Supply Chain Uncertainty

Process Uncertainty Supply Uncertainty Demand Uncertainty Control Uncertainty

Uncertainty Reduction
Look internally (Reduction in Process Uncertainty) Move externally (MRP, Better stock keeping)

Performance Measurement Systems

Traditional system of Measurements

Supply Chain Measurement System

 Balanced Scorecard
Financial Customer Internal Processes Learning and Growth

 The Performance Prism

Stakeholder Satisfaction Strategies Processes Capabilities Stakeholder Contribution

SCOR MODEL (Cross industry standard)

Process reference models integrate the well known concepts of BPR, Benchmarking and Process Measurement into a cross- functional framework. A process reference model contains:
Std descriptions of management processes A framework of relationships among the std. processes. Standard metrics to measure process performance. Management practices that produce best in class performance. Std. alignment to software features and functionality.

 Understand the Context of SCOR

Process Metrics Best Practices

Understand the 7 Steps of a Benchmarking Program

The SCOR model an industry open standard

SCOR is a supply chain process reference model containing over 200 process elements, 550 metrics, and 500 best practices including risk and environmental management Organized around the five primary management processes of Plan, Source, Make, Deliver and Return Any interested organization can participate in its continual development
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

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SCOR Processes
Level 1
Scope
Supply-Chain Source

Level 2
Configuration
S1 Source Stocked Product

Level 3
Activity
S1.2 Receive Product

Level 4
Workflow

Level 5
Transactions
EDI XML

Differentiates Business Defines Scope

Differentiates Complexity Differentiates Capabilities Framework Language

Names Tasks Links, Metrics, Tasks and Practices Framework Language

Sequences Steps Job Details

Links Transactions Details of Automation

Framework Language

Industry or Technology Company Specific Specific Language Language

Standard SCOR definitions

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Company/Industry definitions

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Performance Metrics
Customer Attribute Metric (Strategic) SCOR metrics: Standard Strategic (Level 1) Reliability Perfect Order Fulfillment Metrics Responsiveness Agility Cost Internal Assets Order Fulfillment Cycle Time Supply Chain Flexibility Supply Chain Adaptability Supply Chain Management Cost Cost of Goods Sold Cash-to-Cash Cycle Time Return on Supply Chain Fixed Assets Return on Working Capital
upside and downside adaptability metrics

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Best Practices
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.

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SCOR Benchmarking - Presentation

What is Benchmarking
Qualitative Benchmarking
Comparing best practices among organizations Maturity Assessments

Quantitative Benchmarking
Comparing levels of measured performance Assessment of Performance Gaps

Competitive Benchmarking
Quantitative Benchmarking between companies Identifies superior relative performance
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7 Steps of a Benchmarking Program

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Supply Chain Definition Supply Chain Prioritization Supply Chain Strategy Selecting Metrics Sourcing Data Creating a Balanced SCORcard Performing Benchmark
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What is a Supply-Chain
Product Management Customer processes Supplier processes

Product Design DCOR

Sales & Support CCOR

Supply Chain SCOR

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Supply-Chain Definition
Supply Chains are the Totality of processes spanning operations from supplier to end-customer, focused on material, work and information flow We use a tool called the Supply Chain Definition Matrix to define the supply-chains within an enterprise The Supply Chain Definition (i/o Matrix) Matrix helps determine the number and size of supply chains Columns: Customers (Output) Rows: Products (Input) The intersection of each column and row if the goods or services flow to the customer is a supply chain
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Column Definition
The columns in the matrix are focused on demand e.g. channels or segments or customers start with making a list of customer groups, level by level. Ask your Sales or Marketing functions for customer segmentation information Where you have one customer base with different fulfillment models create two customer segments one for each model In general you can go to any level of detail you want but be sensible. Examples:
Level 1 Europe, Asia, US Commercial, Retail Eastern, Western Region Level 2 Major Accounts Grouped Accounts One-Time Buyer Level 3 Same-Day Shipping Bulk Shipping MOQ 1 Ordering

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Row Definition
The rows in the matrix are focused on supply e.g. business lines or products or locations or suppliers start by making a list of products, level by level Ask product divisions for product hierarchy data If you have the same product that may be build two different create two different products. In general you can go to any level of detail you want but be sensible. Examples:
Level 1 Business Divisions Fulfillment Models Planning Models Level 2 Product Lines Supplier Groups Warehouses Level 3 Product Families Parts

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The Matrix
We now place the customer list as column headings repeating until finished And then the products list as row headings repeating until finished For each product that flows to a customer, we put an X in the cell Its that simple.
Group 1 Customer A Product 1 Business 1 Product 2 Product 3 Business 2 Product 4 Customer B Group 2 Customer C Customer D

X X X X
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X X X

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Example: Air Conditioning Company

Columns are Retail/Commercial, and sub-segmented Rows are the Major Product Lines
Customer/Market/Channels
Your Company Supply-Chain Definition Matrix Retail Internet Big Box Direct Commercial Mom & Major Pop Building Account Stores Distrib

Lines of Business Product Families

Air Conditioners

Big Airco Small Airco Custom Industrial Standard Industrial

x x

x x x x

x x x
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SCOR Benchmarking - Presentation

Logical Supply Chain

Some supply-chains are not unique, group supply chains together where they have common management and goals Each group is considered a logical supply chain Key Differentiators:
Build Strategy Make Buy Model BTO BTS ETO Lifecycle Introduction Mid-Life Commodity EOL Other Region Tax Regime Logistics Strategy Customs/Duty ERP System
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Example: Air Conditioning Company

Columns are Retail/Commercial, and sub-segmented Rows are the Major Product Lines
Customer/Market/Channels Your Company Supply-Chain Definition Matrix
Retail Internet Big Box Direct Commercial Mom & Major Pop Building Account Stores Distrib

Lines of Business Product Families

Air Conditioners

Big Airco Small Airco Custom Industrial Standard Industrial

x x

x x x x

x x x
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Supply Chain Prioritization

We use a tool called the Supply Chain Prioritization Matrix to order the supply-chains according to relevance Each supply chain can be ranked by a number of features We suggest:
size (revenue, volume, and margin), complexity (# SKUs) strategic importance

You can also look at them by

Cash Consumption Risk Volume variability Etc.

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SCOR Benchmarking - Presentation

Supply Chain Priority

Each supply chain is given a rank in each category The total of the values gives the final overall ranking
Weightings and other criteria may apply
Revenue Gross Margin % 2 1 3 # of SKUs 2 3 1 Unit Volume 2 3 1 Strategic Value 2 1 3 Rank 11 10 9

Big Air Small Air Commercial

3 2 1

1=low 3=high

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Supply Chain Strategy

We use a tool called the Supply Chain Strategy Matrix to Identify priority strategic features or attributes of supply-chains. Each supply chain strategy is indicated by a collection of ranked features:
Reliability On time? Complete? Undamaged? Responsiveness From Customer Request to final acceptance Flexibility How long to scale up? How expensive to scale down? Cost Cost of Processes? Cost of Goods Sold? Assets Working Capital? Return on Investments?

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Comparative Ranking
We advocate using a simple ranking system for industry comparison Each rank corresponds to a specific percentile in industry performance We do not use averages or other statistical tests Our key ranks:
Performance Superior Advantage Parity Percentile 90th 70th 50th Choices 1 2 2 Interpretation Top 10 performer Top Half performer Half better/Half worse

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Supply Chain Strategy in 5 Minutes

Build Strategy Buy Make ETO BTO BTS Start Middle Commodity Model Lifecycle Likely Priority 1. Assets 2. Cost 1. Reliability 2. Response 1. Assets 2. Reliability 1. Flexibility 2. Response

1. Cost 2. Reliability
1. Cost 2. Assets 1. Assets 2. Cost

EOL

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SCOR Benchmarking - Presentation

Supply-Chain Strategy Matrix

Supply-Chain Strategy Matrix

Big Airco

Small Airco

Comml

Reliability

P P A A S

Responsiveness

A A
P P

Flexibility

Cost

Assets

Each unique combination of ratings defines Your Supply Chain Strategy for the channel Think of the rating as a desired state, NOT where you want to improve the most
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Internal

External

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The SCORcard
We use a tool called the Supply Chain SCORcard to Identify performance characteristics of supplychains. Each SCORcard is built from a subset of hundreds of SCOR metrics. For supply-chain benchmarking we generally use only Level 1, 2 and 3 metrics The SCOR Manual provides all necessary definitions
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Performance Metrics
SCOR metrics: Standard Strategic (Level 1) Attribute Metric (Strategic) Metrics
Reliability Customer Responsiveness Agility Cost Internal Assets Perfect Order Fulfillment Order Fulfillment Cycle Time Supply Chain Flexibility Supply Chain Adaptability Supply Chain Management Cost Cost of Goods Sold Cash-to-Cash Cycle Time Return on Supply Chain Fixed Assets Return on Working Capital
upside and downside adaptability metrics

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SCORcards in 5 Minutes
Philosophy You need to have the most data where performance is most critical You need to have least data where performance is least critical
For Every Select Superior Level 1 Metric and Level 2 Metric and Level 3 Metric Advantage Level 1 Metric Level 2 Metric Parity Level 1 Metric

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A Metrics Architecture
Supply-Chain SCORcard Reliability Reliability Reliability Reliability Reliability External Reliability Reliability Reliability Reliability Reliability Reliability Reliability
Perfect Condition Accurate Documentation Shipping Documentation Accuracy Billing Documentation Accuracy Delivery Performance to Commit Date

S/A/P
S

Level-1 Metric
Perfect Order Fulfillment

Level-2 Metric

Level-3 Metric

Summary
Perfect Order Fulfilment

% Orders Delivered in Full Delivery Item Accuracy Delivery Quantity Accuracy

% Orders Delivered in Full

Delivery Item Accuracy Delivery Quantity Accuracy Delivery Performance to Commit Date

Date Achievement
Location Achievement

Date Achievement
Location Achievement Accurate Documentation Shipping Documentation Accuracy Billing Documentation Accuracy Perfect Condition

% Orders Received Damage- % Orders Received DamageFree Free

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Metrics Selection
Supply-Chain SCORcard Responsiveness Responsiveness External Responsiveness Responsiveness Flexibility Cost Assets Internal Assets Assets Assets
P

S/A/P
A

Level-1 Metric
Order Fulfilment Cycle Time

Level-2 Metric

Level-3 Metric

Summary
Order Fulfillment Cycle Time

Source Cycle Time

Source Cycle Time

Make Cycle Time

Make Cycle Time

Deliver Cycle Time

Deliver Cycle Time

Upside Supply-Chain Flexibility

Total Supply Chain Management Cost Cash to Cash Cycle Time

Upside Supplly-Chain Flexibility

Total Supply Chain Management Cost Cash to Cash Cycle Time

Days Sales Outstanding Days Payables Outstanding Inventory Days of Supply

Days Sales Outstanding Days Payables Outstanding Inventory Days of Supply

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Planning Data Gathering: Sources of Data

Financial Data
10-K data, Company Annual Reports, Cost Center Reports Must be Verified by Financial Team (Controller)

Non-Financial Data
Customers
Delivery Performance Total Cycle-Time Performance

IT Systems
Process-to-Process Transactions Planning System Parameters (Lead Times)

Suppliers 3PL Providers

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Data Gathering Plan

Look at who owns the data Consider where the transactions may be Organize to alert data owners to gather data Collect and assess Data Quality Use SCOR Metrics Definition as a guide
Process D1.16 D1.17 D1.1 D1.17 Owner Logistics 3PL Provider Deliver Team Due Date 2/2/2008 2/15/2008 2/22/2008 Status Complete 50% Collected Not started

Metric On-Time Delivery Undamaged Order Fulfillment Cycle Time Etc

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The Create the SCORcard

Based on average data averaged over many samples Comes from root transactions, not aggregates Six-Sigma team support a big help
Attribute Reliability Response Flexibility Cost Assets SAP
S A P P A

Metric (level 1)
Perfect Order Fulfillment Order Fulfillment Cycle Time Ups. Supply Chain Flexibility Supply Chain Mgmt Cost Cash-to-Cash Cycle Time

You 97% 14 days 62 days 12.2% 35 days

Parity

Adv

Superior

Gap

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SCORmark
Once the SCORcard is defined, and data for most metrics are gathered Data are submitted electronically to the SCORmark system With days or weeks, an electronic report is returned with the results of comparison against selected demographic groups The principal function of the Benchmark is to determine the gap between actual performance and performance corresponding to desired strategic positioning. The Benchmark is a component of Phase I and II of the SCOR Implementation Roadmap

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SCOR Benchmarking - Presentation

Interpreting the Data

Used for choosing target performance Critical to understand Performance in a particular Demographic Can be internal (competing against other supply chains in same company) Aligns Strategy, Performance, and Performance Goals
Attribute Reliability Response Flexibility Cost SAP
S A P P

Metric (level 1)
Perfect Order Fulfillment Order Fulfillment Cycle Time Ups. Supply Chain Flexibility Supply Chain Mgmt Cost

You 97% 14 days 62 days 12.2%

Parity 92% 8 days 80 days 10.8%

Adv 95% 6 days 60 days 10.4%

Superior 98% 4 days 40 days 10.2%

Gap 1% 8 Days 0 1.4%

Assets

Cash-to-Cash Cycle Time

35 days

45 days

33 days

20 days

2 Days

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Planning
Supply-Chain Definition workshop Supply-Chain Prioritization Gathering Supply-Chain Strategy workshop Supply-Chain Performance workshop Data and Benchmarking
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1-2 Day 1 Day Data

1 Day
1 Day Days/Weeks