Supply Chain Management Survey by liwenting


									      Supply Chain Council
Supply Chain Operations Reference
     (SCOR) Model Overview

             Scott Stephens
        Chief Technology Officer
         Supply-Chain Council, Inc.
             303 Freeport Road
         Pittsburgh, PA 15215 USA
                               SCM Project Success Can Be
        Schedule                      Budget                         Expectations

Completed                                    3%                                        23%
                 9%                                                  28%

                        45%                             56%                            49%

            Early                            Below                            Above
            On-time                          On                               Met
            Late                             Over                             Below

                                              4%                                        16%
                  10%                                                36%
                         43%                                                             48%

  In Process

 Based on a 1997 Survey of Fortune 1000 Companies by Lockheed Martin and Penn State University
• The SCC is an independent, not-for-profit, global corporation with
membership open to all companies and organizations interested in
applying and advancing state-of-the-art supply-chain management
systems and practices.
     • Over 600 Company Members (Practitioners, Technology
     Providers, Consultants, Academicians, Government)
     • Wide range of industries (Manufacturers, Distributors, Retailers)
     • Over 30 new members per month
• The Supply-Chain Council (SCC) has developed and endorsed the
Supply Chain Operations Reference-model (SCOR) as the cross-
industry standard for supply-chain management

The SCC was organized in 1996 by Pittiglio Rabin Todd & McGrath (PRTM) and Advanced Manufacturing
Research (AMR), and initially included 69 voluntary member companies
 Staff – Headquarters in Pittsburgh, Pennsylvania;
  Executive Management, Administrative Staff,
  Member Services
 Chief Technology Officer, Washington, DC
 Managing Director Europe - Amsterdam,
 Managing Director Japan - Tokyo, Japan
 Managing Director Australia/New Zealand – Sydney,
 Managing Director Latin America – Mexico City,
              Organization (continued)
 Board of Directors – US Enrichment, Intel, Deloitte
  Consulting, Bayer, Pennsylvania State University
 European Chapter Leadership – Chair from Seimens
  Business Services
 Japan Chapter Leadership – Chair from Mitsui
  Trading Company
 Australia/New Zealand Leadership – Chair from
  Gooding Fielder
 Latin America Leadership – Chair from Coca-Cola
 600+ SCC members

   SCC Member Composition - June 1999                   SCC Membership by Region


                                    Software Vendors                               North America
                                    Consultants                                    Japan

 Chapters Approved: Europe, Japan, Latin America,
  Australia/New Zealand, Singapore

 Chapters Under Development: Hong Kong, Thailand,
             Liaison Initiatives
 Joint SCM Research with APICS
 Recognition by American National Standards
  Organization (ANSI) to circulate SCOR via Canvass
  Method for National Approval
 OAG / RosettaNet
           SCOR Dissemination

 “Canvas” copies provided to over 50 related
  organizations – their comments invited (Part of the
  ANSI certification process)
 SCOR Workshops – Over 300 members have attended
  SCOR Workshops with companies like Intel, HP, EDS,
  US Department of Defense, Compaq hosting in-house
         Upcoming Events:

Annual Meeting – in June 2000, Detroit,
 Michigan, USA
Supply Chain World-Europe – September 25-
 27, Okura Hotel, Amsterdam, Netherlands
Supply Chain World –Australia, Japan, and
 Mexico - late Autumn, 2000
         Benchmarking Studies

CBSI Self-assessment Studies – one of U.S.
 members completed and one of European
 members underway
Performance Measurement Group – Extensive,
 two-year study underway (approximately 5
 years of data)
                       Supply Chain Council Directions

 SCOR Model Revision 4.0 scheduled for 2000
20 Workshops (US & International)
   60% North America, 40% International
Research & Technology
   Joint research with APICS
   New modeling tools being added for SCOR distribution
     –   Phios
     –   Cobre Group
     –   IDS Scheer
     –   Gensym
   Joint research with system integrators / consultants /
                                 SCOR is founded on four distinct
                                 management processes


     Deliver   Source     Make     Deliver   Source      Make        Deliver   Source     Make   Deliver   Source

Suppliers’                                            Your Company                                         Customer’s
                        Supplier                                                        Customer
 Supplier                                                                                                   Customer
                Internal or External                                            Internal or External
                        What is a process reference
Process reference models integrate the well-known concepts of business
   process reengineering, benchmarking, and process measurement into a
   cross-functional framework
Business Process                            Best Practices           Process Reference
 Reengineering          Benchmarking          Analysis                     Model
                                                                   Capture the “as-is” state
Capture the “as-is”                                                of a process and derive
state of a process                                                 the desired “to-be” future
and derive the                                                     state
desired “to-be”       Quantify the
future state          operational
                      performance of                               Quantify the operational
                      similar companies                            performance of similar
                      and establish                                companies and establish
                      internal targets                             internal targets based on
                      based on “best-in-                           “best-in-class” results
                      class” results       Characterize the
                                           management              Characterize the
                                           practices and           management
                                           software solutions      practices and
                                           that result in “best-   software solutions
                                           in-class”               that result in “best-in-
                                           performance             class” performance
                                                                                                     SCOR Contains 3 Levels Detail


                                               #    Description                                                                Schematic                                               Comments
 Supply Chain Operations Reference-model

                                           1                                                                                                                           Level 1 defines the scope and content for the Supply
                                                         Top Level                                                              Plan
                                                                                                                                                                       Chain Operations Reference-model
                                                                                                         Source                    Make                     Deliver
                                                   (Process Types)                                                                                                     Here basis of competition performance targets are set

                                           2                                                                                                                           A company’s supply chain can be “configured-to-
                                                    Configuration                                                                                                      order” at Level 2 from approximately 17 core “process
                                                       Level                                                                                                           categories.”
                                                       (Process                                                                                                        Companies implement their operations strategy
                                                      Categories)                                                                                                      through their unique supply chain configuration.

                                           3           Process                                                                                                        Level 3 defines a company’s ability to compete
                                                    Element Level                                                                                                     successfully in its chosen markets and consists of:
                                                       (Decompose                                                                                                     • Process element definitions
                                                        Processes)                                                                                                    • Process element information inputs and outputs
                                                                                                                                                                      • Process performance metrics
                                                     Identify, Prioritize, and Aggregate
                                                                                                                                                                      • Best practices, where applicable
                                                                                                                                                                      • System capabilities required to support best
                                                         Production Requirements
                                                                                                        P3.3                                 P3.4

                                                                                           Balance Production Resources with
                                                                                               Production Requirements
                                                                                                                                       Establish Detailed
                                                                                                                                       Production Plans
                                                     Identify, Assess, and Aggregate
                                                                                                                                                                      • Systems/tools
                                                          Production Resources

                                                                                                                                                                       Companies “fine tune” their Operations Strategy at
                                                                                                                                                                       Level 3

                                                                                                                                                                       Companies implement specific supply-chain
                                           4        Implementation                                                                                                     management practices at this level
 Not                                                     Level
  in                                                    (Decompose                                                                                                     Level 4 defines practices to achieve competitive
Scope                                                     Process                                                                                                      advantage and to adapt to changing business
                                                         Elements)                                                                                                     conditions
                                         Supply Chain Operations
                                         Reference Model (SCOR) – Version
            Plan                           P1 Plan Supply Chain

             P2 Plan Source                 P3 Plan Make              P4 Plan Deliver

                                             P0 Plan Infrastructure


                    Source                           Make                           Deliver

            S1 Source Stocked Products           M1 Make-to-Stock         D1 Deliver Stocked Products

             S2 Source MTO Products              M2 Make-to-Order        D2 Deliver MTO Products

              S3 Source ETO Products           M3 Engineer-to-Order      D3 Deliver ETO Products

            S0 Source Infrastructure         M0 Make Infrastructure       D0 Deliver Infrastructure
                                         Version 3.1 - Level 2 provides a tool
                                         kit of 24 process categories
                                                   P1 – Plan Supply Chain
              P2 – Plan Source                     P3 – Plan Make           P4 – Plan Deliver

                     Source                                 Make                           Deliver

            S1 Source Stocked Material              M1 Make-to-Stock             D1 Deliver Stocked Product

            S2 Source Make-to-Order Material                                     D2 Deliver Make-to-Order Product
                                                    M2 Make-to-Order

                                                                                 D3 Deliver Engineer-to-Order Product
            S3 Source Engineer-to-Order Material    M3 Engineer-to-Order

                                  SCOR Methodology: Applied in
                                  Four Steps
1 Analyze Basis                                                                      SCOR Level 1

2                                                                                      SCOR Level 2
     Configure                Intra-     Inter-Company
    Supply-Chain            Company       Configuration

3     Align                                 Intra-Company        Inter-Company
  Performance                              Process, Practice,   Process, Practice,
                                                                                       SCOR Level 3
Levels, Practices,                            and System           and System
  and Systems                                Configuration        Configuration
                                               Elements             Elements

                                                                                       SCOR Level 4
4 Implement
                                                                       Intra-Company    Inter-Company
 Processes and
                                                                        Supply-Chain     Supply-Chain
                                                                       Improvements     Improvements
                                  Level 1 Performance Metrics

                                            Customer-Facing                 Internal-Facing
            SCOR Level 1                     Delivery       Flexibility &
                                           Performance/                      Cost    Assets
       Supply-Chain Management                Quality     Responsiveness

Delivery performance                             
Order fulfillment performance                    
  • Fill rate
  • Order fulfillment lead time
Perfect order fulfillment                         
Supply-chain response time                                         
Production flexibility                                             
Total logistics management cost                                                
Value-added productivity                                                       
Warranty cost or returns processing cost                                       
Cash-to-cash cycle time                                                                
Inventory days of supply                                                               
Asset turns                                                                            
                               Analyze Basis of Competition
                               Supply Chain Scorecard - Representative
              Supply Chain Scorecard v. 3.0                            Performance Versus Competitive Population
           Overview Metrics    SCOR Level 1 Metrics         Actual       Parity   Advantage    Superior
                               Delivery Performance to
                               Commit Date
                                                             50%         85%         90%         95%

                               Fill Rates                    63%         94%         96%         98%

                 Quality       Perfect Order Fulfillment
                                                             0%          80%         85%         90%

                               Order Fulfillment
                               Lead times                   7 days      7 days      5 days      3 days

               Flexibility &
                               Production Flexibility      45 days     30 days     25 days     20 days
                               Total Logistics
                               Management Costs              19%         13%         8%           3%

                  Cost         Warranty Cost                 NA           NA          NA          NA

                               Value Added Employee
                                                           $122K        $156K       $306K       $460K

                               Inventory Days of Supply
                                                           119 days    55 days     38 days     22 days

                               Cash-to-Cash Cycle Time
                 Assets                                    196 days    80 days     46 days     28 days
                               Net Asset Turns (Working
                                                           2.2 turns    8 turns    12 turns    19 turns
                                     Configure Supply Chain
                                     Thread Diagram

                    P1                          P1                         P1

            P              P
            2              3

                                          P2                P4                   P4

Texas RM
            S2        M2        D2

Key Other   S1        M1        D1       S2    M1      D1        S1             D1      S2

                 RM Suppliers                  ALPHA               Regional           Consumer
                        Integrated Level 2 Metrics

     Schedule                                       Faultless Invoices
   Achievement                 P1                          to 97%
      to 97%                                     Order Management Cycle
 Make Cycle Time                                            Time
    30 to 3 days                                            1 day
     Unit Cost            P3                     Order Management Cost
WIP Days of Supply                                     11.3% to 9.3%
   17 to 25 days                                       $113M to $93M
   $26M to $37M         Supplier On Time         Finished Good Inventory
                              Delivery                  30 to 15 days
                               to 97%                  $44M to $22M
                       Source Cycle Time         Days Sales Outstanding
                             90 to 1 day               107 to 55 days
                     Material Acquisition Cost        $292M to $151M
                           3.2% to 2.2%
                           $32M to $22M
                       RM Days of Supply
 P2                        72 to 15 days                                   P4
                          $107M to $22M
                  SCOR Implementations

              Thinking is easy, acting is difficult, and
              to put one's thoughts into action is the
              most difficult thing in the world. Goethe

 Majority of companies adopt SCOR methodology -
  “top down” strategic to tactical
    Following top-down assessment and planning:
       – Look for “low-hanging” fruit
       – Develop incremental approach for improvements
    Some “enter” Model at Level 2
 Most companies focus on their own enterprise
    Baseline processes and performance
    Develop strategies for inter-enterprise initiatives
                 SCOR Projects - Major

 Plan, development, and formation of a company to
  support a new product line (Complete)
 Re-engineering of supply chain processes for a
  corporation (7 divisions) based - (In process)
 Implementation of SCOR processes corporate-wide
    Level 1 Metrics used as executive evaluation criteria
 Re-organization of logistics groups into Plan, Source,
  Make, Deliver (Complete)
                 SCOR Projects - Modest

 Development of sourcing and customer service
  contract instruments, strategies, and systems
    Vendor Managed Inventory
    Continuous Replenishment
 Development / coordination of advanced planning
  system capabilities
    Collaborative Planning and Forecasting
 Rationalization of SKUs
                                        Superior Performers spend less on
                                        Supply Chain Management
Best-in-class companies have an advantage in total supply-chain
management costs (3% – 6% less in revenue)
                                      Total Supply-Chain Management Cost                          Best-in-Class '97
     14                                   13.1                                                    Average '97
     12                                                        11.3                                     11.5
  % of 8                            7.1                                7.0
 Revenue                                                6.7                                       6.5
                5.8                                                                  6.1



             Computers             Industrial           Telecom       Chemicals     Packaged      Overall

    Source: PRTM’s 1997 Integrated Supply-Chain Benchmarking Study
                     Supply Chain Improvement Benefits

      Typical Quantified Benefits from Integrating
                  the Supply Chain
Delivery Performance                     16% – 28% Improvement
Inventory Reduction                      25% – 60% Improvement
Fulfillment Cycle Time                   30% – 50% Improvement
Forecast Accuracy                        25% – 80% Improvement
Overall Productivity                     10% – 16% Improvement
Lower Supply-Chain Costs                 25% – 50% Improvement
Fill Rates                               20% – 30% Improvement
Improved Capacity Realization            10% – 20% Improvement

 Source: 1997 PRTM ISC Benchmark Study

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