scor model

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SCOR MODEL & ITS APPLICATION BY IKEA

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Objective Of SCC through SCOR 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

THE BEGINNINGS OF SCOR…..ROLE OF SUPPLY CHAIN

COUNCIL (SCC)2 Boston -based consu l t ing firms:

P i t t ig l i o Rab in To dd & McGra th & A MR Research d e c i d e d t o d e v e l o p a s t a n d a r d a p p r o a c h t o a n a l y z i n g a n d d e s c r i b i n g a l l t h e a s p e c t s o f s u p p l y c h a i n p r o c e s s e s .

SC C fo rmed – I n d e p e n d e n t G l o b a l N o n - P ro fi t O rg a n i z a t i o n f o u n d e d i n 1996 b y a c o n s o r t i u m o f 6 9 m e m b e r v o l u n t e e r o rg a n i z a t i o n s ; n o w c l o s e t o 1 0 0 0

SCOR Framework deve loped by the Supply Chain Counci l (SCC)

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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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SCOR: THE GLOBAL SUPPLY CHAIN LANGUAGE

R a p i d A s s e s s m e n t o f S u p p l y C h a i n P e r f o r m a n c e

C l e a r i d e n t i fi c a t i o n o f p e r f o r m a n c e g a p s

E ffi c i e n t s u p p l y c h a i n n e t w o r k r e d e s i g n a n d o p t i m i z a t i o n

E n h a n c e d o p e r a t i o n a l c o n t r o l

S t r e a m l i n e d m a n a g e m e n t r e p o r t i n g & o r g a n i z a t i o n a l s t r u c t u r e

A l i g n e d s u p p l y c h a i n t e a m s k i l l s w i t h s t r a t e g i c o b j e c t i v e s

D e t a i l e d g a m e p l a n f o r l a u n c h i n g n e w b u s i n e s s e s & p r o d u c t s

S y s t e m a t i c s u p p l y c h a i n m e r g e r s c a p t u r i n g p r o j e c t e d s a v i n g s

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SCOR SOLVES TOP 5 SUPPLY CHAIN CHALLENGES

Superior Customer

ServiceCost ControlPlanning &

Risk ManagementSupplier/

Partner Relationship ManagementTalent

SCOR DELIVERS VALUE !

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

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

Capture the “as-is” state of a process and derive the desired “to-be” future state

SCOR: Key to achieving Supply Chain

SuperiorityHow 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

Benchmarking

Best Practices AnalysisProcess Reference Model

Business Process Reengineering

Capture the “as-is” state of a process and derive the desired “to-be” future state

Quantify the operational performance of similar companies and establish internal targets based on “best-in-class” resultsCharacterize the management practices and software solutions that result in “best-in-class” performance

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SCOR MODEL – SCOPE/ BOUNDARIES

SCOR covers:• 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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THE SCOR STRUCTURESCOR contains 4P’s:

Performance Measurement: Standard attributes & metrics to measure

process performance

Processes: Standard descriptions of management processes

and a framework of process relationships

Practices: Management practices that produce best-in-class

performance

People: Training and skills requirements aligned with processes, best

practices, and metrics E n a b l e s c o m p a n i e s t o :

E v a l u a t e a n d c o m p a r e t h e i r p e r f o r m a n c e s w i t h o t h e r c o m p a n i e s e ff e c ti v e l y ( b e n c h m a r k &

a d o p t b e s t i n - c l a s s p r a c ti c e s )

I d e n ti f y a n d p u r s u e s p e c i fi c c o m p e ti ti v e a d v a n t a g e s

I d e n ti f y s o ft w a r e t o o l s b e s t s u i t e d t o t h e i r s p e c i fi c p r o c e s s r e q u i r e m e n t s

PROCESSES

PERFORMANCE MEASUREMENT

PRACTICES

PEOPLE

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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 governance.

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Performance Metrics

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Performance Attributes

Relationship Between Attributes And Metrics

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Performance Attributes

Relationship Between Attributes And Metrics

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Return

Level

Description Schematic Comments

Top Level(Process Types)

Level 1 defines the scope and content for the Supply chain Operations Reference-model. Here basis of competition performance targets are set.Source Make Deliver

Plan1

#

Configuration Level (Process

Categories)

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

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Process Element Level (Decompose

Processes)

Level 3 defines a company’s ability to compete successfully in its chosen markets, and consists of:·Process element definitions·Process element information inputs, and outputs·Process performance metrics·Best practices, where applicable·System capabilities required to support best practices·Systems/tools

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P1.1Identify, Prioritize, and Aggregate

Supply-Chain Requirements

P1.2Identify, Assess, and Aggregate Supply-

Chain Requirements

P1.3Balance Production Resources with

Supply-Chain Requirements

P1.4Establish and

Communicate Supply-Chain Plans

Implementation Level (Decompose Process Elements)

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Not in Scope

Return

Three Levels of Process Detail

Companies implement specific supply-chain management practices at this level. Level 4 defines practices to achieve competitive advantage and to adapt to changing business conditions.

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SCOR: PROCESSES

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BASIC BUSINESS PROCESSES

Plan-Source-Make-Deliver-Return constitutes the organizational structure (Core) of the SCOR-model

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PLAN (P)(Processes that balance aggregate demand and supply)• Forecasting• Sensitivity

Analysis• Balance

resources with requirements

• Establish/communicate plans for the whole supply chain

SOURCE (S)(Processes that procure goods and services to meet planned or actual demand)• Schedule

deliveries (receive, verify, transfer)

MAKE (M)(Processes that transform product to a finished state to meet planned or actual demand)• Schedule

production

LEVEL 1 - KEY PROCESSES EXPLAINED…..

RETURN (R) (Processes associated with returning or receiving returned products) – Reverse Logistics

Manage Return business rules

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LEVEL 2 - PROCESS TYPES AND DEFINITIONS

PLANNING A process that aligns expected resources to meet expected demand

requirements.Balance aggregated demand and supplyConsider 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/sequencingTransforming productMoving 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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Level 2 Process Categories

P 1 : P l a n S u p p l y C h a i n P 2 - P 5 : P l a n S C O R P r o c e s s S 1 : S o u r c e S t o c k e d P r o d u c t S 3 : S o u r c e E n g i n e e r - t o - O r d e r P r o d u c t S 2 : S o u r c e M a k e - t o - O r d e r P r o d u c t M 1 : M a k e - t o - S t o c k M 2 : M a k e - t o - O r d e r M 3 : E n g i n e e r - t o - O r d e r D 1 : D e l i v e r S t o c k e d P r o d u c t D 2 : D e l i v e r M a k e - t o - O r d e r P r o d u c t D 3 : D e l i v e r E n g i n e e r - t o - O r d e r

P r o d u c t D 4 : D e l i v e r R e t a i l P r o d u c t S R 1 / D R 1 : R e t u r n D e f e c t i v e P r o d u c t ( S o u r c e R e t u r n / D e l i v e r

R e t u r n ) S R 2 : S o u r c e R e t u r n M R O P r o d u c t ( M a i n t e n a n c e , R e p a i r a n d

O v e r h a u l ) D R 2 : D e l i v e r R e t u r n M R O P r o d u c t S R 3 / D R 3 : R e t u r n E x c e s s P r o d u c t ( S o u r c e R e t u r n / D e l i v e r R e t u r n ) E P, E S , E M , E D , E R : E n a b l e c o r r e s p o n d i n g S C O R P r o c e s s e s

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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.

T h e R e l a t e d S C O R P r o c e s s e s

E P . 9 , E S . 9 , E M . 9 , E D . 9 & E R . 9

PROCESS

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SCOR: People

Skill Experience

Aptitudes Training

Competency

Key Elements of SCOR People

1. Novice2. Experienced

Beginner3. 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 WarehouseIKEA Distribution Center

The Customer

IKEA Store

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PERFORMANCE MEASUREMENT AT IKEA

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PLANNING AT IKEA

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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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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

MANUFACTURING AT IKEA

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IKEA LOGISTICS - WAREHOUSING

IKEA has about 40 d i s t r ibut ion cen ters wor ldw ide in 16 d ifferent count r ies

C ross -Dock ing method used

As t ro WMS adopted by IKEA in 2010 inc reases and improves effic iency in the i r d i s t r ibu t ion cen t re .

As t ro i s an automated warehouse management sys tem that a l l ows fo r o rder ing fu lfi l lment automat i ca l l y so reduc ing manua l cos t w i th automated re -order ing purchase o rders be ing sent to supp l i e rs when s tock leve l s a re low.

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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.

IKEA LOGISTICS - DELIVERY

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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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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.

IKEA BEST PRACTICES

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IKEA SUSTAINABILITY SCORECARD

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IKEA BEST PRACTICES: RISK

MANAGEMENT

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

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

Va l u es - I K E A em b r a c es h u m a n r i g h t s a n d r e s p ec t f o r th e i n d i v i d u a l , a n d th e w ay w e w o r k i s b a s ed o n a s t ro n g a n d l i v i n g c o m p a n y c u l tu r e .

L i s t en i n g t o o u r c o - w o r ke r s IK E A u s es “ VO IC E ” – a c o m p a n y - w i d e s u r v ey – t o m o n i to r h o w c o w o r ke r s v i ew v a r i o u s a s p ec t s o f t h e i r em p l o y m e n t a t I K E A .

Sa f e a n d h ea l th y w o r k i n g c o n d i t i o n s

Ke ep i n g c o - w o r ke r s i n v o l v ed

D i a l o g u e w i th u n i o n s

Su p p o r t i n g w o r k - l i f e b a l a n c e

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?