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2 Boston-based consulting firms:

P i t t i g l i o R a b i n To d d & M c G r a t h & A M R R e s e a r c h
decided to develop a standard approach to analyzing and
describing all the aspects of supply chain processes.

SCC formed – Independent Global Non-Profit Organization


founded in 1996 by a consortium of 69 member volunteer
organizations; now close to 1000

SCOR Framework developed by the Supply Chain


Objective Of SCCC
through
o u n cSCOR
il (SCC)
To develop a standard supply-chain process reference model that
enables effective communication and integration among the supply
chain partners, by

- Using standard terminology to better communicate and


learn the supply chain issues
-Using standard metrics to compare , benchmark and
measure their performances

that is applicable in every type of industry 4


SCOR-A Process Reference Model

Level 1- Process Type

Level 2- Configuration Level

Level 3- Process Element Level

Level 4- Implement Level

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Rapid Assessment of Supply Chain Performance

Clear identification of performance gaps

Efficient supply chain network redesign and optimization

Enhanced operational control

Streamlined management reporting & organizational structure

Aligned supply chain team skills with strategic objectives

Detailed game plan for launching new businesses & products

Systematic supply chain mergers capturing projected savings


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S u p e ri or C u s t omer
S e r vi c e
C o s t C o n t rol
P l a nni ng & R i s k
S u pMa
p lni eage
r/ Pme
a rnt
t ner
R e l ati o nshi p
Ma n age me nt
T a l e nt
SCOR DELIVERS VALUE ! 7
How SCOR Works? It’s all about integration & building relationships
 Integrates Business Process Reengineering, Benchmarking, and Process Measurement into a cross-functional
framework.
 SCOR is one of the best known guidelines used by companies to examine the configuration of their supply
chains, identify and measure metrics in the chain, determine weak links and achieve best practices
Capture the “as-is”
state of a process and
Capture the “as- derive the desired
is” state of a “to-be” future state
process and
derive the Quantify the
desired “to-be” operational Quantify the
future state performance of operational
similar performance of similar
companies and companies and
establish internal establish internal
targets based on targets based on “best-
“best-in-class” Characterize the in-class” results
results management Characterize the
practices and management
software practices and
solutions that software solutions
result in “best-in- that result in “best-
class” in-class”
performance performance
Business Process Best Practices Process Reference
Reengineering Benchmarking Analysis 8
Model
SCOR MODEL – SCOPE/
SCOR covers:
BOUNDARIES
• All customer interactions, from order entry through paid invoice.

• All product (physical material and service) transactions, from supplier’s supplier to 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 attempt to describe every business process or activity, including:

• Sales and marketing (demand generation)

• Research and technology development

• Product development

• Some elements of post-delivery customer support


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SCOR contains 4P’s:
Performance Measurement: Standard attributes & metrics to measure

process performance

Processes: Standard descriptions of management processes PERFORMANCE PROCESSES


MEASUREMENT
and a framework of process relationships

Practices: Management practices that produce best-in-class


PRACTICES PEOPLE
performance

People: Training and skills requirements aligned with processes, best

practices, and metrics


Enables companies to:
 Evaluate and compare their performances with other companies
effectively (benchmark & adopt best in-class practices)

 Identify and pursue specific competitive advantages

 Identify software tools best suited to their specific process


requirements
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Performance Metrics
A metric is a standard for measurement of the performance of a process. SCOR
metrics are diagnostic metrics. SCOR recognizes three levels of predefined metrics:

• LEVEL 1 metrics are diagnostics for the overall health of the supply chain. These
metrics are also known as strategic metrics and key performance indicators (KPIs).
Benchmarking level 1 metrics helps establish realistic targets that support strategic
objectives.

• LEVEL 2 metrics serve as diagnostics for the level 1 metrics. The diagnostic
relationship helps to identify the root cause or causes of a performance gap for a level
1 metric.

• LEVEL 3 metrics serve as diagnostics for level 2 metrics.


The analysis of performance of metrics from level 1 through 3 is referred to as
decomposition.

Many metrics in the SCOR model are hierarchical, just as the process elements are
hierarchical. Decomposition helps identify the processes that need to be studied
further. (Processes are linked to level 1 and level 2 metrics.)

Supply Chain Council recommends that supply chain scorecards contain at least
one metric for each performance attribute to ensure balanced decision making and
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governance.
Relationship Between Attributes And Metrics
Performance Attributes

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Relationship Between Attributes And Metrics
Performance Attributes

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SCOR: PROCESSES
Level
Three Levels of Process Detail
# Description Schematic Comments

1 Level 1 defines the scope and content for the


Plan
Supply Chain Operations Reference Model

Supply chain Operations Reference-model. Here


Top Level Source Make Deliver basis of competition performance targets are set.
(Process Types)
5 Return Return

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

3 Level 3 defines a company’s ability to compete


Process Element
successfully in its chosen markets, and consists
Level (Decompose
of:
Processes)
Process element definitions
185 P1.1
Identify, Prioritize, and Aggregate
Process element information inputs, and outputs
Supply-Chain Requirements
P1.3 P1.4 Process performance metrics
Best practices, where applicable
Balance Production Resources with Establish and
Supply-Chain Requirements Communicate
P1.2 Supply-Chain Plans

System capabilities required to support best


Identify, Assess, and Aggregate
Supply-Chain Requirements

practices
Systems/tools

4 Implementation Companies implement specific supply-chain


Level (Decompose management practices at this level. Level 4
Not Process Elements) defines practices to achieve competitive
in Scope advantage and to adapt to changing business14
conditions.
BASIC BUSINESS PROCESSES

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LEVEL 1 - KEY PROCESSES EXPLAINED…..

PLAN (P) SOURCE (S) MAKE (M) DELIVER (D)


(Processes that provide finished
(Processes that (Processes that procure (Processes that goods and services to meet
balance aggregate goods and services to transform product planned or actual demand,
demand and supply) meet planned or actual to a finished state typically including order
demand) to meet planned or management, transportation
• Forecasting
actual demand) management, and distribution
• Sensitivity Analysis management)
• Schedule deliveries (receive,
• Balance resources with verify, transfer) • Schedule production
Warehouse management from
requirements
receiving and picking product to load
• Establish/communicate and ship product.

plans for the whole

supply chain RETURN (R) (Processes associated with returning or receiving returned
products) – Reverse Logistics
Manage Return business rules 16
LEVEL 2 - PROCESS TYPES AND DEFINITIONS

PLANNING
A process that aligns expected resources to meet expected demand requirements.
Balance aggregated demand and supply
Consider consistent planning horizon
(Generally) occur at regular, periodic intervals

EXECUTION
A process triggered by planned or actual demand that changes the state of material goods.
Scheduling/sequencing
Transforming product
Moving product to the next process

ENABLE
A process that prepares, maintains, or manages information or relationships on which planning and
execution processes rely

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 P1: Plan Supply Chain
 P2-P5: Plan SCOR Process
 S1: Source Stocked Product
 S3: Source Engineer-to-Order Product Level 2 Process Categories
 S2: Source Make-to-Order Product
 M1: Make-to-Stock
 M2: Make-to-Order
 M3: Engineer-to-Order
 D1: Deliver Stocked Product
 D2: Deliver Make-to-Order Product
 D3: Deliver Engineer-to-Order
Product
 D4: Deliver Retail Product
 SR1/DR1: Return Defective Product (Source Return/Deliver Return)
 SR2: Source Return MRO Product (Maintenance, Repair and Overhaul)
 DR2: Deliver Return MRO Product
 SR3/DR3: Return Excess Product (Source Return/Deliver Return)
 EP, ES, EM, ED, ER: Enable corresponding SCOR Processes 18
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SCOR: Best Practices

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1. SCOR Supply Chain Risk Management
The systematic identification, assessment, and mitigation of potential disruptions (both within and
outside the supply chain) in logistics networks with the objective to reduce their negative impact on the
logistics network’s performance.
SCOR: Best Practices

PROCESS

The Related
SCOR
Processes

E P. 9 , E S . 9 ,
EM.9, ED 22. 9
& ER.9
SCOR: Best Practices
2.

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SCOR: People

1. Novice
2. Experienced Beginner
3. Competent
4. Proficient
5. Expert

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WHY DOES IKEA USE SCOR MODEL?
Legitimacy & Common Terminology (Integration) in supply chain for better
communication

Sustainable Supplier Relationship Management

Designing Performance Measurement

A framework for guidance & control

More holistic view for co-workers –


I-people need to become T-people

Designed by practitioners

Neutral

No need to invent the wheel


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Supplier Raw Material Warehouse Factory Finished Goods Warehouse
IKEA Distribution
Center
The Customer

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IKEA Store
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IKEA INVENTORY PLANNING & FORECASTING
Cost-Per-Touch Inventory Tactic

In-Store Logistics

Maximum/Minimum Settings
As Proprietary System

Usage Of High-Flow & Low-Flow


Warehouse Facilities

Do-It-Yourself Assembly
Lowers Packaging Costs

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SOURCING AT IKEA

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SOURCING AT IKEA

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IKEA MANUFACTURING &
DISTRIBUTION NETWORK

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MANUFACTURING AT IKEA
Designs for furniture, lamps, kitchen
equipment and beds are logistically formed

The packaging also is designed to squeeze


as many units as possible into trucks
delivering inventory to the stores. “Air out,
product-in” – Loading Ledge technology

Once a product is designed and


manufactured, it can be checked for quality
by an independent firm whose location is as
proximate to the manufacturer as possible.
Example, Intertek in China
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IKEA LOGISTICS - WAREHOUSING

IKEA has about 40 distribution centers worldwide in 16


different countries

Cross-Docking method used

Astro WMS adopted by IKEA in 2010 increases and


improves efficiency in their distribution centre.

Astro is an automated warehouse management system


that allows for ordering fulfillment automatically so
reducing manual cost with automated re -ordering purchase
orders being sent to suppliers when stock levels are low.

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IKEA LOGISTICS - DELIVERY
IKEA products are transported by road, rail and sea between suppliers, distribution centers and IKEA
stores, and from the stores to customers.

IKEA transport service providers must comply with the requirements in the supplier code of conduct
IWAY, including industry-specific requirements.

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IKEA – RETURN POLICY
IKEA takes returned products seriously.

Customers have at least 30 days to bring back purchased


products for a full refund regardless of the reason for the
return

Recovery team present at each store

After necessary repairs, they offer them to customers in


store space tagged “As Is,”

More damaged products are broken down to their


components and recycled.

Every return and complaint is systematically


documented so that IKEA can analyze reasons for returns
and take action throughout the value chain when needed.
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IKEA BEST PRACTICES
It launched a code of conduct called ‘IWAY’ as corporate sustainability standards
through the practice of following environmental responsibility in relation to customers,
co-workers and suppliers

Offer solutions and know-how that help customers live a more sustainable life

Use natural resources in a sustainable manner within the entire supply chain ;
careful waste management

Minimize the carbon footprint from all IKEA related operations

Be transparent to all stakeholders and communicate more to customers and co-


workers

IKEA’s sustainability effort, successfully spans across all major supply chain
processes from Source to Make, Deliver and Return, which demonstrates long-term
management commitment.

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IKEA SUSTAINABILITY SCORECARD

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 Rigorous safety alarm procedures

 Every IKEA store and national


Service Office has dedicated
resources working with safety alarm
procedures, and they receive regular
training.

 Proactive risk assessment and


extensive testing

 Special focus on children’s safety

 Using the safest possible


chemicals 46
IKEA MANAGING
PEOPLE
“Our co-workers are our most valuable resource – when they grow, IKEA grows.”

Values - IKEA embraces human rights and respect for the individual,
and the way we work is based on a strong and living company culture.

Listening to our co-workers IKEA uses “VOICE” – a company-wide


survey – to monitor how coworkers view various aspects of their
employment at IKEA.

Safe and healthy working conditions

Keeping co-workers involved

Dialogue with unions

Supporting work-life balance

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IKEA MANAGING
PEOPLE

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IKEA MANAGING
PEOPLE

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IKEA MANAGING
PEOPLE

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IKEA MANAGING
PEOPLE

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SCOR could be extended into a complete business process architecture, or even into
a complete process-centric enterprise architecture (HOLISTIC/ SYSTEM VIEW)

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HOW DOES IT ALL COME TOGETHER AT
IKEA?

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