition of the concept in a broader manner and naming them
as relations with Customers and relations with suppliers. On the other hand,
the other fundamental force in any supply chain are the technological and
economic components related to the transformation process (understood as
the production process of the good or service), since they affect structural
decisions related to the production process and therefore affect the design
and performance of the supply chain.

Supply Chain Profile

The structure of a supply chain is comprised of three macro processes:
Supply, Transformation and Distribution. The latter process must involve a
redefinition of the traditional vision, since the growing trend of introducing
value-added services that accompany the product in the companies value
proposal, has forced developing an infrastructure inside the organizations for
the production of products and for the delivery of value-added services,
which leads us to reconsider the traditional supply chain structure, modifying
the traditional concept of order winners / qualifiers introduced by Hill, to a
concept that is more focused on the current value proposal, which we shall
call Product winners / qualifiers and Service winners / qualifiers. This
approach intends to differentiate the competencies and infrastructure that
must be developed for each one of the aspects of the value proposal and
ensure that both the product and the service have the importance required
by the market in the organizations supply chain strategy.
Its important to clarify that some authors describe product as the
combination of physical goods and services accompanying and supporting
commercial transaction, but, in order to differentiate competences required
under a manufacturing perspective (oriented to physical goods) and
competences required under a supply chain perspective, well be using
Product concept as a definition for Physical goods features and Service
as a definition of Other features supporting companys value proposal.
Figure presents the roadmap for the design of the supply chain, where the
Activities related to the flow of products, information and financial
transactions interrelate with the competitive environment, which are
Supply Chain Framework and Supply Chain Profile respectively. Based on
the interaction between them is defined the unique value proposal. The
complete model is designated as Supply Chain Roadmap.
In few words, Supply Chain Roadmap method understands supply chain
strategy as the interaction of external forces, internal processes/capabilities
and companys competitive positioning.


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Strategies for
reducing costs and improving services. London: Pitman Publishing.

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Towill, Supply chain dynamics, International Journalof Computer Integrated
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-Supply-Chain Operations Reference-model. SCOR Version 10.0 Overview.



- How do I use SCOR. Peter Bolstoff