Supply Chain Operations (SCOR) Reference Model and the Integrated Business Reference Framework

Scott Stephens President Business Forerunners, Inc. Chief Technology Officer Supply Chain Council www.supply-chain.org

Introduction
This presentation describes preliminary concepts in managing the advancement of the state of the art of business operations by the Supply Chain Council
While SCOR development activities are relatively mature, the Council is working to develop a consensus philosophy in the management of an integrated business reference framework This presentation should be considered a working paper

The Integrated Business Framework (DCOR SCOR CCOR) Common Process Structure Common Metrics Common Implementation Methodology Component Model Linkage Design Advantages Common Tools

SCOR and Business Competitiveness

Practitioners (business leaders) created the SCOR Model and the Supply Chain Council to improve competitiveness and cooperation between trading partners Competitiveness improved in three ways: Reducing costs Increasing revenue Improving the efficiency of asset management Partner cooperation improved by establishing a crossenterprise / cross-industry common language, set of common measurements, and a set of best practices

Integrated Business Reference Framework

Business Business Plan Plan Design Design Plan Plan
Research Research Design Design Integrate Integrate

Supply Chain Supply Chain Plan Plan Source Make Deliver Source Make Deliver Return Return
Relate Relate

Customer Customer Plan Plan

Sell Sell Price Price

Amend Amend

Assist Assist

Version 1.0 Version 1.0 Spring 2006 Spring 2006

Version 8.0 Version 8.0 Spring 2006 Spring 2006

Version 1.0 Version 1.0 Spring 2007 Spring 2007

The Components of a Business Framework

DCOR spans the activities between customer requirements and the design or specification of a product to meet customer demand. SCOR spans the activities between recognition of demand through product delivery CCOR spans the activities associated with establishing and maintaining a customer relationship, identifying customer requirements and product support.

Integrated Business Reference Framework and the Product Life Cycle

CCOR

Customer Customer Plan Plan Relate Relate Sell Sell Assist Assist Supply Chain Supply Chain Plan Plan Source Source Make Make Return Return
Design Design Plan Plan Research Research Design Design Amend Amend Integrate Integrate

Price Price

SCOR

Deliver Deliver

CCOR

Common Structure for Component Models (DCOR/SCOR/CCOR)

DCOR/SCOR and CCOR Built with Common Objectives and a Common Structure
Objective - The performance of key processes must link directly to financial objectives. Objective The primary purpose of the framework and the component models is to achieve business advantage through implementation. Structure - Measurements must be hierarchical to support cross-enterprise optimization while supporting the management of specific improvement activities. Structure - For measurement purposes, there must be clear boundaries between activities and organizations. Structure - Measurement must be tied to the activities they are designed to monitor. Structure - Processes must be hierarchical to allow cross-enterprise analysis and cross-industry generalization, while allowing organizations to describe the particular nuances in their businesses. Structure - Best practice must be linked to the processes that they support and the measurements which are used to determine the success of their implementation. Structure - Inputs and outputs describe the transactions between processes, documenting the origin and destinations of material, information, and finances. Inputs and outputs provide the mechanism for integrating and de-coupling the models within the framework.

What is a process reference model?

Process reference models integrate the well-known concepts of business process reengineering, benchmarking, and process measurement into a cross-functional framework
Best Practices Analysis Process Reference Model Capture the as-is state of a process and derive the desired to-be future state Quantify the Quantify the operational operational performance of performance of similar companies similar companies and establish and establish internal targets internal best-inbased ontargets based on best-inclass results class results Quantify the operational performance of similar companies and establish internal targets based on best-in-class results Characterize the management practices and software solutions that result in best-inclass performance

Business Process Reengineering Capture the as-is Capture the as-is state of aaprocess state of the and derive process and derive the desired to-be desired to-be future state future state

Benchmarking

Characterize the Characterize management the management practices and practices and software solutions software in bestthat resultsolutions that result in-class in bestin-class performance performance

SCOR Boundaries
SCOR Spans: Order entry through paid invoice Physical material transactions, financials, information flow Market interactions From the understanding of aggregate demand to the fulfillment of each order Returns SCOR Considers but does not include process descriptions and measurement for related activities including: Sales and Marketing Research and Development / Product Design QA It

SCOR is structured around five distinct management processes

Plan

Deliver Return

Source Return

Make

Deliver Return

Source Return

Make

Deliver Return

Source Return

Make

Deliver Return

Source Return

Suppliers Supplier

Supplier
Internal or External

Your Company

Customer
Internal or External

Customers Customer

SCOR Model
Building Block Approach Processes Best Practice Metrics Technology

SCOR 7.0 Processes Level 2

Plan
P2 Plan Source P1 Plan Supply Chain P3 Plan Make P4 Plan Deliver P5 Plan Returns

Suppliers

Source
S1 Source Stocked Products S2 Source MTO Products

Make
M1 Make-to-Stock Make- to-

Deliver
D1 Deliver Stocked Products

M2 Make-to-Order Make- to-

D2 Deliver MTO Products

S3 Source ETO Products

M3 Engineer-to-Order Engineer- to-

D3 Deliver ETO Products

D4 Deliver Retail Products

Return Source

Return Deliver

Enable

Customers

SCOR Process Tables

Process Element: Receive, Enter & Validate Order Process Element Number: D1.2 Process Element Definition Receive orders from the customer and enter them into a companys order processing system. Orders can be received through phone, fax, or electronic media. Technically examine orders to ensure an orderable configuration and provide accurate price. Check the customers credit. Optionally accept payment. Performance Attributes Metric None Identified Reliability Responsiveness Receive, Enter and Validate Order Cycle Time Flexibility Upside Deliver Flexibility Downside Deliver Adaptability
Upside Deliver Adaptability

Cost

Assets Best Practices Electronic Commerce (customer visibility of stock availability, use of hand-held terminals for direct order entry, confirmation, credit approval), On-line stock check and reservation of inventory Enable real-time visibility into backlog, order status, shipments, scheduled material receipts, customer credit history, and current inventory positions Continuous Replenishment Programs; Vendor Managed Inventory, Telemetry to automatically communicate replenishment of chemicals Remote (sales, customers) order entry capability Automatic Multi-level Credit Checking: Dollar Limits; Days Sales Outstanding; Margin Testing Value Pricing based on Cost to Serve; EDLP; Cost Plus Pricing Inputs (Customer) Customer Order (Customer) Deliver Contract Terms (Customer) Customer Replenish Signal Outputs

Order cost / type of order Order Entry and Maintenance Costs as % of (S+M+D) cost Return on Supply Chain Assets Features EDI applications and integrated order management

None Identified

Integrated demand/deployment planning to customer location driven by POS; Customer movement data

None Identified Integrated Order/Financial Management

Activity Based Costing; Integrated Order Management by Customer by Line Item Plan Source Make Deliver Return

Plan

Source

Make

Deliver

Return

SCOR Graphics
Routing Guide (carrier) Rated Carrier Data (Carrier) (P2) Supply Plans (Customer) Customer (P3) Production Order Plans (Customer) Deliver (P4) Deliver Plans Contract Terms (S) (M) (D) Inventory (Customer) Customer (M) Scheduled Replenish Signal Output (Customer) Inquiry

D1.7 Select Carriers and Rate Shipments

Scheduled Deliveries (P)

D1.6

D1.5 Plan and Build Loads

D1.4

D1.3 Reserve Inventory and Determine Delivery Date

Delivery Commit Date

D1.2 Receive, Enter & Validate Order

Validated Order

D1.1 Process Inquiry & Quote

Route Shipments

Consolidate Orders

Daily Shipment Volume

(S) (M) Scheduled Receipts

(D) Consolidated Product (D) Inventory

(D) Advanced Ship Notice

D1.8
From Make or Source

D1.9

D1.10

D1.11 Load Vehicle Generate Ship Docs

D1.12 Ship Product

D1.13 Receive & Verify at Customer Site

D1.14 Install Product

D1.15 Invoice

Receive Product

Pick Product

Pack Product

(D) Inventory

Shipping Documents (carrier, cust, gov.) Delivered End Items (cust)

Payment

Common Metrics Structure for Component Models (DCOR/SCOR/CCOR)

Linking Supply Chain Performance Attributes and Level 1 Metrics

Performance Attribute
Supply Chain Reliability

Performance Attribute Definition The performance of the supply chain in delivering: the correct product, to the correct place, at the correct time, in the correct condition and packaging, in the correct quantity, with the correct documentation, to the correct customer. The speed at which a supply chain provides products to the customer. The agility of a supply chain in responding to marketplace changes to gain or maintain competitive advantage. The costs associated with operating the supply chain. The effectiveness of an organization in managing assets to support demand satisfaction. This includes the management of all assets: fixed and working capital.

Level 1 Metric Perfect Order Fulfillment

Supply Chain Responsiveness

Order Fulfillment Cycle Time

Upside Supply Chain Flexibility

Supply Chain Flexibility

Supply Chain Costs Supply Chain Asset Management

Upside Supply Chain Adaptability Downside Supply Chain Adaptability Supply Chain Management Cost
Cost of Goods Sold

Cash-to-Cash Cycle Time Return on Supply Chain Fixed Assets

Supply Chain Scorecard & Gap Analysis

Supply Chain SCORcard
Overview Metrics SCOR Level 1 Metrics Supply Chain Reliability EXTERNAL
Delivery Performance to Commit Date Fill Rates Performance Versus Competitive Population

Actual 50% 63% 0% 35 days 97 days 45 days 19%

Parity 85% 94% 80% 7 days 82 days 30 days 13%

Advantage 90% 96% 85% 5 days 55 days 25 days 8%

Superior 95% 98% 90% 3 days 13 days 20 days 3%

Value from Improvements

Perfect Order Fulfillment Order Fulfillment Lead times Supply Chain Response Time Production Flexibility Total SCM Management Cost

$30M Revenue $30M Revenue Key enabler to cost and asset improvements

Responsiveness Flexibility

$30M Indirect Cost

INTERNAL

Cost

Warranty Cost

NA

NA

NA

NA

NA

Value Added Employee Productivity Inventory Days of Supply

NA 119 days 196 days 2.2 turns

$156K 55 days 80 days 8 turns

$306K 38 days 46 days 12 turns

$460K 22 days 28 days 19 turns

NA NA $7 M Capital Charge NA

Assets

Cash-to-Cash Cycle Time Net Asset Turns (Working Capital)

Common Implementation Methodologies for Component Models (DCOR/SCOR/CCOR)

SCOR/DCOR/CCOR Implementation
SCOR Implementations (Practitioner) Vary in scope and objective Green Field Establishing a new supply chain Distribution analysis Implementing distribution strategy Planning Improving planning processes Supply Chain Failure Analysis Change Management / COTS-Consultant Selection Information Technology SCOR Implementation (Academia) Curriculum Research Projects SCOR Implementation (Consultants) SCOR Implementation (Government)

Mapping material flow

(S1, D1) (SR1,DR1,DR3)

Manufacturing
Warehouse (S1, S2, M1, D1) (SR1,,DR1)

Customer

Customer

European Supplier (D2) (DR1)

(S1) (SR1,SR3) Warehouse (S1, D1) (SR1,DR1,DR3) Other Suppliers (D1) Latin American Suppliers (D1) Warehouse (S1, D1) (SR1, DR3)

(S1) (SR1,SR3

Customer

Warehouse (S1, D1) (SR1,DR1,DR3)

Customer

(S1) (SR1,SR3)

(S1) (SR1,SR3)

Mapping the execution processes

Americas Americas Distributors Distributors S1 SR1 European European RM Supplier RM Supplier S2 M2 D2 SR3 S2 M1 DR1 SR1 DR1 SR1 DR1 SR1 D1 S1 D1 S1

DR3 S1 Key Other Key Other RM RM Suppliers Suppliers S1 M1 D1

SR3

DR3

SR3

RM Suppliers

ALPHA

Alpha Alpha Regional Regional Warehouses Warehouses

Distributors

Decomposing Metrics
Cycle Time Perfect Order Fulfillment

Revenue Accounts Receivable Cash Flow

Supplier on time delivery

Schedule Achievement

Perfect Order Fulfillment On Time On Time In Full Docs Damage Perfect Order Fulfillment D1 S1

Delivery Performance European European RM Supplier RM Supplier Key Other Key Other RM RM Suppliers Suppliers

In Full Docs

S2

M2

D2 S2

Damage Supplier on time delivery M1 S1 Alpha Regional Warehouses D1 S1

S1

M1

D1

RM Suppliers

ALPHA

Consumer Consumer

Performance Measurement
Cycle Time

Revenue Accounts Receivable Cash Flow

Inventory Metrics Conflict

Supplier Supplier on time delivery on time delivery Actual 85% Delivery Delivery Performance Performance Actual 99%

Perfect Order Fulfillment Perfect Order Fulfillment Goal 95%

Schedule Schedule Achievement Achievement Actual 95%

Perfect Order Fulfillment Order Perfect Fulfillment Perfect Order Actual 90% On TimeFulfillment On Time Actual - 85% In Full In Full Docs Docs Damage Perfect Order Fulfillment

European European RM Supplier RM Supplier Key Other Key Other RM RM Suppliers Suppliers

S2

M2

D2 S2

Under-performance Damage Process Supplier Systems on time delivery

M1 D1 S1

S1

M1

D1 S1

Under-performance D1 Process S1 Systems

RM RM Suppliers Suppliers

ALPHA

Alpha Regional Warehouses

Consumer Consume Consumer r

Component Models (DCOR/SCOR/CCOR) Linked by Inputs / Outputs, Best Practice, and Metrics

Integrated Business Reference Framework Linkages

Business Business Plan Plan Customer Requirements
Producability,Supportability, Transportability

Design Design Plan Plan

Research Research Design Design Integrate Integrate

Supply Chain Supply Chain Plan Plan Source Make Deliver Source Make Deliver Return Return
BOM, Recipe, Specification
Relate Relate

Customer Customer Plan Plan

Sell Sell

Price Price

Amend Amend

Assist Assist

Product

Component Models (DCOR/SCOR/CCOR) Loosely Integrated Tightly Bundled

Design Philosophy
Tight Bundle
Component Models work together to support analysis, measurement, and improvement of the end-to-end product life cycle Models used together will better support analysis and measurement of complex activities
Time to Market Time to Volume

Loose Integration
Component Models are separable so organizations can use individual Models of interest without the others Component Models can be separately improved based on advances in specific disciplines

SCOR Release History

1997 1998 1999 2000 2001 2002 2003 2004 2005
Version 1.0 First version of the Model, Plan, Source, Make, Deliver, metrics, best practice, and technology Version 2.0 Model modified to reconcile distinctions between discrete and process industries Version 3.0 Model modified to enhance inputs and outputs and infrastructure elements. Specific reference to software products removed. Version 3.1 Restructured infrastructure / enable elements. Restructuring of metrics begun definitions of performance attributes developed. Language to support services as well as tangible goods provided Version 4.0 Restructuring of infrastructure enable elements completed. Returns introduced. Version 5.0 Returns processes introduced. E-business practices updated Metrics re-structuring continued Version 6.0 Retail D4, revamped MRO, Make e-biz best practices Version 6.1 Updated Return, Best Practices Version 7.0 New Level 1 Metrics, New Best Practices, Addition of 2 appendices

Current Technical Projects

SCOR Rehost
Release 8.0
XML / HTML Access Word Excel

Best Practice Metrics ISA 95

DCOR
Version 1.0

Integrated Business Reference Framework Release Plan

2001 2006
SCOR Version 4.1 DCOR Strawman (Version 0) CCOR Strawman (Version 0) Posted Posted DCOR Version 1.0 Best Practice Update Metrics Update Input/Output Update Business Validation DCOR Version 2.0 Best Practice Update Metrics Update Input/Output Update Integration CCOR Strawman (Version 0) Validation

SCOR Version 8.0 Best Practice Update Metrics Update ISA 95 Restructure dB Host SCOR Version 9.0 Best Practice Update Metrics Update Input/Output Update Risk Management Integration

2007

CCOR Version 1.0 Best Practice Update Metrics Update Input/Output Update Business Validation Integration

2008

Integrated Business Framework Version 1.0 Metrics Best Practice Inputs / Outputs
SCOR Version 10.0 Best Practice Update Metrics Update ISA 95 Restructure dB Host DCOR Version 3.0 Best Practice Update Metrics Update Input/Output Update Business Validation CCOR Version 2.0 Best Practice Update Metrics Update Input/Output Update Business Validation

Component Models (DCOR/SCOR/CCOR) Design Philosophy Supports Common Tools and IT

Common Tools

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