SCOR Framework Introducing all elements of the Supply Chain reference model: Standard processes, metrics and best practices Version 2.0 update 1. Minor.

SCOR Framework Introducing all elements of the Supply Chain reference model: Standard processes, metrics and best practices Version 2.0 update 1. Minor changes: Removal of the reference to the version of SCOR. This training is focused heavily 80% on the content of the SCOR framework, with 20% focused on it’s specific use to solve problems. The intention is to look at modeling aspects of the SCOR framework specifically, and to walk through a half-dozen or dozen metrics, and also to look at how to use best practices for benchmarking and problem solving. It is structured so that attendees, with taking the SCOR Implementation training, will be able to pass a test (with several months gap) in SCOR for certification that they are competent in the framework and it’s application. The class can be easily customized for a specific client, or specific industry with a substitution throughout of the example problem (air conditioning) to any industry or client. The benchmarking exercise, with data from Hoover’s, in particular can be customized for a specific client/industry combination. There is no ‘alpha company’ per se, that will be covered in the SCOR Implementation training, though we do walk through a specific solution for a problem in Day 2, with a light exercise in how to use the framework with a simplified SCOR roadmap. Students should expect at the end of this course to be able to create level-1, 2, 3 models with SCOR and understand the differences and similarities and linkages; create a basic SCORcard, and set of selected metrics for managing a business; look at best practices and benchmark them for a problem; and describe how to solve a known problem (known metric ‘out of whack’) with a simple five-step process. Instructors should be prepared with flip charts and markers as well as the projected presentation to take notes, questions, and issues to fall back on and to reflect back to the designers of the material for continuous improvement. -Joseph Francis, CTO Supply-Chain Council This presentation is the exclusive property of the Supply Chain Council. Copyright © Supply Chain Council All rights reserved. The marks SCOR®, CCOR™, DCOR™ and SCOR Roadmap™ are the exclusive property of the Supply Chain Council.

SCOR Framework Workshop
Understand the History and Context of SCOR Learn the Components of the SCOR Framework Process Nomenclature Process Metrics Process Best Practices Understand how to model a Supply-Chain with SCOR Understand how to characterize a Supply-Chain with SCOR metrics Apply the SCOR framework using a simplified SCOR Project Roadmap The introduction to this course walks a student through some of the History and Context of SCOR, as well as all the components of the framework, modelling, measurement, and application. “Nomenclature” refers to Supply- Chain Council naming of Supply-Chain process elements. ‘Characterization’ refers to both measurement, ownership, and relation of performance to an industry, competitors, or to the SCOR base itself. The history is important for two reasons: first, the student needs to understand that SCOR is a tool created by and for practitioners to improve their supply- chains; the information comes from ‘real world’ examples and research, and is not an academic exercise. As with any ‘real world’ information, it’s not always perfect or pretty – many participants will complain about the structure or certain parts which may or may not make sense at first. Second, they must understand that SCOR is a “living document”. There are numerous committees and teams which are rethinking, developing, and researching information to contribute to the framework, and that as users of the framework, they’re more than welcome to participate as members of the council to provide their input and feedback to the framework. The participants in a sense will begin to ‘own’ the framework as they use it. This workshop is also not intended to do certain things. It is not a general class in Supply-Chain, though many supply-chain concepts and techniques will be discussed. It is not a primer in business process re-engineering, but rather a deep discussion of best practices in supply-chain process reengineering. There is an expectation that students generally understand supply-chain (good general starting question), and that they are familiar with modelling, metrics, and business performance. Copyright © Supply Chain Council, All rights reserved 2

Driving value through the use of SCOR®
Supply-Chain Council The SCC is an independent, not-for-profit, trade association Membership open to all companies and organizations Focus is on research, application and advancement and advancing state-of-the-art supply chain management systems and practices Developer and endorser of the Supply Chain Operations Reference (SCOR®) as a cross-industry standard for supply chain management Offers Training, Certification, Benchmarking, Research, Team Development, Coaching, and Cross-standard Integration focused on the SCOR® framework Founded in 1996 Approaching 1000 Association Members Chapters in North America, Europe, Japan, South Africa, Latin America, Australia/New Zealand, South East Asia and Greater China, with developing Chapters India and Middle East This slide highlights the current state of affairs of the supply-chain council ( ). Instructors can highlight additional information as appropriate, including industries covered (from Oil and Gas to Automotive to Aerospace), sectors (Private, Defense, Governmental, Educational Institutions). Another point which can be supplied is that council members in two recent studies have outperformed their peers both in revenue and profit (2003 study) as well as outperformed the DOW and S&P 500 Stock indicators in the united states ( benchmark). The council itself is a non-for-profit institution run by and for it’s membership. Structurally, it has a board of directors, day-to-day operations managed through an association management agency, and as well numerous committees and groups – Training and Education oversaw the development of this material, the Technical Development and Steering Committee (TDSC) researches, improves, and adjusts the framework content, variouis SIG’s (Special Industry Groups) look at specific application and practices with SCOR for their areas, and then committees also look at the function of the council – Legal, Marketing, and Financial oversight. It’s just like a company, but there are no ‘owners’. represents the 10th anniversary of the Council. Driving value through the use of SCOR® Copyright © Supply Chain Council, All rights reserved 3

Product/Portfolio Management
Supply-Chain Customer processes Supplier processes Product/Portfolio Management Supply Chain SCOR ® Product Design DCOR™ Sales & Support CCOR™ Please note the picture represents processes not departments or organizations. This is probably the most critical slide for the instructor. Classes unfamiliar with SCOR and Supply-Chain may end up having many questions and long discussion about how this slide represents various linkages inside a company. Encourage discussion of how the various participants have a different ‘process’ view of supply-chain. Help highlight differences between the process and functional view. It is usually helpful for the class to think about an order ‘walking’ from the customer through supply chain to suppliers, or for them to hypothesize what different kinds of activities there are in different areas. Don’t get trapped in: my company isn’t organized this way: some companies combined sales and supply-chain processes; some combine sales and marketing; some combined design and marketing. A good practice is to put a timer on this slide and defer question if discussion goes longer than minutes. In a large group of 20 or more from diverse companies, set a hard stop on discussion. In a custom training for an individual company, the instructor should rapidly go beyond this slide once participants have logically mapped their company structure to this process view. Copyright © Supply Chain Council, All rights reserved 4

Supply-Chain Supply Chain Supply Chain Plan Customer processes
Supplier processes Supply Chain Customer processes Supplier processes Supply Chain Deliver Make Source Return Plan The example here is for productss however the supply-chain does also apply to services. Please note the picture represents processes not departments. Flows are bi-directional It IS: Sourcing Raw or semi-finished material Building products or executing services (Make) Taking orders and scheduling acitivites to fulfil them (Deliver) Managing Suppliers Planning and coordinating all activities in terms of resources, materials, and demand Handling Maintenance, Repair, Overhaul, Returns It is NOT: Developing new suppliers – generally what happens in product design Selling a product, but rather taking orders – sales happens elsewhere Planning the lifecycle of a product – that planning is generally with design/marketing Process, arrow indicates material flow direction Process, no material flow Information flow Copyright © Supply Chain Council, All rights reserved 5

SCOR: A Process Framework
Process frameworks deliver the well-known concepts of business process reengineering, benchmarking, and best practices into a cross-functional framework Standard processes: Plan, Source, Make, Deliver, Return, Enable Standard metrics: Perfect Order Fulfillment, Cash-to-Cash Cycle Time, Cost of Goods Sold, Order Fulfillment Cycle Time, etcetera Standard practices: EDI, CPFR, Cross-Training, Sales & Operations Planning, etcetera Pre-defined relationships between processes, metrics and practices and inputs and outputs Instructors may highlight that there are many process frameworks: Most consulting houses have their own process framework for working with clients (Accenture, Deloitte, PRTM). There are specialized industry frameworks – eTOM (enhanced Telecom Operations Map) and NGOSS (Next Generation Operations Support System) are useful for Telephone Networks; ITIL (IT Infrastructure Library) for Information Technology. Participants with questions about alternative frameworks should search a WIKI on internet for further information. What’s one unique feature about SCOR is that as opposed to most frameworks, it is not only a list of processes, or a list of practices, or metrics. It combines all three and adds ‘pre-defined’ relationships between processes, in terms of material, information, and work flows. These pre-defined relationships are the result of the research and collaborative definition that all participants in the SCOR development have contributed. It’s not perfect – it doesn’t represent all business flows – but it is quite valuable for hitting 95% of most business flows in supply chain. Copyright © Supply Chain Council, All rights reserved 6

Combines Best Techniques
Business Process Re-Engineering Benchmarking Best Practices Analysis Process Reference Framework Capture the ‘As-is’ business activity structure and derive the future ‘To-be’ state Quantify the operational performance of similar companies and establish internal targets based on ‘best in class’ results Characterize the management practices and software solutions that result in superior performance Capture the ‘As-is’ business activity structure and derive the future ‘To-be’ state Quantify the operational performance of similar companies and establish internal targets based on ‘best in class’ results Characterize the management practices and software solutions that result in superior performance When we solve business problems – which is what SCOR is all about – there are generally three main techniques. One is to look at business processes, business activities in detail, mapping them, and seeing ‘if they make sense’, if when we measure them the are working the right way. Second is to compare our company to others, at all levels, and benchmarking like for like measures and by selecting our basis for competition that we ensure better than competitive performance. Lastly, when we need to look at practices for solving process performance problems, SCOR provides a quick basis for analysis to ensure we’re starting out at least even with competitors. Business Process Re-engineering column represents process (column 1) Benchmarking represents metrics (column 2) Best Practices Analysis represents best practices (column 3) A Process Reference Framework contains all and includes the linkage between these aspects. (column 4) The SCOR-model is a business process reference model. That is, it is a model that links process elements, metrics, best practice and the features associated with the execution of a supply chain in a unique format. The uniqueness and power of the Model and its successful implementation is chiefly derived from using these four elements together. 3 techniques become 1 integrated approach Copyright © Supply Chain Council, All rights reserved 7

End-to-End Supply Chain
Supplier Customer Suppliers’ Supplier Source Internal or External Your Company Return Deliver Make Plan Customers’ Customer SCOR reference model Because SCOR is does not represent organizations, but rather activities, it is ‘boundaryless’. This is intentional. When you are considering how a supply- chain operates, you don’t want to ‘stop’ describing it when you must look at the activities of some participants. You can, in effect, look all the way from a grain of sand to a finished computer. In looking at various ways to describe this, you can use an anecdote that SCOR looks from “Cow to Cone” for Ice Cream, or if you feel particularly humorous, “from Stump to Rump” for toilet paper. Different trainers use different anecdotes, but you need to get across to the audience that by using Standard names Standard interconnects Boundaries only defined by process start/stop points You have the ability to truly optimize the performance of very, very large systems, cutting waste, cycle time, and improving cash consumption. This is a second unique feature of the SCOR model. Whether from Cow to Cone or from Rock to Ring SCOR is not limited by organizational boundaries Copyright © Supply Chain Council, All rights reserved 8

End-to-End Supply Chain
Customer’s Customer Customer MP3 Company Supplier Supplier’s Supplier Sub assemblies Manufacturer Retailer Consumer Components Source Deliver Make Process, arrow indicates material flow direction Source, Make, Deliver connections from suppliers to their customers. Note that the Retailer does not have a Make process as it is simply sourcing goods and delivering those to their customers. (If asked: yes, retail can do Make, for example preparing food, repackaging in the deli or meats departments or cutting wood in the lumber department). Copyright © Supply Chain Council, All rights reserved 9

S1 Source Stocked Product
SCOR Hierarchy Level 1 Level 2 Level 3 Level 4 Level 5 Scope Configuration Activity Workflow Transactions Differentiates Business Differentiates Complexity Names Tasks Sequences Steps Links Transactions Defines Scope Differentiates Capabilities Links, Metrics, Tasks and Practices Job Details Details of Automation Framework Language Industry or Company Language Technology Specific Language S Source S1 Source Stocked Product S1.2 Receive Product EDI XML SCOR has three levels. This chart shows an example process for a level, how generally it can be used. What we normally stress when business people what to understand why there are levels, is the significance of decisions at each leel. Impact of a significant change by level: Level 1 = 10,000; add/remove warehouse, plant, planning group Level 2 = 100; consolidating warehouses, manufacturing, suppliers Level 3 = 10; changing loading/unloading steps, manufacturing testing Level 4 = 1; changing the order, or the detail of individual person’s task Level 5 = 0.1; changing the format of a message Six sigma projects mostly operate at level 4. SCOR projects operate at Level 1-3, that's why SCOR projects are much more profitable. The average return on a Six-Sigma project (from GE, the mother ship) is US$50,000 in improvement. SCOR programs tend to operate much, much bigger – typically in the millions and hundreds of millions in change/improvement – consider a merger. This hierarchy also supports why we do level-by-level modeling. The instructor should help the student understand through leading questions that once you’ve mapped the “level 1”, area, if you don’t have a problem in a particular area, you need to map no further ‘down’. Each step ‘down’ in the framework, for mapping, measuring, and changing, adds roughly 3x to 10x the complexity of work. We are strong advocates of ‘if it isn’t broken, don’t model it!’ Standard SCOR practices Company/Industry definitions Copyright © Supply Chain Council, All rights reserved 10

Organizational Hierarchy
Level 1 Level 2 Level 3 Level 4 Level 5 Scope Configuration Activity Workflow Transactions Differentiates Business Differentiates Complexity Names Tasks Sequences Steps Links Transactions Defines Scope Differentiates Capabilities Links, Metrics, Tasks and Practices Job Details Details of Automation CxO (COO, CIO) EVP SVP VP Director Line Manager Manager Team Lead Individuals Programmer S Source S1 Source Stocked Product S1.2 Receive Product EDI XML Impact of a significant change by level: Level 1 = 10,000; make outsourcing/insourcing decisions Level 2 = 100; consolidation of labs or source groups Level 3 = 10; new ways for prototyping or piloting builds Level 4 = 1; changing peoples tasks Level 5 = 0.1; changing the format of a message Six sigma projects mostly operate at level 4. SCOR projects operate at Level 1-3, that's why SCOR projects are much more profitable. Organization focused Activity focused Copyright © Supply Chain Council, All rights reserved 11

SCOR Process Codification
SCOR processes have unique identifiers: One capital only are level 1 processes: P, S, M, D and R (5 in total) A capital plus a number are level 2: P1, S2, M3, D2, D4 (15 in total) Two groups of exceptions for level 2: Enable: EP, ES, EM, ED and ER (5 in total) and Return: SR1, DR1, SR2, DR2, SR3, DR3 (6 in total) A capital plus a number, a period and a number are level 3 processes: P1.1, P1.2, S2.1, M1.5, D3.12 (111 processes in total) Two groups of exceptions for level 3: Enable: EP.1, ES.3, EM.4, ED.8, ER.1 (47 in total) Return: SR1.1, DR1.3, SR2.2, DR2.4, SR3.5, DR3.1 (27 in total) X = level 1, Xn = level 2, Xn.m = level 3 Copyright © Supply Chain Council, All rights reserved 12

Exercises: The Dinner Party
The supply chain used for the exercises is a dinner party You will host a party this weekend with of your dearest friends You will serve them burgers from your grill (barbecue) You are responsible for organizing the event, ingredients, grill, tools and utensils and general well-being of your guests We will be using “The Dinner Party” through the rest of today to exercise different modeling characteristics Ingredients of a burger: The class is designed with multiple exercise sessions which can be stretched or shrunken depending on the size of the class, and the composition. The example exercise – a “Hamburger” supply chain – can be substituted by the instructor for any other relevant material for describing the supply chain, but ideally it’s a very common object which combines build-to-order, build-to- stock, and engineer-to-order components to look at how different things combine. Instructors can customize the example program for an industry client – perhaps a computer – or if the hamburger doesn’t work culturally, perhaps a Shoe or Sandal which exists almost everywhere. A ‘bill of materials’ for the product must be present and students should understand that in this case (ingredients) that it is a bill of materials. They should be led to understand that the bill of materials actually begins to partition or identify elements of the supply-chain they will be mapping and characterizing, at least at a high level. The ‘recipe’ is actually the process steps to manufacture the goods. The students should be able to recognize this, and the instructor should stress that this generally identifies the activities at level-3 within a model they develop. The instructor may stress at this point that, for many situations, the information given the SCOR participant may be no better than this in existing documentation. But they need to find the key features – bills of material, lists of products or materials, and any documentation on general steps followed for manufacturing. 750g minced steak 1 onion (rings) 1 tsp Worcestershire sauce 4 sesame seed buns 2 tbsp mustard 10 shredded lettuce leaves 2 sliced tomatoes 2 sliced dill pickles 10 thin slices Swiss cheese Salt and pepper Copyright © Supply Chain Council, All rights reserved

Execution Processes Processes: Source, Make and Deliver
Customer processes Supplier processes Supply Chain Customer processes Supplier processes Supply Chain Plan Source Make Deliver Return Return The example here is for productss however the supply-chain does also apply to services. Please note the picture represents processes not departments. Flows are bi-directional It IS: Sourcing Raw or semi-finished material Building products or executing services (Make) Taking orders and scheduling acitivites to fulfil them (Deliver) Managing Suppliers Planning and coordinating all activities in terms of resources, materials, and demand Handling Maintenance, Repair, Overhaul, Returns It is NOT: Developing new suppliers – generally what happens in product design Selling a product, but rather taking orders – sales happens elsewhere Planning the lifecycle of a product – that planning is generally with design/marketing Processes: Source, Make and Deliver Objective: value-add, revenue generating Copyright © Supply Chain Council, All rights reserved 14

Capability Models Level: Different capabilities
Stocked Product (S1, M1, D1) Inventory Driven (Plan) Standard Material Orders High Fill-rate, short turnaround Make-to-Order (S2, M2, D2) Customer Order Driven Configurable Materials Longer turn-around times Engineer-to-Order (S3, M3, D3) Customer Requirements Driven Sourcing New Materials Longest long lead-times, low fill rates D1 R1 I1 M1 S1 I2 R1 D2 R2 S1 M2 S2 The pictures on the right are example configurations. More on configurations later in the workshop. The instructor should be familiar with the different types of Level-2 capabilities or configurations. Give examples: Stocked Product – A retail air conditioner which is pulled off the shelf, and restocked based on a SKU. Can the class think of other stocked product models? Do their companies have stocked product models? Make-to-Order – A car is built with a particular combination of colors and features and ordered from a distributor. Can the class think of other make-to- order products? Do their companies have make-to-order? Engineer-to-Order – An architect and engineer creates a new kitchen for you, with some custom-build and custom-sourced materials. Can the class think of other engineer-to-order products? Do their companies have engineer-to- order? Focus is to get them to think of concrete examples. In each of the configurations to the right, instructor can optionally show them that ‘make to order’ can also have stock material flows (custom car, but standard interior, colors and finishes), and ‘engineer to order’, can also have make-to-order (cabinets of a certain color, finish) as well as stock (faucets, sinks) and engineer-to-order (custom exhaust system) work. I3 R1 D3 R3 R2 M3 S3 S1 S2 Copyright © Supply Chain Council, All rights reserved 15

Source (Process ID: S) Objectives of this process:
The ordering, delivery, receipt and transfer of raw material items, subassemblies, product and/or services. Key processes comprehended: Schedule product deliveries Receive, inspect, and hold materials Issue material to Make or Deliver processes Supplier/Vendor Agreements Vendor certification and feedback, sourcing quality Manage Raw Materials inventories Freight, import/export documentation Hint: Receiving processes? Probably Source in SCOR This is a discussion of the source “process”, not a source organization. Watch to ensure that participants don’t confuse a function with an activity. Key here to stress is that sourcing is all about managing the inbound flow from a material vendor, including all the listed activities. Copyright © Supply Chain Council, All rights reserved 16

Source Configurations
Source Stocked Product (Process ID: S1) The ordering and receiving of existing products, components and services from existing contracts, based on requirement plans. Source Make-to-Order (Process ID: S2) The ordering and receiving of existing products, components and services for a unique and identified customer order. Source Engineer-to-Order (Process ID: S3) The selection, ordering and receiving of specialized products or services that are designed and/or built based on the requirements or specifications of a particular customer order or contract. In this slide, the key elements for the instructor to highlight are specific examples for each of the configurations – stocked product sourcing, make-to- order sourcing, and engineer-to-order sourcing. Here are some starters. You’re an air-conditioner manufacturer. Stock sourcing may involve buying bulk coolant material, or bulk motors of a specified size. Make-to-Order sourcing may involve buying thermostats or electronic controls which normally have a variety of power supply options, tolerances, ranges and so forth – thermostat running on 220v, in Celsius, which can range from -20c to 50c Engineer-to-Order sourcing would involve passing custom requirements to a manufacturer – perhaps you have to make a radiator for the space shuttle which has to have an extra layer of metal for robustness. It can be a standard radiator, but there is a degree of engineering then done to get the right ‘hardness’ to make it resistant to outer space. Copyright © Supply Chain Council, All rights reserved 17

Source Process Elements
Stocked Product (S1) Make-to-Order (S2) Engineer-to-Order (S3) S2.1 Schedule Product Deliveries S3.1 Identify Sources of Supply S3.2 Select Final Supplier(s) and Negotiate S1.1 Schedule Product Deliveries S3.3 Schedule Product Deliveries S1.2 Receive Product S2.2 Receive Product S3.4 Receive Product S1.3 Verify Product S2.3 Verify Product S3.5 Verify Product S1.4 Transfer Product S2.4 Transfer Product S3.6 Transfer Product S1.5 Authorize Supplier Payment S2.5 Authorize Supplier Payment S3.7 Authorize Supplier Payment The instructor should not dwell on this slide (time). It is a ‘periodic table’ of process for sourcing, and these are the general steps all sourcing goes through. It would be appropriate to walk through one cycle of the simplest sourcing so the class understand the order and material flow. It is arranged so the class understands that though the numbering changes for each of the configurations (level 2’s) the basic steps remain the same. Question for class here would be if they have a unique sourcing model which this would not be able to describe Copyright © Supply Chain Council, All rights reserved 18

Question: Process Flows
Which of the following flows is/are correct? S2.2 Receive Product S2.4 Transfer Product S2.5 Authorize Supplier Payment S2.1 Schedule Product Deliveries S2.3 Verify Product Answer: All Copyright © Supply Chain Council, All rights reserved 19

Source Process Exercise
A supply chain manager finds that a high percentage of finished goods need to be reworked as a certain component that is ordered specifically for customer orders is showing high failure rates when installed in the product. Which (1) level 3 process should catch faulty materials before they are used in production? Which metric indicates the yield of this process? Where do this process’ inputs come from? Which best practices could this manager consider if he wants to reduce the time it takes to complete the materials testing? Answers: S2.3 % Orders or % Order lines received defect free S2.2 Supplier certification, skip lot/sampling inspection logic. And maybe deliveries balanced throughout day/week (prevent peeks). Copyright © Supply Chain Council, All rights reserved 20

Make (Process ID: M) Objectives of this process:
The process of adding value to products through mixing, separating, forming, machining, and chemical processes. Key Processes Comprehended: Schedule production, request and receive material from Source and/or Make processes Manufacture, assemble/disassemble and test product, package, hold/release product Managing product quality and engineering changes Managing facilities and equipment, production status workflow and capacity management Manage Work-In-Process (WIP) inventories Hint: Itemnumber change? Probably Make in SCOR The instructor should spend some time here discussing the reason why the word ‘make’ is used. Not all the designers of SCOR perform manufacturing activities. Chemical companies, service companies, and discrete manufacturing all ‘make’ a product or service which is why a neutral word was found – perhaps instead of being equally valid, it’s equally mysterious (humor). Generally, this is the key step of ‘adding value’ to a product, service, material. Copyright © Supply Chain Council, All rights reserved 21

Make Configurations Make-to-Stock (Process ID: M1)
The making of standard products and services. Planning (Plan) processes determine what, how much and when to make. Make-to-Order (Process ID: M2) The making of standard or configurable products and services for unique customer orders. Customer orders determine what, how much and when to make. Customer orders can be traced throughout the Make process. Engineer-to-Order (Process ID: M3) The making of specialized products or services that are fully or partially designed and made based on the unique requirements and specifications of a particular customer order or contract. Customer orders and specifications can be traced throughout the Make process. In this slide, the key elements for the instructor to highlight are specific examples for each of the configurations – stocked product make, make-to- order, and engineer-to-order. Here are some starters. You’re an air-conditioner manufacturer. Stock manufacture is all about cranking out, for example, retail air conditioners of a fixed SKU and built to plan to send to distributors. Key to stress is that it is usually a plan-driven build. Make-to-Order is about being driven by customer orders (perhaps commercial) which are very specific combinations of options. The key to stress is that the customer order is usually passed in some form directly to the factory. Engineer-to-Order would be about not only takeing the customer order which lists some variable options on SKU’s, but also would include specifications for which there may or may not be a SKU. An example is getting that order for the radiator needed by the space shuttle. Encourage the class to come up with other examples Copyright © Supply Chain Council, All rights reserved 22

Engineer-to-Order (M3)
Make Process Elements Make-to-Stock (M1) Make-to-Order (M2) Engineer-to-Order (M3) M1.1 Schedule Production Activities M2.1 Schedule Production Activities M3.1 Finalize Production Engineering M3.2 Schedule Production Activities M1.2 Issue Material M2.2 Issue Sourced/In-Process Product M3.3 Issue Sourced/In-Process Product M1.3 Produce and Test M2.3 Produce and Test M3.4 Produce and Test M1.4 Package M2.4 Package M3.5 Package M1.5 Stage Product M2.5 Stage Finished Product M3.6 Stage Finished Product M1.6 Release Product to Deliver M2.6 Release Finished Product to Deliver M3.7 Release Product to Deliver M1.7 Waste Disposal M2.7 Waste Disposal M3.8 Waste Disposal The instructor should not dwell on this slide (time). It is a ‘periodic table’ of process for make, and these are the general steps all make goes through. It would be appropriate to walk through one cycle of the simplest make so the class understand the order and material flow. It is arranged so the class understands that though the numbering changes for each of the configurations (level 2’s) the basic steps remain the same. Question for class here would be if they have a unique make model which this would not be able to describe Copyright © Supply Chain Council, All rights reserved 23

Make Process Exercise A production manager finds that her engineer-to-order shop is unable to meet the daily schedules; down-time, change-over- times and misalignment between sequence and materials seem to be the key problems: Which (1) level 3 process should she investigate? Which metric or metrics should she monitor to continuously track this problem? Where do relevant inputs come from? Which best practices could this manager consider? Copyright © Supply Chain Council, All rights reserved 24

Deliver (Process ID: D)
Objectives of this process: Perform customer-facing order management and order fulfillment activities including outbound logistics. Key processes comprehended: Product, service and price quotations Order entry and maintenance Order consolidation, picking, packing, labeling and shipping Import/export documentation Customer delivery and installation Logistics and Freight Management Manage Finished Goods inventories Hint: Order taking or Shipping? Probably Deliver in SCOR The instructor should dwell somewhat on the use of the word ‘deliver’, which encompasses what generally the participants will understand are “order management” and “logistics.” The stress should be that these are the principal ‘customer facing’ processes, and are usually grouped together in companies from a management and measurement perspective. Copyright © Supply Chain Council, All rights reserved 25

Deliver Configurations
Deliver Stocked Product (Process ID: D1) The delivery of standard products (and services) that are maintained in a finished goods state prior to the receipt of a customer order. Deliver Make-to-Order Product (Process ID: D2) The delivery of standard or configurable products and services that are obtained (Source or Make) for a customer order. Deliver Engineer-to-Order Product (Process ID: D3) The delivery of specialized products and services that have been fully or partially designed in negotiation and based on requirements from a customer order and customer provided specifications Deliver Retail Product (Process ID: D4) The delivery of standards goods in a retail store The critical information to convey in this slide is the difference in treatment of the customer order in the three configurations Stock model handles the matchup of a customer order to stock material. Make-to-order model passes the customer order into manufacturing and procurement processes Engineered model passes not only the order (SKU) but also the requirements into manufacturing and procurement. The retail model is a specialized sequence of deliver steps for use within the four-walls retail environment, which can be substantially different than the other deliver models. Encourage the class to discuss these difference within their own companies. Copyright © Supply Chain Council, All rights reserved 26

Deliver Process Elements (1/3)
Stocked Products (D1) Make-to-Order (D2) Engineer-to-Order (D3) D1.1 Process Inquiry & Quote D2.1 Process Inquiry & Quote D3.1 Obtain & Respond to RFP/RFQ¹ D1.2 Receive, Enter & Validate Order D2.2 Receive, Configure, Enter & Validate Order D3.2 Negotiate & Receive Contract D1.3 Reserve Inventory & Determine Delivery Date D2.3 Reserve Inventory & Determine Delivery Date D3.3 Enter Order, Commit Resources & Launch Program D1.4 Consolidate Orders D2.4 Consolidate Orders D3.4 Schedule Installation D1.5 Build Loads D2.5 Build Loads D3.5 Build Loads D1.6 Route Shipments D2.6 Route Shipments D3.6 Route Shipments D1.7 Select Carriers & Rate Shipments D2.7 Select Carriers & Rate Shipments D3.7 Select Carriers & Rate Shipments The instructor should not dwell on this slide (time). It is a ‘periodic table’ of process for deliver, and these are the general steps all deliver goes through. It would be appropriate to walk through one cycle of the simplest deliver so the class understand the order and material flow. It is arranged so the class understands that though the numbering changes for each of the configurations (level 2’s) the basic steps remain the same. Retail is highlighed here as not quite fitting into the ‘periodic table’. Question for class here would be if they have a unique deliver model which this would not be able to describe ¹ RFP = Request for Proposal, RFQ = Request for Quote Copyright © Supply Chain Council, All rights reserved 27

Stocked Products (D1) Make-to-Order (D2) Engineer-to-Order (D3) D1.8 Receive Product from Source or Make D2.8 Receive Product from Source or Make D3.8 Receive Product from Source or Make D1.9 Pick Product D2.9 Pick Product D3.9 Pick Product D1.10 Pack Product D2.10 Pack Product D3.10 Pack Product D1.11 Load Product & Create Documentation D2.11 Load Product & Create Documentation D3.11 Load Product & Create Documentation D1.12 Ship Product D2.12 Ship Product D3.12 Ship Product D1.13 Receive & Verify Product by Customer D1.14 Install Product D2.14 Install Product D3.14 Install Product D1.15 Invoice D2.15 Invoice D3.15 Invoice Copyright © Supply Chain Council, All rights reserved 28

The Retail supply chain model does not match up to the Manufacturing supply chain model, therefore processes are quite different Retail Products (D4) D4.1 Generate Stocking Schedule D4.2 Receive Product at Store D4.3 Pick Product from Backroom D4.4 Stock Shelf D4.5 Fill Shopping Cart D4.6 Checkout D4.7 Deliver and/or Install Copyright © Supply Chain Council, All rights reserved 29

Control processes: Plan, Enable
Plan and Enable processes prepare the supply-chain to ensure smooth execution Planning processes balance the need for resources, materials, capacity, etc. with the availability of these resources. This includes prioritization if needed. Enable processes address 8 control aspects for the supply chain. They monitor compliance, deliver information from other process areas and highlight dependencies on these other process areas. They also support maintenance of relationships with suppliers. Purpose of slide: Explain control processes Two types of control processes exist: Plan processes: Main objective is to make sure the materials are delivered (capacity) Enable processes: Ensure the supply-chain is ready and performs as required Enable processes in reality aren't processes like plan and execution processes. They function as interfaces to other process domains –such as: IT, HR, Facilities, Process Improvement, etc. They monitor and signal 'out-of-bounds' behavior They receive, format and activate information from other domains These are not ‘in-line’ processes, they aren’t particularly ‘value add’ to the end customer. Enable may require special explanation why it isn’t on the master slide list. Because all processes have one or more enable elements, and because there are so many, for purposes of simplicity, Enables are traditionally left off of high-level models (there are no “Enable Plan” processes) and only shown at level-3 activities. Copyright © Supply Chain Council, All rights reserved 30

Planning Processes Processes: Plan
Customer processes Supplier processes Supply Chain Customer processes Supplier processes Supply Chain Plan Source Make Deliver Return Return Planning processes are grouped together under one heading: Plan. Plan interacts with all Execution processes and the Return processes. Plan can also interact with Customers and/or Suppliers Processes: Plan Objective: Drive/coordinate execution processes Copyright © Supply Chain Council, All rights reserved 31

Plan (Process ID: P) Objectives of this process:
The process of determining requirements and corrective actions to achieve supply chain objectives Key Processes Comprehended: Supply chain revenue planning/forecasting Materials requirement planning Factory, repair, maintenance facilities capacity planning Distribution requirements planning Manage planning parameters Hint: Forecasting, S&OP, MRP? Probably Plan in SCOR Copyright © Supply Chain Council, All rights reserved 32

Plan Configurations (1/2)
Plan Supply Chain (Process ID: P1) Planning overall supply chain targets. Plan Supply Chain drives and coordinates P2, P3, P4 and P5 plans (Compare to “Revenue plan”, or “Budget” in certain industries) Plan Source (Process ID: P2) Planning of material ordering and receiving activities. Plan Source calculates which materials need to be available when to support the production plan (P3) and/or the delivery plan (P4). (Compare to “Materials Requirements Plan”) Plan Make (Process ID: P3) Planning of production and/or MRO activities. Plan Make ensures the production resources (capacity) are in place as needed and may generate production orders. (Compare to “Production Plan”) The critical information to convey in this slide is the difference in treatment of the customer order in the three configurations Stock model handles the matchup of a customer order to stock material. Make-to-order model passes the customer order into manufacturing and procurement processes Engineered model passes not only the order (SKU) but also the requirements into manufacturing and procurement. The retail model is a specialized sequence of deliver steps for use within the four-walls retail environment, which can be substantially different than the other deliver models. Encourage the class to discuss these difference within their own companies. Copyright © Supply Chain Council, All rights reserved 33

Plan Configurations (2/2)
Plan Deliver (Process ID: P4) Planning of order management, material handling and transportation activities. Plan Deliver ensures resources are in place as needed and may generate or recalculate shipping dates based on material availability. (Compare to “Shipment Plan”, “Load Planning”) Plan Return (Process ID: P5) Planning of the reverse logistics shipping and material handling capacity. Note: This does not include the maintenance, repair or overhaul activity planning as those are Make processes. The critical information to convey in this slide is the difference in treatment of the customer order in the three configurations Stock model handles the matchup of a customer order to stock material. Make-to-order model passes the customer order into manufacturing and procurement processes Engineered model passes not only the order (SKU) but also the requirements into manufacturing and procurement. The retail model is a specialized sequence of deliver steps for use within the four-walls retail environment, which can be substantially different than the other deliver models. Encourage the class to discuss these difference within their own companies. Copyright © Supply Chain Council, All rights reserved 34

Plan Processes Planning is an iterative process:
The output of Plan Supply Chain is the input for Plan Source, Plan Make, Plan Deliver and Plan Return The output of Plan Source, Plan Make, Plan Deliver and Plan Return are inputs for Plan Supply Chain; The output of one cycle is the input for the next cycle Plan Make Plan Source Plan Supply Chain P1.1 P1.2 P1.3 P1.4 P2.1 P2.2 P2.3 P2.4 P3.1 P3.2 P3.3 P3.4 2 1 to P3.2 end full cycle begin next cycle It is a common practice to plan and continuously replan. Compare to create a plan from scratch and use it. Then next time you need a plan: ignore the previous plan and start from scratch again. That’s not a common or good practice. That’s why we are saying it’s an iterative, cyclical process. Copyright © Supply Chain Council, All rights reserved 35

Enable Processes Customer processes Supplier processes Supply Chain Customer processes Supplier processes Supply Chain Plan Source Make Deliver Return Return The orange border at the bottom refers to the fact that Enable processes are part of the Level 1 processes Plan, Source, Make, Deliver and Return. You can show it on the quick reference that they are displayed at the bottom of Plan, Source, Make, Deliver and Return. Processes: Enable Plan, Enable Source, Enable Make, Enable Deliver and Enable Return Copyright © Supply Chain Council, All rights reserved 36

Enable Processes Objective: The Enable processes are five groups of processes under Plan, Source, Make , Deliver and Return with 3 distinct types of objectives: Manage process performance Manage process control data Manage process relationships Key processes comprehended: Managing business rules and monitoring adherence Measuring supply chain performance and determine corrective action Managing risk and environmental impact Managing the supply chain network and facilities Hint: Equipment or plant maintenance? Probably Enable Copyright © Supply Chain Council, All rights reserved 37

Enable Categories Enable Plan (Process ID: EP)
Performance, data and relationship management processes for all types of planning processes: Plan Supply Chain, Plan Source, Plan Make, Plan Deliver and Plan Return. Examples: maintain planning cycles, monitor planning accuracy, manage supply chain risks. Enable Source (Process ID: ES) Performance, data and relationship management processes for all receiving activities and supplier related processes. Examples: Monitor supplier performance, maintain what is sourced where. Enable Make (Process ID: EM) Enable management processes for manufacturing, repair and overhaul type processes. Examples: BOM maintenance, preventive equipment maintenance, monitoring capacity utilization/shortage. Copyright © Supply Chain Council, All rights reserved 38

Enable Categories Enable Deliver (Process ID: ED)
Performance, data and relationship management processes for all order management, warehouse and distribution activities and forwarder related processes. Examples: Monitor order management and forwarder performance, maintain a distribution network, managing risk. Enable Return (Process ID: ER) Enable management processes for all types of reverse logistics processes: MRO returns, defective product returns and excess inventory returns. Examples: Maintain return approval rules, Maintain issue tracking software, maintain a return distribution network. Copyright © Supply Chain Council, All rights reserved 39

Reverse Processes Processes: Return (Source Return, Deliver Return)
Customer processes Supplier processes Supply Chain Customer processes Supplier processes Supply Chain Plan Source Make Deliver Return Return The example here is for productss however the supply-chain does also apply to services. Please note the picture represents processes not departments. Flows are bi-directional It IS: Sourcing Raw or semi-finished material Building products or executing services (Make) Taking orders and scheduling acitivites to fulfil them (Deliver) Managing Suppliers Planning and coordinating all activities in terms of resources, materials, and demand Handling Maintenance, Repair, Overhaul, Returns It is NOT: Developing new suppliers – generally what happens in product design Selling a product, but rather taking orders – sales happens elsewhere Planning the lifecycle of a product – that planning is generally with design/marketing Processes: Return (Source Return, Deliver Return) Objective: reverse material flows Copyright © Supply Chain Council, All rights reserved 40

Return (Process ID: R) Objective of this process:
Moving material from customer back through supply chain to address defects in product, ordering, or manufacturing, or to perform upkeep activities. Key Processes Comprehended Identification of the need to return a product or asset Requesting and issuing return authorization Inspection and disposition decision-making Transfer/Disposition of product or asset Managing return transportation capacity Managing returned material inventories Hint: Reverse material flow? Probably Return in SCOR Purpose of slide: Introducing Return process and different types of Return processes (Level 2) Not manufacturable or fulfillable: The product cannot be made as per the make. Incomplete/inaccurate bills-of-materials and vendor (quality) issues are typical manufacturing examples. In fulfillment typical examples are: spare part availability, boxes don't fit on pallet, in truck, through door-ways, and packaging failure in normal handling. A third area is the lack of specifications for sales and after-sales processes. Not according to specifications: The product specifications such as temperature, wear and tear, color, battery life, noise levels, emissions, etc, aren't met. These 'Quality issues' may be observed in the supply chain or in the field To support orders: The product needs to be modified in support of (engineer- to-order) orders. This is the link between engineer-to-order engineering and product engineering. Copyright © Supply Chain Council, All rights reserved 41

Return Configurations
Return Defective Products (Process IDs: SR1 and DR1) The return of products because the product is defective, the wrong product was ordered or shipped. Return Maintenance, Repair & Overhaul (IDs: SR2 and DR2) The return of products or assets to perform preventative maintenance, (end-of-life) overhaul or repairs due to breakage/aging with use Return Excess Products (Process IDs SR3 and DR3) The return of excess inventories and inventories of product which will be retired (end-of-life excess). The product is new and in original packaging. SR = Source Return, DR = Deliver Return Copyright © Supply Chain Council, All rights reserved 42

Return Configurations
Positioning Source Return and Deliver Return Consider the flow of goods; Notice the positions of Source and Deliver Now, notice the positions of Source Return and Deliver Return Customer My Company Deliver Source Supplier Note that return flows do not necessarily flow from customer to supplier. One of the parties may repair or dispose differently. Supplier Customer My Company Deliver Return Source Return Copyright © Supply Chain Council, All rights reserved 43

Modeling with SCOR Drivers for modeling: Why do you model
Business opportunities: Strategy Development Merger, Acquisition or Divestiture (Companies or Supply Chains) Process optimization and Re-engineering Standardization, Streamlining and Management alignment New business start-up (Company and Supply Chain start-ups) Benchmarking Process Outsourcing Technology services: Software implementation (ERP, PLM, QC) Workflow & Service Oriented Architecture Purpose: Why do we model This is a list of the reasons why companies may need to document their business processes. Merger, Acquisition or Divestiture: Focus on integration of operations, understanding the process requirements and selection of 'best' process to meet new company objectives. This is selecting one Supply-Chain over another. (Note: this is not about integration of financial reporting, it is about integrating the operational processes of make and source). Standardization and streamlining: Regaining control of large number diverging processes to same purpose. (10 factories resulted in 10 ways to do pilot build) This is focused at level 3 processes. Merger, Acquisition and Divestiture focuses at level 1. Optimization and Re-engineering: The most traditional reason: Solve a business performance problem, such as cycle time, cost, reliability. Developing a new set of processes for the company, or fine-tuning existing ones. Management Alignment: Operationalizing strategy, focus on metrics alignment throughout the company. Translating company strategy to operational metrics. Standard metrics (i.e. standard way of measuring) across the enterprise. New business start-up: Establish (and deliver) critical processes to establish a new service or product. (includes a new business inside an existing company) Benchmarking: Benchmark performance inside and outside the company. Comparing performance of businesses or business units with similar processes is valuable, comparing product refresh to new technology is not; objectives and targets are different. Model the processes first to understand what you are measuring. Process Outsourcing: Defining which activities you want to outsource and how you will measure the third party you outsource to, before you issue a RFQ. Note: outsourcing can also be done within the enterprise. Technology (shouldn't there still be a business reason): Software implementation: Software is automation of the activity, describing the process (not the IT transactions) provides a linkage between the business process and the software. Workflow and Service Oriented Architecture: Modeling provides the linkage between the software and the processes it supports. Pre-defined metrics, inputs and outputs ensure completeness of architectures. Copyright © Supply Chain Council, All rights reserved 44

Different Model Types SCOR recognizes different types of models. Each serving a different purpose: Business Scope diagram: Set the scope for a project or organization Geographic Map (a.k.a. Geo Map): Describes material flows in a geographic context; Highlights node¹ complexity or redundancy Thread Diagram: Material flow diagram, focused on level 2 process connectivity; Describes high level process complexity or redundancy Workflow or Process Models: Information, material and work flow diagram at level 3 (or beyond); Highlights information, people and system interaction issues ¹) A node represents a logical or geographic entity in a supply chain. Examples: Warehouse, Factory, Store Copyright © Supply Chain Council, All rights reserved 45

Creating a Scope Diagram
Steps to create a Business Scope Diagram Create or open the business scope diagram template Identify customers of your organization or project and enter these in the customers column in the scope diagram. Identify and enter the key nodes within your organization or project. A node represents a logical or geographic entity in the supply chain. Consider: Warehouse, Factory, Store, HQ etc. Identify and enter the suppliers of your organization or project Optionally link the nodes to reflect material and/or information flows. Use a different color and/or stroke differentiate material and information flows. Example: Material and information flow Information flow Copyright © Supply Chain Council, All rights reserved 46

Creating a Scope Diagram
1 Steps to create a Business Scope Diagram Create or open the business scope diagram template Identify and enter the customers of your project or organization Identify and enter the key nodes within your project or organization Identify and enter the suppliers of your project or organization Optionally link the nodes to reflect material and/or information flows (using different color/stroke) Supplier My Organization Customer Supplier My Organization Customer Flash Inc. Battery ltd. Comps Factory DC Retail Inc. mp3 HQ Supplier My Organization Customer Flash Inc. Battery ltd. Comps Factory DC Retail Inc. mp3 HQ 5 4 3 2 Copyright © Supply Chain Council, All rights reserved 47

The Result: Scope Diagram
Flash Inc. Battery ltd. Components Factory Warehouse Retail, Inc. mp3 HQ Material and information flow Information flow Suppliers mp3, Inc. Customers Service Providers Copyright © Supply Chain Council, All rights reserved 48

Modeling with SCOR Steps to create the Geographic Map:
Create geographic context (a.k.a. the map) Draw and name your customers on the map Identify the level 2 processes List the level 2 processes in the customer on your map Beginning with your customers, repeat this for every node on the map: Identify all supplying nodes (where does material come from) Draw and name these supplying nodes on the map list these in the node on your map Draw the material flows (arrows connecting the nodes) Repeat until you have included all your suppliers/nodes Copyright © Supply Chain Council, All rights reserved 49

Creating a Geographic Map
Steps to create the Geographic Map: Create geographic context (a.k.a. the map) Draw and name your customers on the map Identify the level 2 processes List the level 2 processes in the customer node Starting with your customers, repeat for each node: Identify all supplying nodes Draw and name these supplying nodes List the level 2 processes in each node Draw the material flows (connecting arrows) Repeat until you have included all your suppliers 1 Drive Supplier D1, P1, P4 b² d² Retail, Inc S1, P2 b France Spain UK Germany 2 3 e¹ China e² India MP3 Factory S1, M1, D1 b¹ d¹ Copyright © Supply Chain Council, All rights reserved 50

Result: The Geographic Map
Retail, Inc S1, P2 Drive Supplier D1, P1, P4 Battery Supplier D1, P1, P4 HQ P1, P2, D2, S2 MP3 Factory P3, S1, M1, D1 Answer: The Geographic Map shows material flows. HQ communicates information, no materials Question: No flow from HQ; Why? Copyright © Supply Chain Council, All rights reserved 51

Modeling with SCOR Steps to establish SCOR process models (workflows)
Obtain generic descriptions (this is what people describe) Map these generic descriptions to SCOR process IDs (normalize) Create swimming lanes to reflect organizational boundaries Create workflow with these SCOR processes Add description to workflows to reflect inputs/outputs of the processes Optionally add other relevant information 1 2 Orders are faxed in and entered in OMS Every night the orders are scheduled The orders are released to the factory based on the delivery date offset Factory creates and schedules factory work orders in SFCS D2.2 Receive, Enter, Validate Order D2.3 Reserve Inventory & Determine Delivery Date M2.1 Schedule Production Activities Copyright © Supply Chain Council, All rights reserved 52

Elements of a Business Process
Process is defined by more than just activity organization activity business rules technology measurements inputs outputs people metrics best practices geography platform interface skills not in SCOR Purpose: Explain what defines a process (who, what, why, when, etc). A process is not just defined by the inputs, process and outputs. The performance of a process also defines it. As an example: and USPS- mail both enable the process of mailing written word from me to you. The lead-time and cost are defining factors in choosing between these two. If I want it to you today I will NOT use USPS. Furthermore there are other aspects that determine the process: Who does it, who is the customer, where is it performance, how is it supposed to perform, what technology supports it, etc. So if I want to send it to my grandmother (customer) I will use USPS (she has no box, but does have a USPS-mail box - technology). If I want to reduce the risk hackers read my mail I choose USPS-mail. In SCOR and USPS-mail are referred to as (best) practices. Copyright © Supply Chain Council, All rights reserved 53

Obtaining Generic Descriptions
Staple-Yourself-To-An-Order; Proven technique to obtain generic language process descriptions: Follow the logical flow of an order through the process. Each level 1 process has an order (except Plan): Customer order for Deliver, Production order for Make, Purchase order for Source and Return Authorization for Return. For each order start with the process of order creation and follow the order and document each activity until the order is completed/closed. Similarly follow the steps of the planning cycles you encounter. Finally cover any process you have missed so far; Use your SCOR list of processes as a check-list. Hint: To obtain generic descriptions for an end-to-end supply chain: Start with Plan, then Deliver, Make, Source. Purpose: Provide example process capture method The idea is that the order guides you through the process. There are two types you can mention: Hand-carrying the order - difficult in worldwide businesses - and Copyright © Supply Chain Council, All rights reserved 54

Obtaining Generic Descriptions
The purpose of capturing process is to understand it and remove, adjust or repair it where needed Recognize process characteristics: 'Measurements': It takes 30 minutes to build… 'Business rule': The plan is updated weekly… 'People': This is handled by Joanna on Thursdays … 'Business rule': This is done to provide .. with .. data.. 'Inputs' or 'triggers': When we receive the document.. 'Outputs': We send them the document.. 'Technology': We print the document from the .. system.. 'Business rules': We need two copies of the form .. Verify hearsay statements, to eliminate perception Purpose: Show examples (how to recognize) Copyright © Supply Chain Council, All rights reserved 55

SCOR Metrics Definitions: SCOR metrics: Diagnostic metrics
Performance Attribute: a characteristic to describe a strategy. Performance attributes serve as classification for KPIs and metrics Key Performance Indicator (KPI): a metric that is representative to measure the overall performance or state-of-affairs Metric: a standard for measurement Measurement: an observation that reduces the amount of uncertainty about the value of a quantity SCOR metrics: Diagnostic metrics Linked to business objectives Highlight the gap in performance Change over time is more valuable than a single sample Copyright © Supply Chain Council, All rights reserved 56

Performance Attributes
Strategy Reliability (RL) Consistently getting the orders right, product meets quality requirements Responsiveness (RS) The consistent speed of providing products/services to customers Agility (AG) The ability to respond to changes in the market (external influences) Cost (CO) The cost associated with managing and operating the supply chain Assets (AM) The effectiveness in managing the supply chain’s assets in support of fulfillment Customer Internal Reliability: The ability to deliver, on-time, complete, in the right condition, packaging and documentation to the right customer Responsiveness: The speed at which products and services are provided Agility (Flexibility): The ability to change (the supply-chain) in order to support changing (market) conditions Cost: The cost associated with operating the supply chain Assets: The effectiveness in managing assets in support of demand satisfaction Question: What is/are the most important attributes to achieve your supply chain strategy? Copyright © Supply Chain Council, All rights reserved 57

‘Levels’ in Metrics Level 1: Strategic metrics a.k.a. Key Performance Indicators Measure overall supply chain performance; health of the supply chain Set the scope and objectives for a supply chain, project or organization Translate a business problem or strategy into something measurable Establish the priority or priorities for organization Level 2: Diagnostic metrics Measure a part of the supply chain and/or a part of the strategic metric Provide direction to where problems originate Caution: Level 2 metrics do not by definition add up to a level 1 metric Beyond level 1 and 2: all metrics are called level 3 SCOR does not specify levels for metrics that are not level 1 or 2 These metrics serve as further diagnostic tools Purpose of slide: Understanding what Level 1 metrics are used for, and which ones to use. Level 1 metrics are the starting point of your improvement project. Understand how a supply-chain is measured. E.g. is it speed, cost, or quality (or a mix). Different metrics may lead to different processes to review and improve or monitor. Focus on measuring those metrics that are applicable to your process. Shaving a day more of the supply-chain cycle time is probably not the most valuable use of resources for a new technology supply-chain. Don't discard non-priority metrics completely (as you may cause permanent damage to other organs of the patient during a 'successful' heart transplant if it lasts too long). Look towards the 'customer' of your process to understand how they measure your performance. Note: Trend is often more important then value. Copyright © Supply Chain Council, All rights reserved 58

SCOR Metrics Codification
SCOR metrics have unique identifiers: Two capitals are performance attributes: RL, RS, AG, CO and AM (5) Two capitals, a period the number one (1) and a number are strategic (a.k.a. level 1) metrics: RL.1.1, RS.1.1, AG.1.1, CO.1.1, CO.1.2, AM.1.3 (10 in total) Two capitals, a period the number two (2) and a number are diagnostic (a.k.a. level 2) metrics: RL.2.1, RS.2.1, AG.2.1, CO.2.1, CO.2.2, AM.2.7 (36 in total) Two capitals, a period the number three (3) and a number are diagnostic (or level 3) metrics: RL.3.1, RS.3.1, AG.3.1, CO.3.149, CO.3.151, AM.3.44 (>500) XX = performance attribute, XX.1.n = level 1, XX.2.n = level 2, and so on Copyright © Supply Chain Council, All rights reserved 59

KPIs; Strategic Metrics
Measuring strategy: KPIs are strategic (level 1) metrics Attribute Strategic metric Reliability RL.1.1 Perfect Order Fulfillment Responsiveness RS.1.1 Order Fulfillment Cycle Time Agility AG.1.1 Upside Supply Chain Flexibility AG.1.2 Supply Chain Upside Adaptability AG.1.3 Supply Chain Downside Adaptability Cost CO.1.1 Supply Chain Management Cost CO.1.2 Cost of Goods Sold Assets AM.1.1 Cash-to-Cash Cycle Time AM.1.2 Return on Supply Chain Fixed Assets AM.1.3 Return on Working Capital Customer Reliability: The ability to deliver, on-time, complete, in the right condition, packaging and documentation to the right customer Responsiveness: The speed at which products and services are provided Agility (Flexibility): The ability to change (the supply-chain) in order to support changing (market) conditions Cost: The cost associated with operating the supply chain Assets: The effectiveness in managing assets in support of demand satisfaction Internal Copyright © Supply Chain Council, All rights reserved 60

Strategic Reliability Metric
RL.1.1 Perfect Order Fulfillment Definition: The percentage of orders delivered on-time, in full. Components of perfect include all items and quantities on-time, using the customer’s definition of on-time, complete documentation and in the right condition Calculation: [Total Perfect Orders] / [Total Number of Orders] Diagnostic Metrics: (examples) RL.2.1 % Orders Delivered in Full RL.2.4 Perfect Condition RL.3.19 % Orders Received Defect Free RL.3.24 % Orders Received Damage Free Notes: An order is perfect only if all L2/L3 metrics are perfect; An order must be: on-time AND in-full AND right condition AND right documentation This metric is customer focused. Even for non-commercial (e.g. internal supply chain like processes – like internal warehouse, internal procurement, etc) usage this is still a very valuable metric. (How is the process customer perceiving the service). Each order is a Boolean AND collection of level 2/3 metrics, that need to be met to score a 'perfect'. At the order level the score is either 'perfect' (1) or 'not perfect' (0). The average performance is the number of perfects divided by the total sample size. For example if the order was delivered at the date requested (score: 1), with the correct paperwork (score: 1), but one item on the order is on backorder and arrived 2 days too late (score: 0) then the overall score for this order is: 1 x 1 x 0 = 0 i.e. the order was not perfect. Copyright © Supply Chain Council, All rights reserved 61

Strategic Responsiveness Metric
RS.1.1 Order Fulfillment Cycle Time Definition: The average actual cycle time consistently achieved to fulfill customer orders. The actual cycle time starts with the receipt of the order and ends with the customer acceptance of the delivery. The unit of measure is days. Calculation: [Sum Actual Cycle Times For All Orders Delivered] / [Total Number Of Orders Delivered] Diagnostic Metrics: (examples) RS.2.2 Make Cycle Time RS.2.3 Deliver Cycle Time RS.3.96 Pick Product Cycle Time Notes: Order Fulfillment Cycle Time includes dwell time. Dwell time is the time no value add activities are performed on the order or product, imposed by customer requirements. This metric is customer focused. Even for non-commercial (e.g. internal supply chain like processes – like internal warehouse, internal procurement, etc) usage this is still a very valuable metric. (How long, on average, does it take to..). This metric only includes orders that have actually been delivered. This is not and does not include the Average published lead time metric. Note that the metric is at the customer order level. Line items that should be delivered together are not measured separately. Order fulfillment dwell time is defined as ‘any lead time during the order fulfillment process where no activity takes place, which is imposed by customer requirements’. Copyright © Supply Chain Council, All rights reserved 62

Strategic Agility Metrics
AG.1.1 Upside Supply Chain Flexibility Definition: The number of days required to achieve an unplanned sustainable 20% increase in quantities delivered. Seasonality is not considered unplanned/unforeseen. The unit of measure for flexibility is calendar days. Calculation: The larger of the number of days required to achieve sustainable increase for Source, Make and Deliver Diagnostic Metrics: AG.2.1 Upside Source Flexibility AG.2.2 Upside Make Flexibility AG.2.3 Upside Deliver Flexibility Notes: This metric may have more than one Source, Make and Deliver Flexibility component depending on the complexity of the supply chain. This metric addresses a company's ability to respond to unplanned increase in demand. Flexibility indicates how long it takes to respond. Each supply chain should be measured separately. Aggregation of data of multiple supply chains is not really a valuable metric. Copyright © Supply Chain Council, All rights reserved 63

Strategic Asset Metrics
AM.1.1 Cash-to-Cash Cycle Time Definition: The time it takes for cash invested in materials to flow back into the company after finished goods have been delivered to customers. The unit of measure for Cash-to-Cash Cycle Time is calendar days Calculation: [Inventory Days of Supply] + [Days Sales Outstanding] – [Days Payable Outstanding] Diagnostic Metrics: AM.2.1 Days Sales Outstanding (DSO) AM.2.2 Inventory Days of Supply (IDOS) AM.2.3 Days Payable Outstanding (DPO) Notes: For services, the time between paying the resources assigned to a service and receiving payment for the service delivery. This metric is internal focused (cash utilization). This is one of the most powerful company/supply-chain metrics. This because it indicates both lead time and inventory performance. Furthermore it can also highlight the influence of commercial terms and conditions on the overall company performance (T&C's are outside the supply chain). The components of this metric (Inventory days of supply, DSO and DPO) are available in the annual reports of most companies. We use this to do a high level benchmark of company or process peers. Copyright © Supply Chain Council, All rights reserved 64

Strategic Asset Metrics
AM.1.2 Return on Supply Chain Fixed Assets Definition: The return an organization receives on its invested capital in supply chain fixed assets. This includes the fixed assets used to Plan, Source, Make, Deliver and Return. Examples of fixed assets include land, buildings, machinery, trucks Calculation: ([Supply Chain Revenue] – [COGS] – [Supply Chain Management Costs]) / [Supply Chain Fixed Assets] Diagnostic Metrics: AM.3.11 Deliver Fixed Assets Value AM.3.18 Make Fixed Assets Value AM.3.20 Plan Fixed Asset Value AM.3.27 Source Fixed Assets Value Notes: Supply-Chain Revenue is the operating revenue generated from a supply chain. This does not include non-operating revenue, such as investments, etc.. This metric is internal focused (cash utilization). The focus is on supply specific fixed assets, such as buildings, machinery, fleet, automation (assuming it is considered a fixed asset and allocated to the supply chain), etc.. The Supply-Chain Revenue component is the operating revenue generated from a supply chain. This does not include non-operating revenue, such as leasing real estate, investments, court settlements, sale of office buildings, etc.. Copyright © Supply Chain Council, All rights reserved 65

Metrics and Analysis Levels in metrics help root cause performance issues Strategic metrics (level 1) can be diagnosed by investigating the level 2 metrics. Different types of relationships exist between a metric (the ‘parent’) and it’s diagnostic metrics (the ‘children’): The parent is the sum of it’s children (e.g. time and cost) The children are multiplied to calculate the parent (e.g. yield) The relationship is undefined (but can be statistically observed) Diagnostic metrics don’t necessarily add up to their parents: Order Fulfillment Cycle Time IS NOT the sum of Deliver Cycle Time + Make Cycle Time + Source Cycle Time for most supply chains Emphasize the last bullet. There are several examples where level 2 to level 1 is not a direct sum or multiplication. Copyright © Supply Chain Council, All rights reserved 66

Metrics Data Each company will need to develop a tool or instructions where to source the data for the SCOR metrics There are two types of data: Recorded data; obtain from transactional systems such as ERP (Enterprise Resource Planning), WMS (Warehouse Management System), financial systems, etc. For example: compare time-stamps in these systems to calculate cycle times. Observed data; obtain through interviews, error logs, audits and/or time- studies. For example the observed percentage of orders requiring additional customer setup in a system, percentage of manual repackaging events on the shipping dock. There is no easy button Copyright © Supply Chain Council, All rights reserved 67

Scorecards and SCORcards
Definitions Scorecard: A visual display of the most important information needed to achieve one or more objectives, consolidated and arranged in a single view Balanced Scorecard: A scorecard providing metrics related to four organizational strategies: financial, customer, internal process, and employee learning and growth SCORcard: A scorecard providing metrics related to five supply chain strategies: reliability, responsiveness, Agility, cost and assets Importance Communicate supply chain priorities Monitor all strategic areas, not just the top priority Copyright © Supply Chain Council, All rights reserved 68

SCORcard Metrics Selection
SCORcard metric requirements: Measurable and quantifiable Avoid 'feel good' metrics like supplier satisfaction or customer satisfaction, unless they are an aggregation of well-defined detail metrics. Framework-based metrics simplify the selection process. Linkage to responsibility Avoid metrics that have no impact on performance reviews (supplier or employee), ensure the metric is linked to the (right) process owner at the right level. Ensure metric is well-defined Multiple interpretations of a metric may lead to 'work-arounds' and negation of the effort. SCOR metrics are pre-defined; limiting the discussion on metric definitions. Purpose: Highlight some of the pitfalls of balanced scorecards The purpose of a balanced scorecard is to monitor process performance, perform corrective action and monitor the effects of these actions. In reality it monitors the performance of the person or organization doing the work. If these requirements are not met those measured will creatively work-around the metrics are challenge them. A (balanced) scorecard is valuable if managed properly. Copyright © Supply Chain Council, All rights reserved 69

Metrics Selection Interpreting the definitions
Customer facing metrics should be measured as close to the customer experience as possible. The moment of order submission instead of order entry Delivered performance instead of shipping performance Received quality instead of produced or shipped quality Measure what makes sense: Don’t have data; approximate the missing component until you will be able to obtain the data Tip: It is not about how you think it should be measured, ask your customer what is important to him/her And: Internal focused metrics also have a customer Purpose: Highlight some of the pitfalls of balanced scorecards The purpose of a balanced scorecard is to monitor process performance, perform corrective action and monitor the effects of these actions. In reality it monitors the performance of the person or organization doing the work. If these requirements are not met those measured will creatively work-around the metrics are challenge them. A (balanced) scorecard is valuable if managed properly. Copyright © Supply Chain Council, All rights reserved 70

Benchmarking Definitions Usage
Benchmarking: Comparing an organization’s performance, products, practices, and/or services with those of other organizations that operate in the same or comparable industry Parity: Being equal in performance; No real advantage over others Advantage: Being in a favorable position; In a stronger position than Superior: Being of high rank or quality; Leading Usage Establish Goals. Know where you are relative to others (competitors or peers), and express where you're going. Monitor Performance. Track relative progress you and others (your competitors or peers) make. Copyright © Supply Chain Council, All rights reserved 71

Benchmark Requirements
Compare like for like Using standard metrics A numerical comparison of the performance of two companies in the same industry may not have value when the metric is different. Measuring the same process/business model Avoid comparing the performance of a make-to-stock process to an engineer-to-order process. The purpose of these processes is different, measure them accordingly. Demographics Make sure you understand the other organizations in the benchmark. Regional differences, and differences in product, or services may influence results. Copyright © Supply Chain Council, All rights reserved 72

Best Practices Definitions: Importance
Best practice: "A current, structured, proven and repeatable method for making a positive impact on desired operational results." Current: Must not be emerging and can not be antiquated Structured: Has clearly stated Goal, Scope, Process, and Procedure Proven: Success has been demonstrated in a working environment and can be linked to key metrics Repeatable: The practice has been proven in multiple environments. Importance Alternatives to the way you do business Equalize the competitive landscape Purpose: Best practices are not a hype, they have produced outstanding results in existing business situations. As the definition says they need to be defined (structured), so they can be benchmarked. Which we will discuss a little later. Copyright © Supply Chain Council, All rights reserved 73

Types of Practices Best practices are Current, structured, proven and repeatable methods for making a positive impact on desired operational results. Leading practices are innovations adopted by single companies or industries which provide dramatically improved performance in a process, but because of proprietary restrictions, or novelty, are not widely known or adopted. Worst practices or Poor practices: Practices that are known to produce negative impacts on operational results. Copyright © Supply Chain Council, All rights reserved 74

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This presentation is the exclusive property of the Supply Chain Council. Copyright © Supply Chain Council All rights reserved. The marks SCOR®, CCOR™, DCOR™ and SCOR Roadmap™ are the exclusive property of the Supply Chain Council.

SCOR Framework Introducing all elements of the Supply Chain reference model: Standard processes, metrics and best practices Version 2.0 update 1. Minor.

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SCOR Framework Introducing all elements of the Supply Chain reference model: Standard processes, metrics and best practices Version 2.0 update 1. Minor.

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Presentation on theme: "SCOR Framework Introducing all elements of the Supply Chain reference model: Standard processes, metrics and best practices Version 2.0 update 1. Minor."— Presentation transcript:

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