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Overview of Model Structure Revision 3.0 European Conference Hotel Metropole, Brussels October 25-27, 1998 SCOR Primer.

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Presentation on theme: "Overview of Model Structure Revision 3.0 European Conference Hotel Metropole, Brussels October 25-27, 1998 SCOR Primer."— Presentation transcript:

1 Overview of Model Structure Revision 3.0 European Conference Hotel Metropole, Brussels October 25-27, 1998 SCOR Primer

2 The Supply Chain Operations Reference-model (SCOR) has been developed and endorsed by the Supply-Chain Council (SCC), an independent not-for-profit corporation, as the cross- industry standard for supply-chain management (SCM) SCOR is freely available to all who wish to use the standard reference model The SCC was organized in 1996 by Pittiglio Rabin Todd & McGrath (PRTM) and Advanced Manufacturing Research (AMR), and initially included 69 voluntary member companies Council membership is now open to all companies and organizations interested in applying and advancing state-of-the-art supply-chain management systems and practices Member companies pay a modest annual fee to support Council activities All who use the SCOR model are asked to acknowledge the SCC in all documents describing or depicting the SCOR model and its use All who use SCOR are encouraged to join the SCC, both to further model development and to obtain the full benefits of membership Further information regarding the Council and SCOR can be found at the Councils web site, www.supply-chain.org © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 1

3 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 2 Session objectives and take-aways äIntroduce you to the Supply Chain Operations Reference-model (SCOR) developed by the Supply-Chain Council äEducate you on how to apply SCOR –To configure your supply chain äHelp you understand next steps toward supply-chain improvement

4 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 3 Supply Chain Operations Reference-model Overview äIntroduction äHistory äSCOR äApplying the Model –A Case Study –Developing Supply-Chain Configurations äSummary Contents

5 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 4 Introduction to the Supply Chain Operations Reference-model (SCOR) äThis document provides a basic overview of the Supply Chain Operations Reference-model (SCOR) äThis document is intended for use in a comprehensive SCOR training program äPlease review SCOR materials carefullywe need your feedback. Feedback may be: –Posted on the appropriate Supply-Chain Council web forums at www.supply-chain.org Integration Plan Source Make Deliver

6 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 5 Introduction to the Supply Chain Operations Reference-model (SCOR) äSCOR feedback may be: –Emailed or faxed to Bill Hakanson, Executive Director of the Supply-Chain Council Email address: bill@hakanson.com Tel:(412) 781- 4101 Fax: (412) 781-2871 –Please include your name and contact information so SCC technical committees may clarify your feedback or questions Continued

7 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 6 % of Revenue Source: PRTMs 1997 Integrated Supply-Chain Benchmarking Study Definition:Total supply-chain management cost is the sum of Order Management, Material Acquisition, Inventory Carrying, and Supply-Chain Finance, Planning, and MIS Costs Total Supply-Chain Management Cost Why is supply-chain management so important? A $1B company can save $30M – $60M Best-in-class companies have an advantage in total supply-chain management cost of 3% – 6% of revenue

8 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 7 Cash-to-Cash Cycle Time Calendar Days Source: PRTMs 1997 Integrated Supply-Chain Benchmarking Study Definition: Cash-to-cash cycle time is calculated as inventory days of supply + days sales outstanding - average payment period for materials Why is supply-chain management so important? Leading companies have cash available 2 – 3 months faster Leading companies have a 40% – 65% advantage in cash-to-cash cycle time over average companies

9 Supply Chain Operations Reference-model (SCOR) History © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 8

10 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 9 Broad industry interest in supply-chain management triggered the SCOR project äPRTM and AMR helped form the Supply-Chain Council (SCC) in Q1 1996 –Approximately 70 charter companies participated –A wide range of industry segments was represented äThe SCC objective is to develop a standard supply-chain process reference model enabling companies to: –Communicate supply-chain issues –Measure their performance objectively –Influence future SCM software

11 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 10 Who are the founding Supply-Chain Council members? AlliedSignal Inc. Alza Corporation Amoco Petroleum Product Analog Devices Armstrong World Industries, Inc. Avnet Bayer Corporation Becton Dickinson Supply-Chain Services Bethlehem Steel BHP Information Technology BHP Transport Black & Decker Bristol-Myers Squibb Company C.R. Bard Medical Division Carrier Corp. Case Corp. CertainTeed Corp. Chesebrough-Ponds USA Ciba Geigy Colgate Palmolive Company Compaq Computer Corp. CPC Baking Business Digital Equipment Corp. Dow Chemical Dow Corning Eastman Kodak Company Eaton Cutler-Hammer Emerson Electronics Ethicon Exabyte, Inc. Federal Express General Electric General Mills GTE Government Systems Harris Hasbro Haworth, Inc. IBM Heineken USA, Inc. Hoffman-LaRoche IMATION Johnson & Johnson L.L. Bean, Inc.

12 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 11 Who are the founding Supply-Chain Council members? Lockheed Martin Corp. Lonza Corp. Lotus Development Corp. Lucent Technologies Merck & Co., Inc. Miller Brewing Co. Minnesota Mining & Manufacturing (3M) Monsanto Business Services Motorola (Semicon) Nabisco Nortel Occidental Chemical Corp. Uniden America Corp. Warner-Lambert Co. Western Digital Corp. Whirlpool Witco Corp. Xerox Corp Olympus America, Inc. Pitney-Bowes, Inc. Procter & Gamble QUALCOMM, Inc. QUALCOMM Personal Electronics Rhone-Poulenc Rorer Rockwell International Corp. Solectron Corp. Sonoco Products Co. Synopsys, Inc. Texas Instruments (Semicon) UPS Logistics Group Continued

13 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 12 The 1998 Supply-Chain Council Board of Directors and its members are responsible for the maintenance of SCOR SCC European Leadership Team Supply-Chain Council Membership Company Chair: Siemens Business Services GEC Marconi Cranfield University Avnet IMS Jonker Advies ICI plc Pittiglio Rabin Todd & McGrath Supply Chain Council Individual Herbert Heinzel Russ Armitage Martin Christopher Douglas Kent Robin Martens Shahpur Patell Joseph Rousel Bill Hakanson

14 What is a Process Reference Model? © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 13

15 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 14 What is a process reference model? äProcess reference models integrate the well-known concepts of business process reengineering, benchmarking, and process measurement into a cross-functional framework 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 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

16 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 15 äProvide a balanced horizontal (cross-process) and vertical (hierarchical) view äDesigned to be (re)configurable äUsed to represent many different configurations of a similar process äAggregate a series of hierarchical process models Classic process decomposition models are strictly hierarchical Process decomposition models are developed to address one specific configuration of process elements Process Reference Models accommodate a number of constructs Process Element Level 1 2 3 4 Process Process Element Task Activities Task Activities Contains: A process reference model differs from classic process decomposition models

17 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 16 What is a process reference model? äStandard descriptions of management processes äA framework of relationships among the standard processes äStandard metrics to measure process performance äManagement practices that produce best-in-class performance äSoftware tools that enable best practices A Process Reference Model describes

18 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 17 Why use a process reference model? äA process reference model allows companies to: –Communicate, using common terminology and standard descriptions of the process elements –Leverage metrics and benchmarking to determine performance goals, set priorities, and quantify the benefits of process changes –Understand the best practices that yield the best performance –Understand the overall SCM process and evaluate overall performance –Identify the software tools best suited for their process requirements äOnce a business process has been captured in a process reference model it can be: –Described unambiguously –Communicated consistently –(Re)designed to achieve competitive advantage –Measured, managed, controlled, and refined to meet specific purposes

19 Supply Chain Operations Reference-model: The Basics © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 18

20 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 19 SCOR is founded on four distinct management processes äSCOR spans –All customer interactions, from order entry through paid invoice –All physical material transactions, from your suppliers supplier to your customers customer, including: Equipment, supplies, spare parts, bulk product, software, etc. –All market interactions, from the understanding of aggregate demand to the fulfillment of each order From your suppliers supplier to your customers customer Supplier Plan Customer Customers Customer Suppliers Supplier Make DeliverSourceMake DeliverMakeSource Deliver Source Deliver Internal or External Your Company Source

21 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 20 The boundaries of any model must be carefully defined äSCOR does not include –Sales administration processes –Technology development processes –Product and process design and development processes –Post-delivery customer support operations including technical support processes äLinks to processes not included within the models scope, such as product development, are noted in SCOR

22 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 21 Processes that balance aggregate demand and supply to develop a course of action which best meets the business rules processes äDemand/supply planning –Assess supply resources, aggregate and prioritize demand requirements, plan inventory, distribution requirements, production, material, and rough-cut capacity for all products and all channels äManage planning infrastructure –Make/buy decisions, supply-chain configuration, long-term capacity and resource planning, business planing, product phase-in/phase-out, manufacturing ramp-up, end-of-life management, product-line management Plan

23 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 22 Processes that procure goods and services to meet planned or actual demand äSourcing/material acquisition –Obtain, receive, inspect, hold, and issue material äManage sourcing infrastructure –Vendor certification and feedback, sourcing quality, in-bound freight, component engineering, vendor contracts, initiate vendor payments Source Continued

24 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 23 Processes that transform goods to a finished state to meet planned or actual demand äProduction execution –Request and receive material, manufacture and test product, package, hold and/or release product äManage make infrastructure –Engineering changes, facilities and equipment, production status, production quality, shop scheduling/sequencing, short-term capacity Make Continued

25 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 24 Processes that provide finished goods and services to meet planned or actual demand äOrder management –Enter and maintain orders, generate quotations, configure product, create, and maintain customer database, manage allocations, maintain product/price database, manage accounts receivable, credits, collections, and invoicing äWarehouse management –Pick, pack, and configure products, create customer specific packaging/labeling, consolidate orders, ship products äTransportation and installation management –Manage traffic, manage freight, manage product import/export –Schedule installation activities, perform installation, verify performance äManage deliver infrastructure –Manage channel business rules, order rules, manage deliver inventories, manage deliver quality Deliver Continued

26 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 25 Each basic supply chain is a chain of Source, Make, and Deliver Execution processes SourceMakeDeliver... Customer & Supplier A Supply Chain Customer & Supplier Plan äEach intersection of two execution processes (Source- Make-Deliver) is a link in the supply chain äPlanning processes manage these customer-supplier links

27 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 26 SCOR contains three levels of process detail # Level Schematic Comments 1 2 3 4 Configuration Level (Process Categories) Process Element Level (Decompose Processes) Plan Deliver Make Source A companys supply chain can be configured-to- order at Level 2 from approximately 19 core process categories. Companies implement their operations strategy through the configuration they choose for their supply chain Companies fine tune their Operations Strategy at Level 3 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 Systems/tools by vendor Implementation Level (Decompose Process Elements) Companies implement specific supply-chain management practices at this level Level 4 defines practices to achieve competitive advantage and to adapt to changing business conditions Supply Chain Operations Reference-model Top Level (Process Types) Level 1 defines the scope and content for the Supply Chain Operations Reference-model Here basis of competition performance targets are set Not in Scope Description Balance Production Resources with Production Requirements Establish Detailed Production Plans Identify, Prioritize, and Aggregate Production Requirements Identify, Assess, and Aggregate Production Resources P3.1 P3.3 P3.4 P3.2

28 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 27 At Level 1, SCOR is based on four core management processes 1

29 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 28 SCOR Level 1 Supply-Chain Management Metrics Assets Delivery Performance/ Quality Cost Flexibility & Responsiveness Delivery performance Order fulfillment performance Fill rate (Make-to-stock) Order fulfillment lead time (ETO, MTO, CTO) Perfect order fulfillment Supply-chain response time Production flexibility Total supply-chain management cost Value-added productivity Warranty cost or returns processing cost Cash-to-cash cycle time Inventory days of supply Asset turns Customer-Facing Internal-Facing SCOR Level 1 metrics characterize performance from customer-facing and internal-facing perspectives 1

30 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 29 At Level 2, SCOR provides a toolkit of 17 process categories Customers Suppliers P1 Plan Supply Chain Plan P2 Plan SourceP3 Plan MakeP4 Plan Deliver SourceMakeDeliver S1 Source Purchased Materials S2 Source Make-to-Order Products M1 Make-to-Stock M2 Make-to-Order M3 Engineer-to-Order S3 Source Engineer-to-Order Products S0 Source Infrastructure M0 Make Infrastructure D0 Deliver Infrastructure D1 Deliver Stocked Products D2 Deliver Made-to-Order Products D3 Deliver Engineered-to-Order Products P0 Plan Infrastructure Any supply-chain configuration can be represented with this toolkit 2

31 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 30 At Level 2, each SCOR process can be further described by process type 2

32 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 31 For each SCOR Process, Level 2 Process Categories represent supply-chain variations äSCOR process categories reflect distinctions in how products are planned, sourced, made, and delivered 2

33 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 32 Process categories are defined by the relationship between a SCOR process and a process type Practitioners select appropriate process categories from the SCOR configuration toolkit to represent their supply-chain configuration(s) SCOR Configuration Toolkit Process Type Planning Execution Infrastructure Process Category SCOR Process PlanSourceMakeDeliver P1P2P3P4 S1 – S3M1 – M3D1 – D3 P0S0M0D0 2

34 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 33 An example of SCOR Level 3 process element logic flow Inventory Source Execution Data Sourcing Plans Replenishment Signals Procurement Signal Material on Order Purchased Materials Material Pull Signals Material Inventory Location WIP Inventory Location Finished Goods Inventory Location Receipt Verification Schedule Material Deliveries S1.1 Receive & Verify Material Transfer Material S1.3S1.2 Inputs Process Elements Outputs Level 3 Example S1 Source Stocked Product äInputs, outputs, and basic logic flow of process elements are captured 3

35 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 34 An example of a SCOR Level 3 standard process element definition and standard performance metrics 3

36 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 35 An example of SCOR Level 3 best practices, software features, and vendors 3

37 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 36 % of order changes # of end devices/SKUs Production volume Inventory carrying cost Level 3 Diagnostic Metrics Product volume by channel # of channels Supply-chain complexity, # of S/M/D sites Planning cycle time Forecast accuracy Obsolete/end of life inventory days of supply Replan cycle Order entry methods Order entry modes Supply-Chain Management Practices Measures Level 2 Performance Metrics Supply-Chain Complexity Measures Supply-Chain Configuration Measures Material acquisition costs Source cycle time Raw material DOS Purchased material by geography % of purchasing spending by distance Supplier delivery performance Payment period % part numbers received with lead time < 8 weeks % unpenalized 30-day decrease % purchasing spending by distance # of suppliers Supply-chain finance and planning costs Demand/supply planning costs Inventory days of supply Source Plan Assets Delivery Performance/ Quality CostFlexibility & Responsiveness Levels 2 and 3 performance metrics and diagnostic measures drive performance improvement 3 2

38 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 37 Value-add % % build-to-stock, % build-to-order % of mfg. order changes due to internal issues WIP & plant FG DOS # of devices/SKUs Upside production flexibility # of orders, line items & shipments by channel % parts returned % re-returns Delivery locations by geography # of channels Field & samples FG DOS Published delivery lead time # of faultless invoices Manufacturing process steps by geography Asset turns Fill rates Order management costs Order fulfillment lead time Forecast accuracy by channel # of returns/complaints Build order attainment Make cycle time Product quality Level 3 Diagnostic Metrics Supply-Chain Management Practices Measures Level 2 Performance Metrics Supply-Chain Complexity Measures Supply-Chain Configuration Measures Deliver Make AssetsCostFlexibility & Responsiveness Delivery Performance/ Quality Levels 2 and 3 performance metrics and diagnostic measures drive performance improvement (continued) 3 2

39 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 38 Implementation of supply-chain management practices occurs at Level 4 (and below) äBelow Level 3, each process element is described by classic hierarchical process decomposition D1 - Deliver Stocked Product Level 4 Process Element - D1.2 Activities Tasks 1.Contact customer account rep. 2.Look up customer history 3.If necessary, account rep. calls sales manager to authorize additional credit 4a.Account rep clears credit issue 4b.Account rep refuses credit request Task - D1.2.3 Activities Enter Order Receive Order Validate Price Access Credit Screen Check Credit Availability Clear Order Contact Accounting Communicate Results to Customer Check Credit Route Shipments D1.6 Plan & Build Loads D1.5 Reserve Inventory & Determine Delivery 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 & Ship D1.10 Receive & Verify Product at Customer Site D1.11 Install Product D1.12 Invoice & Receive Payment D1.13 Consolidate Orders D1.4 Select Carriers & Rate Shipments D1.7 From Make or Source Level 5 Level 6 4

40 Applying the Model © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 39

41 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 40 SCOR can be used to achieve many objectives äRapidly map own or others supply chain –Illustrate current supply-chain configurations –Establish common reference point and definitions –Communicate effectively with suppliers and customers äCompare process performance to targets –Benchmark metrics across multiple industries –Compare existing practices to industry best practices äDetermine required information systems capabilities –Identify software vendors providing required capabilities

42 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 41 SCOR can be used to achieve many objectives äIdentify supply-chain management improvement opportunities –Identify gaps in current processes –Quantify the potential benefits of specific process improvements –Provide data for project financial justifications äImplement supply-chain process improvements –Design to meet strategic objectives –Fine tune based on pilot results and changing market needs äInfluence creation of desired software products –Communicate needed product features to software vendors Continued

43 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 42 SCOR Level 1 Basis of Competition Operations Strategy 1 SCOR Level 2 Intra- Company Configuration Inter-Company Configuration Supply-Chain Configuration 2 Intra-Company Process, Practice, and System Configuration Elements SCOR Level 3 Performance Levels, Practices, and System(s) Selection Inter-Company Process, Practice, and System Configuration Elements 3 Supply-Chain Processes and System(s) Implementation SCOR Level 4 Intra-Company Supply-Chain Improvements Inter-Company Supply-Chain Improvements 4 Supply-chain configurations are defined and implemented by iterating through the SCOR model

44 Applying the Model: A Case Study © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 43

45 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 44 Beta Corporation designs, manufactures, distributes, and repairs consumer electronics products äCompany overview –Number 1 in market share for core product lines in North America, Beta also has a presence in over 50 other countries –A full breadth of products supports multiple channels of distribution and consumer preferences –A core competence in manufacturing consistently demonstrates competitive performance äProblem –Significant losses (20% of revenue) were being incurred despite the brand premium –The presence in more than 50 countries grossed less than 10% of total revenue –The product line was unfocused; over 50% were not designed by Beta –More than 70% of the products were produced by Original Equipment Manufacturers (OEMs) despite the core competence in manufacturing

46 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 45 Beta Corporation designs, manufactures, distributes, and repairs consumer electronics products (continued) äDiagnostic approach –Understand the business problem from managements viewpoint (Level 1 metric performance) –Map supply-chain processes using SCOR –Determine the strategic elements requiring change and associated performance targets –Define the new supply-chain configuration

47 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 46 Flexibility & Responsiveness Supply-Chain Reliability COGS/ Expense Assets/ Utilization SCOR Level 1 metrics quickly revealed that the supply chain was a key contributor to the problem Beta Performance

48 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 47 Pacific Rim Several Hundred Suppliers CA Raw Material Manufacturing Distribution Captive RetailRetailersOEM Manufacturing Suppliers Distribution Many OEMs OEM Product Drawing the supply chain showed that North American operations supported a lot of traffic

49 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 48 SCOR Level 2 modeling reinforced that Beta had a very complex supply chain OEM Supply Chain Many OEM Suppliers 80% of product supply ($$) Deliver Stocked Product 60% of product volume High Volume Retailers 50% product volume Retailers 15% product volume OEM 5% product volume Captive Retail 30% product volume P2 P2 P4 P4 Manufacturing Supply Chain S1 S1 S1 S1 MTS Components 20% of product supply ($$) M2 M2 M2 M2 MTS Factories D1 D1 D1 D1 Deliver Stocked Product 40% of product volume P2 P2 P2 P2 P3 P3 P3 P3 P4 P4 P4 P4 P4 P4 D1 D1 S1 S1 S1 S1 S1 S1 S1 S1 S1 S1 D1 D1 M1 M1 M1 M1 M1 M1 M1 M1 M1 M1 M1 M1 M1 M1 M1 M1 M1 M1 D2 D2 D2 D2 D2 D2 D2 D2 D2 D2 D2 D2 D2 D2 D2 D2 D1 D1 D2 D2 D2 D2 D2 D2 D2 D2 D2 D2 D2 D2 D2 D2 D2 D2 D1 D1 D2 D2 D2 D2 D1 D1 D2 D2 D2 D2 D1 D1 M1 M1 M1 M1 M1 M1 M1 M1 M1 M1 M1 M1 M1 M1 M1 M1 M1 M1

50 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 49 Management set the performance targets at Level 1 to assure a competitive basis would be achieved Supply-Chain Scorecard and Performance Targets COGS/Expense Asset Utilization Supply-Chain Flexibility/ Responsiveness Supply-Chain Reliability Key Supply-Chain Performance Attribute Performance vs. Competition Major Opportunity DisadvantageParityAdvantageBest-in-Class Actual Performance Performance Requirement

51 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 50 Performance targets drove the specific actions required to migrate to a new configuration äSimplify supply-chain logistics –Consolidate factories (Make) –Consolidate distribution centers (Deliver) –Reduce the number of distinct channels (Deliver) –Dramatically reduce the number of suppliers and the reliance on OEM product (Source) –Consolidate product lines (Total Supply Chain) äImprove customer-facing performance –Institute processes and systems to more closely link Beta Co. to high-volume customers –Move from make-to-stock to make-to-order to improve supply- chain flexibility and response time and reduce inventory investment –Implement Enterprise-wide Resource Planning (ERP)

52 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 51 Pacific Rim <100 Suppliers Suppliers CA Raw Material Co-located Manufacturing and Distribution OEM Retailers Few OEMs OEM Product Performance gains came from simplifying and focusing the supply-chain configuration

53 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 52 SCOR Level 2 modeling reveals how the simplified supply chain achieved greater performance Company Single, Co-located Manufacturing and Distribution SuppliersCustomers D2 D2 D2 D2 D2 D2 D1 D1 80% Manufactured Product Supply 20% Manufactured Product Supply MTO Components MTS Components MTO Components MTS Components High-Volume Retailers 80% product volume Trend Retailers 15% product volume Trend OEM 5% product volume Trend 95% of product volume Manufacturing Supply-Chain Planning VMI OEM Cross- docking 5% of product volume OEM Supply- Chain Planning OEM Supply-Chain Execution P1P1 S2 S2 S1 S1 D2 D2 M2 M2 S2 S2 D1 D1 P2P2 P4P4 P1P1 P2P2 P3P3 P4P4 S2 S2 S2 S2 S2 S2 D2 D2 D2 D2 D2 D2

54 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 53 P1P1 P4P4 S 2 D 2 D 1 D 2 S 1 S 2 P1P1 P2P2 P4P4 P3P3 VMI P2P2 Make D 1 S2S2 S2S2 S2S2 Cross- docking D 2 M 2 Source Deliver Multiple systems were chosen to support the enterprise-wide supply chain, based on Level 3 analysis SuppliersCustomers Manufacturing Supply-Chain Planning OEM Supply- Chain Planning Supply-Chain Execution ERP System & Legacy Advanced Planning System Customized 3rd Party System

55 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 54 Delivery Performance Up 54 pts % Customer Requested Ship Date Year 1Year 2Year 3 Year 4 Inventory Days of Supply Down 55% Days Year 1Year 2Year 3 Year 4 Incr. Cash Flow from Operations Up 10% of Rev $ Millions Year 1Year 2Year 3 Year 4 100 Cash-to-Cash Intervals Down 55% Days Year 1Year 2Year 3 Year 4 Gross margin improved 50% in two years on the basis of supply-chain performance Good

56 Applying the Model: Developing Supply-Chain Configurations © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 55

57 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 56 The concept of configurability äThe primary use for SCOR is to describe, measure, and evaluate supply-chain configurations äA supply-chain configuration is driven by –Deliver channels, inventory deployment, and products –Make production sites and methods –Source locations and products –Plan levels of aggregation and information sources äSCOR must accurately reflect how a supply chains configuration impacts management processes and practices Configurability

58 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 57 1.Select the business entity to be modeled (geography, product set, organization) 2.Illustrate the physical locations of: Production facilities (Make) Distribution activities (Deliver) Sourcing activities (Source) 3.Illustrate primary point-to-point material flows using solid line arrows 4.Place appropriate Level 2 execution process categories to describe activities at each location Configuring a supply-chain thread illustrates how SCOR configurations are done SourceMakeDeliver S1 Source Stocked Materials S2 Source Make-to-Order Materials M1 Make-to-Stock M2 Make-to-Order M3 Engineer-to-Order S3 Source Engineer-to-Order Materials D1 Deliver Stocked Products D2 Deliver Make-to-Order Products D3 Deliver Engineer-to-Order Products Execution Process Toolkit

59 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 58 Step 1: We will focus on ACMEs North American supply-chain execution processes ACME North America produces desktop and laptop PCs that are sold through retailers

60 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 59 Step 2: Identify the location of manufacturing facilities Desktop Production Monitor Production Laptop Production

61 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 60 Step 2 (contd): Identify the location of distribution activities Desktop Production Desktop DC Monitor Production Laptop Distributor Laptop Production Desktop Retailer Laptop Retailers Monitor North American Distribution Center

62 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 61 Step 2 (contd): Identify the location of the major sourcing activities ACME Taiwan Desktop Production Desktop DC Monitor Production North American Distribution Center Laptop Distributor Semiconductor Distributor (S1, D2) Laptop Production Desktop Retailer Laptop Retailers Semiconductor Manufacturer

63 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 62 Step 3: Illustrate primary point-to-point material flows using solid line arrows ACME Taiwan Desktop Production Desktop DC Monitor Production North American Distribution Center Laptop Distributor Semiconductor Distributor Laptop Production Desktop Retailer Laptop Retailers Semiconductor Manufacturer

64 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 63 Step 4: Place appropriate Level 2 execution process categories to describe activities ACME Taiwan (D2) Desktop Production (S1, M1, D2) Desktop DC (D1) Monitor Production (S1, M1) North American Distribution Center (D1) Laptop Distributor (S1, D1) Semiconductor Distributor (S1, D2) Laptop Production (S1, M1, D1) Desktop Retailer (S1, D1) Laptop Retailers (S1, D1) Semiconductor Manufacturer (S1, M2, D2) Legend S1 = Source Stocked Material M2 = Make-to-Order M1 = Make-to-stock D2 = Deliver Make-to-Order Products

65 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 64 5.Describe each distinct supply-chain thread –A supply-chain thread ties together the set of Source-Make- Deliver supply-chain processes that a given product family flows through –Develop each thread separately to understand common, and distinct, execution process categories –Consider end-to-end threads in the Intercompany case 6.Place planning process categories, using dashed lines to show links with execution processes 7.Place P1, if appropriate –P1 – Plan Supply Chain aggregates outputs from P2, P3, and P4 Configuring a supply-chain thread illustrates how SCOR configurations are done Continued

66 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 65 Step 5: Describe each distinct supply-chain thread ACME Taiwan (D2) San Jose Desktop Production (S1, M1, D2) Desktop DC (D1) Monitor Production (S1, M1) North American Distribution Center (D1) Laptop Distributor (S1, D1) Semiconductor Distributor (S1, D2) Laptop Production (S1, M1, D1) Desktop Retailer (S1, D1) Laptop Retailers (S1, D1) Semiconductor Manufacturer (S1, M2, D2) Legend S1 = Source Stocked Material M2 = Make-to-Order M1 = Make-to-Stock D2 = Deliver Make-to-Order Products ACME Laptop Supply-Chain Thread

67 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 66 SCOR configurations utilize a horizontal flow to show the total supply-chain links D3 D2 ACME Taiwan Semiconductor Distributor S1 M1 D1 Customers ACME ACME Laptop Production (San Jose) ACME Laptop Distribution (San Jose) Semiconductor Manufacturer S1 D2 Customers Customer Laptop Distributor Laptop Retailer S1 D1 S1 D1 Suppliers Supplier ACME Laptop Supply-Chain Thread

68 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 67 Step 6: Place planning process categories, using dashed lines to show links with execution processes D3 D2 ACME Taiwan Semiconductor Distributor S1 P2 P4 P3 M1 D1 Customers ACME ACME Laptop Production (San Jose) ACME Laptop Distribution (San Jose) P4 Semiconductor Manufacturer S1 D2 Customers Customer Laptop Distributor Laptop Retailer S1 P2 D1 S1D1 P2 Suppliers Supplier

69 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 68 Step 7: Identify any P1 supply-chain planning activities that aggregate the outputs from P2 – P4 D3 D2 ACME Taiwan Semiconductor Distributor S1 P2 P1 P4 P3 M1 D1 Customers ACME ACME Laptop Production (San Jose) ACME Laptop Distribution (San Jose) P4 Semiconductor Manufacturer S1 D2 Customers Customer Laptop Distributor Laptop Retailer S1 P2 D1 S1D1 P1 P2 Suppliers Supplier

70 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 69 In our ACME example, P1 could be extended to manage an intercompany supply chain D2 ACME Taiwan Semiconductor Distributor S1 P2 P1 P4 P3 M1 D1 Customers ACME ACME Laptop Production (San Jose) ACME Laptop Distribution (San Jose) P4 Semiconductor Manufacturer S1 D2 Customers Customer Laptop Distributor Laptop Retailer S1 P2 D1 S1D1 P1 P2 Customers Suppliers Supplier P1 Plan Intercompany Supply Chain

71 Supply Chain Operations Reference-model: Summary © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 70

72 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 71 SCOR overview Summary äSCOR is a process reference model designed for effective communication among supply-chain partners äSCOR is used to describe, measure, and evaluate Supply-Chain configurations äThe success of SCOR as a standard depends on its use and refinement by Supply-Chain Council practitioners

73 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 72 SCOR has a powerful role in defining complex supply chains SCOR Level 1 äBasis of Competition –Set business requirements and define the basis of competition –Evaluate the performance of the current operations strategy vis-a-vis required performance –Set SCOR Level 1 metrics and targets, and define the gap –Set business priorities and state what needs to change

74 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 73 SCOR has a powerful role in defining complex supply chains SCOR Level 2 äSupply-Chain Configuration –Model current supply-chain configuration, considering asset, product volume and mix, and technology requirements and constraints –Reconfigure the supply chain at SCOR Level 2 to determine expected performance Continued

75 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 74 SCOR has a powerful role in implementing supply chains SCOR Level 3 äPerformance Levels, Practices, and System(s) Selection –Develop process models that support strategic objectives and work within the new supply-chain configuration –Set process metrics and performance targets –Establish business practices at the operating level –Build system requirements that support the supply-chain configuration, processes, and practices –Select appropriate system(s) Continued

76 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 75 SCOR Level 4 Continued äSupply-Chain Process and System(s) Implementation –Implement best practices to achieve results SCOR has a powerful role in implementing supply chains

77 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 76 A note on additional SCOR educational materials…to learn more about SCOR äThe Supply-Chain council has published a curriculum of SCOR-based SCM improvement tips and techniques: –Module 1:Using SCOR to support Supply-Chain Education and Training –Module 2:Using SCOR to understand implications of a shift in Operations Strategy –Module 3:Using SCOR metrics to frame and justify supply-chain improvement programs –Module 4:Using SCOR to integrate your suppliers supplier into your supply chain –Module 5:Using SCOR to integrate your customers customer into your supply chain äThis material is fully available to SCC members at www.supply-chain.org. The current format is Adobe.pdf

78 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 77 A note on the Supply-Chain Council…to learn more about the SCC äThe SCC is a member-company managed, not-for-profit corporation based in Pittsburgh, PA äThe SCC maintains a web page at www.supply-chain.org –Membership list –Schedule of events –The SCOR model content –Email discussion forums

79 © Copyright 1998 Supply-Chain Council 3651MVSCOR Overview 78 The SCC mission statement describes the purposes and approaches of the Supply-Chain Council A non-profit, member-supported trade organization, the Supply-Chain Council (SCC) enables the discussion, definition, and dissemination of best practice in the rapidly evolving field of supply-chain management (SCM). The Council promotes the Supply Chain Operations Reference- model (SCOR), which embodies a common standard language, consistent metrics, practical models, and analytic tools to expand and enhance leading SCM practices. The SCC provides executive management opportunities to network with peers from all SCM constituencies and share lessons learned to define the frontiers of best practice and enabling software applications. The SCC supports the practical application of best practices through education.

80 Conclusion SCOR Primer


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