Supply Chain Management
SCOR Can Help Analyze Your Supply-Chain Operation
The idea of developing a standard approach to analyzing, and then describing, all aspects of a supply-chain arose in the first quarter of 1996 from two Boston-based consulting firms: Pittiglio Rabin Todd & McGrath (PRTM) and AMR Research (AMR) and many of their Fortune 100 clients. Following several meetings that year which included PRTM and AMR and approximately 70 major manufacturers, ,Version 1 of the Supply-Chain Operations Reference-model (SCOR), was released in the fall of 1996.
SCOR is a standard supply-chain process reference model designed to embrace all industries. It enables companies to communicate supply-chain issues, measure their performance objectively, identify performance improvement objectives, and influence future SCM software development. SCOR includes all the metrics that might exist in a supply-chain, the formulae associated with the metrics, a reference to best practice vis-a-vis the metrics, and the model indicates which technology can contribute to achieving “best practice.”
The boundaries of any model must be carefully defined. SCOR spans from the supplier’s supplier to the customer’s customer. This includes:
• All customer interactions, from order entry through paid invoice;
• All physical material transactions, from your supplier’s supplier to your customer’s customer, including: equipment, supplies, spare parts, bulk product, software, etc.;
• All market interactions, from the understanding of aggregate demand to the fulfillment of each order.
SCOR does not include:
SCOR is founded on four distinct management processes, PLAN, SOURCE, MAKE, and DELIVER.
The scope of each of the four processes is defined in the model and definitions of these SCOR Level 1 processes are as follows.
In the SCOR-model, each process is composed of three levels, which are used to analyze a company’s supply-chain operation. There are more granular levels below level 3, i.e., levels 4, 5, & 6, but they are company specific and not to be included in this public model.
At level 1, companies using SCOR establish basic strategic objectives regarding their operations areas like those listed. This list can be enhanced with additional strategic criteria as deemed appropriate, i.e., safety. Companies can not be “best in class” in all of these areas, so they choose which are most important to their success. The criteria list is: Delivery performance; Order fulfillment performance; Fill rate (Make-to-stock); Order fulfillment lead time (ETO, MTO, CTO); Perfect order fulfillment; Supply-chain response time; Production flexibility; Total supply-chain management cost; Value-added productivity; Warranty cost or returns processing cost; Cash-to-cash cycle time; Inventory days of supply; Asset turns.
SCOR level 2 enables companies to configure their supply-chain(s). Each product or product type may have its own supply-chain. There are 17 “process elements” at SCOR level 2. To use this “tool kit,” a company begins with a physical layout of its supply-chain. The next step is to choose the appropriate SCOR level 2 process elements and depict the supply-chain using SCOR. This process is outlined in the model.
It is at this point where a company using SCOR will learn what information inputs are needed for each of the process elements, and what outputs to expect. An example of Process Element S1 – Source Stocked Product - appears below:
Accompanying all Process Elements in SCOR is the overall definition of the Process Element, Performance Attributes in Cycle Time, Cost, Service/Quality, and Assets; the Metrics associated with each of the Performance Attributes, the Best Practices, and the Software Features Required. Keep in mind, SCOR is not a software guide, it is a business process guide that references software features if they contribute to supply-chain success. In many cases, changes to management process will enable companies to achieve best practice without the deployment of software.
SCOR is a new tool. However, it is having a dramatic effect. Most companies begin at Level 2 where they configure their supply-chain(s). At this point, inefficiencies are usually revealed and a process of reengineering the supply-chain occurs. This takes time as it typically includes a reduction in the number of suppliers, factories and distribution centers. In some cases, companies can eliminate links in their supply-chains. After the reengineering, the measurement of metrics and the work to achieve best practice begins.
Striving to achieve efficiency in supply-chain management should last as long as the company is in business. And while it is working to achieve efficiency in its own operation, the company can begin working with suppliers and customers to develop what has been called an “extended enterprise” – a set of partnerships between members of the supply chain.
We are already seeing companies that are shutting down foreign, “cheap labor” situations because they have improved the efficiency of their domestic operations to the point where the cost of shipping is more than the labor cost savings. This trend will continue with the help of SCOR and the Supply-Chain Council.