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How SCOR Model Enhance Global Sourcing Effectiveness 1

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How SCOR Model Enhance

Global Sourcing Effectiveness

1

What are the challenges in global sourcing?

» Supplier selection

» Supplier performance monitoring

» MOQ

2

» MOQ

» Complex Logistics

» And many more …

» The Supply-Chain Operations Reference-model (SCOR) is a process reference model that has been developed and endorsed by the Supply-Chain Council as the cross-industry standard diagnostic tool for supply-chain management. SCOR enables users to address, improve and communicate supply-chain management practices within and between all interested parties.

» SCOR has been adopted by major industries over the past 10 years and the latest

What is Supply Chain Operation Reference (SCOR) Model?

3

version of SCOR (v. 9.0).

What are the benefits of SCOR model?

» Provides a structured approach and practical methodology for supply chain process improvements.

» Provides a common language to share operational views, and communicate changes or definitions of processes .

» Provide a set of common, easy to understand terminology, proc ess building blocks with definitions and performance me trics.

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building blocks with definitions and performance me trics.

» SCOR offers companies insights and suggestions on best practices to build a project portfolio for improvement.

Three Major Components of SCOR

Performance Metrics

5

Best Practices

Process Building Blocks

Process Building Block

6

Level 1 Process Type

7

Customer’sCustomer

All Process Type

8

Process Classification

Management

ProcessReturn

Deliver

Make

Source

Plan

9

Process Type

ProcessManufacturing

Environment

Return

Engineer-to-Order

Make-to-Order

Make-to-Stock

Enable

Execution

Planning

What Can You Tell From The Process Map?

M2S2 D2

S2

S1

SR1

SR3

10

S1

D1 S1M1 D1 S1

D1M1

S1

DR1 SR1

DR1 SR1 DR1 SR1

DR3 SR3DR3 SR3

M2S2 D2

S2

S1

SR1

SR3

What Can You Tell From The Process Map?

11

S1

D1 S1M1 D1 S1

D1M1

S1

DR1 SR1

DR1 SR1 DR1 SR1

DR3 SR3DR3 SR3

Your RegionalWarehouses

Your Production Site

Raw Material Supplier’s Production Site

Customer’s Warehouses

M2S2 D2

S2

S1

SR1

SR3

What is the implication of S2+S1->M1

What Can You Tell From The Process Map?

12

S1

D1 S1M1 D1 S1

D1M1

S1

DR1 SR1

DR1 SR1 DR1 SR1

DR3 SR3DR3 SR3

Your RegionalWarehouses

Your Production Site

Raw Material Supplier’s Production Site

Customer’s Warehouses

M2S2 D2

S2

S1

SR1

SR3

What is the implication of SR3->DR1

What Can You Tell From The Process Map?

13

S1

D1 S1M1 D1 S1

D1M1

S1

DR1 SR1

DR1 SR1 DR1 SR1

DR3 SR3DR3 SR3

Your RegionalWarehouses

Your Production Site

Raw Material Supplier’s Production Site

Customer’s Warehouses

Business Process Reengineering

• Change the performance of a business process by capturing the “As-Is” state of a process, deriving the desired “To-Be” future state and closing the gap between the two states.

• The operational states can be documented by SCOR process building blocks and measured by SCOR metrics.

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blocks and measured by SCOR metrics.

• The gap can be closed through applying SCOR best practices.

P1

P2 P3 P4 P4

P1

D1

NORTH & SOUTH AMERICAN

S1 M3

D2S1 M3

D1S1 M3

“As-Is”

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D2 S2 M2

D1 S1 M1

D2

D1

D2 S2 M2

D1 S1 M1

D2

D1

ROW CUSTOMERS

INDIAN &BANGLADESHICUSTOMERS

AMERICANCUSTOMERS

CUSTOMERS

D2

D1S1 M3

D2S1 M3

D1

P1

P2 P3 P4P4

D1

D1

NORTH & SOUTH AMERICAN

“To-Be”

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D2 S2 M2

D1 S1 M1

D2

D1

D2 S2 M2

D1 S1 M1

D2

D1 D1

ROW CUSTOMERS

INDIAN &BANGLADESHICUSTOMERS

CUSTOMERSD1

AMERICANCUSTOMERS

Performance Metrics

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Measuring Performance

• Measuring how well the supply chain performs is as essential as understanding how it operates» Measurements must link to business objectives» Measurements must be repeatable

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» Measurements must be repeatable» Measurements must provide insights into how to

manage the supply chain more effectively» Measurements must be appropriate for the

process activity they are measuring- Same level

Attribute Strategic metric

Reliability RL.1.1 Perfect Order Fulfillment

Responsiveness RS.1.1 Order Fulfillment Cycle Time

Agility AG.1.1 Upside Supply Chain Flexibility

AG.1.2 Supply Chain Upside Adaptability

Cus

tom

erSupply-chain Performance Risks (Performance Metrics of SCOR)

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AG.1.2 Supply Chain Upside Adaptability

AG.1.3 Supply Chain Downside Adaptability

Cost CO.1.1 Supply Chain Management Cost

CO.1.2 Cost of Goods Sold

Assets AM.1.1 Cash-to-Cash Cycle Time

AM.1.2 Return on Supply Chain Fixed Assets

AM.1.3 Return on Working Capital

Copyright © Supply Chain Council, 2008. All rights reserved

Cus

tom

erIn

tern

al

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Measuring Process Performance with SCOR Performance Metrics

Cycle Time

Perfect OrderFulfillment

Perfect OrderFulfillment

M2S2 D2

S2

S1

SR1

SR3

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S1

D1 S1M1 D1 S1

D1M1

S1

DR1 SR1

DR1 SR1 DR1 SR1

DR3 SR3DR3 SR3

Benchmarking - Parity, Advantage, Superior

Attribute Metric (level 1) P A S

Reliability Perfect Order Fulfillment

Responsiveness Order Fulfillment Cycle Time

Agility Supply Chain Flexibility

Cost Supply Chain Mgmt Cost

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Compare to:

» Lines of business in your company

» Businesses in your industry

» Businesses across industries

Assets Cash-to-Cash Cycle Time

Parity Median of

Statistical Sample

Advantage Midpoint of Parity

and Superior

Superior 90th percentile of

population

Supply-Chain Strategy Matrix

» Each unique combination of ratings defines Your Supply Chain Strategy for the channel

Supply-ChainStrategy Matrix

Supply

Chain

A

Supply

Chain

B

Supply

Chain

C

External

Reliability P P S

Responsiveness A P A

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» Think of the rating as a desired state, NOT where you want to improve the most

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External

Agility P P P

Internal

Cost S A P

Assets P S P

Benchmarking

• Quantify the operational performance of similar companies and establish internal targets based on the “best-in-class” results.

• A question that managers should always ask themselves is “How is my company’s performance compared with other similar companies?”

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• It may be easy to compare on financial performance, but how about responsiveness to customer need, flexibility in dealing with changes and reliability of the supply chain?

• SCOR defines a set of metrics to measure operational performance which enable direct comparison of supply chains similar to those of financial performance.

Supply-chain Performance Scorecard

Strategic Metrics Actual Parity(50th)

Advantage Superior(90th)

Parity gap

Require-ment gap

Reliability[Perfect order fulfillment]

60 % 74 % 81 % 88 % 14 % 14 % [P]

Responsiveness[Order cycle time] 9 days 10 days 6.5 days 3 days -- 6 d [S]

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[Order cycle time] 9 days 10 days 6.5 days 3 days -- 6 d [S]

Agility[Upside supply chain flexibility]

110 d 60 d 45 d 29 d 50 d 81 d [P]

Cost[Supply Chain Management Cost]

14.0 % 9.5 % 6.7 % 3.9 % 4.5% 7.3% [A]

Asset[Cash-to-cash cycle time] 197 d 98 d 64 d 30 d 99 d 99 d [P]

Best Practice

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Best Practice

• A current, structured, proven and repeatable method for making a positive impact on desired operation results.» Current : Must not be emerging & must not be antiquated.» Structured : Has clearly stated goal, scope, process & procedure.» Proven : Success has been demonstrated in a working

environment.» Repeatable : The practice has been proven in multiple

environments.

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environments.» Method : Used in a very broad sense to indicate business process,

practice, organizational strategy, enabling technology, business relationship, business model and information or knowledge management.

» Positive impact on desired operation results : The practice shows operational improvement related to the stated goal and could be linked to key metrics. The impacts should show either as gain (increase in speed, revenue, quality) or reduction (resource utilizations, costs, loss, returns, etc.)

(Defined by SCC Best Practices Team 2003)

Best Practices Analysis

• Characterize the management practices and software solutions that result in “best-in-class” performance

• Not all best practices are suitable to all industries / companies, things to be considered include but not limited to the following items:» Geographical location

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» Geographical location» Industry» Management practices» Software solutions» ..etc

Improving Process Performance with SCOR Best Practices

VMI

EDI

AutomaticIdentificationM2S2 D2

S2

S1

SR1

SR3

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S1

D1 S1M1 D1 S1

D1M1

S1

DR1 SR1

DR1 SR1 DR1 SR1

DR3 SR3DR3 SR3

Practice Relevance

(Y/N)

Importance

(H/M/L)

Implemented

(Y/N)

ATP

Carrier Agreements

CPFR

Best Practice Analysis

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Copyright © Supply Chain Council, 2006-2010. All rights reserved

Co-located Procurement

Cross Docking

TOC-DBR

Postponement

S&OP

VMI

Wave Picking

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CPFR is a Best Practice

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Cross Docking

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SCOR Model is a Business Process Reference Model

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How to Start Supply Chain Improvements?

Education FeasibilityStudy

Competitive& StrategyAnalysis

1 2 3

As-Is Operation Modeling

4

To-Be Operation Modeling

5

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Gap Identification & ProjectPortfolio

ProjectJustification

6 7ProjectImplement-ation

8

Align Internalunderstanding

Define Areas of Improvement

Define Supply ChainPerformance

Define CurrentProcess Description

Set Improvement Targetand Projects Portfolio

Justify Project Based onSavings or Benefits

Implement SCOROperations

Improvement Audit

9

Audit on Result of Project Implementation

Define RequiredProcess Description

Step 1

Education FeasibilityStudy

Competitive& StrategyAnalysis

1 2 3

As-Is Operation Modeling

4

To-Be Operation Modeling

5

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Gap Identification & ProjectPortfolio

ProjectJustification

6 7ProjectImplement-ation

8

Align Internalunderstanding

Define Areas of Improvement

Define Supply ChainPerformance

Define CurrentProcess Description

Set Improvement Targetand Projects Portfolio

Justify Project Based onSavings or Benefits

Implement SCOROperations

Improvement Audit

9

Audit on Result of Project Implementation

Define RequiredProcess Description

Education – SCOR Workshop

» 4-days workshop» 2-days workshop on the SCOR Framework» 2-days workshop on SCOR Project.

» The SCOR Framework focus on» how to map their current operations using SCOR’s process building blocks (the “As-is”

operations) and define the required SCOR process (the “To-be” operations) based on management requirements

» define performance metrics to measure the performance of individual process

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» define performance metrics to measure the performance of individual process» provide recommended best practices for the right direction on supply-chain process

improvements

» The SCOR Project workshop focus on» how to implement successful SCOR projects using the implementation roadmap that

was developed based on more than 60 SCOR projects.

» All students are entitled to take the SCOR-Professional Examination (awarded by Supply Chain Council) after taking the Framework and Project workshops

Certify as SCOR Professional

» Examination Format» Computer based multiple choices» 60 questions» Passing mark is 45 out of 60 (at least 45 correct answers)

» Examination Time Frame» Examination window 2010-1 2010-02-08 2010-02-19» Examination window 2010-2 2010-05-24 2010-06-04

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» Examination window 2010-2 2010-05-24 2010-06-04» Examination window 2010-3 2010-08-23 2010-09-03» Examination window 2010-4 2010-11-08 2010-11-19

» Venue» GUANGZHOU» GUANGZHOU UNIVERSITY OF FOREIGN STUDY, BAIYUN DADAO NORTH #2

GUANGZHOU, CHN 510420» HONG KONG» RM 501 HKEA SAN PO KONG SUB-OFFICE

#17 TSUEK LUK STREET, SAN PO KONGKOWLOON

More Information

www.supply-chain.org

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Common Sourcing

KPIs (ESCAB)

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Common Sourcing KPIs (ESCAB)

KPI name KPI description

Factory Certification -Technical

Measure the ability of factory, compliant with buyer's hard and soft factors/requirements

Factory Compliance -Regulatory, Environmental and

Focus on Business Behaviours (such as Operating according to government / authority laws and regulations, provides safe working environment, Code of Conduct, C-TPAT, etc.), and Compliance to required standards to best benefit both sides.

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Environmental and Social

Compliance to required standards to best benefit both sides.

Product introduction

Focus on product, supply chain management, and process.

Vertical set up To count supplier's own vertical set up, e.g. own washing mills, own weaving mills, own printing facilities, own embroidery facilities provided that it delivers economy of scale

Cost Competitiveness

Estimated Landed Cost (ELC) Comparison

Common Sourcing KPIs (ESCAB)

KPI name KPI description

Manufacturing Lead Time

The manufacturing lead time quoted by the supplier during the bid process which the will abide by.

Response time The time supplier needs to response, e.g. confirm orders, reply requests, sign agreements and others

1st Sample rejection

The sample is rejected if failure or does not meet our requirement

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rejection requirement

Sample Cycle Time Measure the number of days taken to approve sample. Can apply to various kind of sample, e.g. color sample, fit sample, etc.

Sample Iteration Measures the frequency with which samples require rework, indicate efficiency and timeliness for on time production. Can apply to various kind of sample, e.g. color sample, fit sample, etc.

Sample on time To measure if the requested sample can be submitted before the deadline

Common Sourcing KPIs (ESCAB)

KPI name KPI description1st Inspection Passing Rate

Measure final inspection passing rate

Inspection rejection rate An order is rejected during final inspection due to quality problems or formal mistakes.

Quality (Major/Minor defects during QC Inspection)

‘Quality’ reflects the product quality of the supplier. Basis for the calculation of that KPI are the inspection results.

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Inspection)

Upside Deliver Flexibility The number of days required to achieve an unplanned sustainable % increase in quantity delivered with the assumption of no other constraints (= Elasticity of ETD)

Cancellations rate (responsible party supplier)

Measures the share of order cancellations caused by the supplier

Claim to shipment ratio (dollar value)

Measure unmet customer expectations

Claim to shipment ratio (no. of incidents)

Quality problem or formal mistakes after arrival to our customer.

Common Sourcing KPIs (ESCAB)

KPI name KPI descriptionCompliance Document accuracy and completeness

material safety data sheets, GDOT, etc are complete and correct

Container Booking Timeliness

A container booking is considered submitted to 3PL within the agreed time frame

Delivery Quantity Measures the share of articles delivered correctly

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Delivery Quantity Accurary

Measures the share of articles delivered correctly concerning quantities. Only short deliveries have a negative influence.

Document submission cycle time

Meaure the average time when the supplier submit document to the document is confirmed correct and completed

Forwarder document process time

To measure the time which the forwarder needs to provide the documents e.g. airway bill (AWB), BL, SWB

On time and honouredInspection Booking

Measure the reliability of inspection booking by vendor

Common Sourcing KPIs (ESCAB)

KPI name KPI description

On time document submission

Supplier is supposed to submit document according to predefined timeframe in order to ensure accurate documents are on time for custom clearance.

On time Shipment Booking

A vessel booking is submitted within the agreed time frame.

Shipment booking cycle time

Measure the average time when the supplier submit first booking to the time carrier booking is confirmed.

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cycle time first booking to the time carrier booking is confirmed.

Shipment reliability Measure timeliness of shipments.

Shipping document accuracy and completeness

Shipping documents are complete and accurate

Space & Equipment Availability

Carriers performance on space and equipment availability

Common Sourcing KPIs (ESCAB)

KPI name KPI descriptionTimely Advanced Shipment Notification (ASN) submission

Measure the timeliness of ASN / Dispatch Advice

Withhold Payment Measure the % of payment that ware withhold due to supplier's issues

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Annual Sales Growth Measure the sales growth of a supplier

Enquiry

» Please contact us for further enquires:

» Mr. Rocky Yu Ms. Tina Ho

» Tel: 2863 9731 Tel: 2863 9758

» Email: [email protected] Email: [email protected]

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Thank You.Thank You.Questions?