supply chain improvement_supply chain operations reference (scor) model

PRAGMATEK Consulting Group, Ltd. 2001 pragmatek.com

Supply Chain ImprovementSupply Chain Operations Reference (SCOR) model

Peter A. BolstorffExecutive Director, Supply ChainPRAGMATEK Consulting Group, LTD.

2 PRAGMATEK Consulting Group, Ltd. 2001 pragmatek.com

SCOR - FAQs Who is the Supply Chain Council? What is SCOR? How do you use SCOR to achieve

supply chain performance improvement?

How can this apply to my company? How can I learn more about SCOR?


Supply Chain Council

The Supply-Chain Council (SCC) is an independent, not-for-profit, global corporation with membership open to all companies and organizations

Over 800 Company Members (Practitioners, Technology Providers, Consultants, Academicians, Government)

Wide range of industries (Manufacturers, Distributors, Retailers, CPG)

The SCC endorses the Supply Chain Operations Reference-model (SCOR) as the cross-industry standard for supply-chain managementThe SCC was organized in 1996 by Pittiglio Rabin Todd & McGrath (PRTM) and Advanced Manufacturing Research (AMR), and

initially included 69 voluntary member companies


The Two Faces of SCOR

Process Reference Applied


The SCOR Framework

Supplier

Plan

Customer Customer’sCustomer

Suppliers’Supplier

Make DeliverSource Make DeliverMakeSourceDeliver SourceDeliver

Internal or External Internal or External

Your Company

Source

Supply Chain Operations Reference Model

PlanPlanPlanPlan

Return

The integrated processes of Plan, Source, Make, Deliver and Return, spanning your suppliers’ supplier to your customers’ customer, aligned with Operational Strategy, Material, Work & Information Flows.


SCOR Project Roadmap

Material Flow

Operations Strategy

Analyze Basis of

Competition

ConfigureSupply Chain

AlignPerformance

Levels, Practices,

and Systems

ImplementSupply-Chain

Changes

•Supply Chain Scope•Performance Metrics•Supply Chain SCORcard•Competitive Performance Requirements and SCORcard Gap Analysis

•AS IS Material Flow•Disconnect & Gross Opportunity Analysis•Material Flow Strategy and Best Practice Analysis•Supply Chain Strategy•TO BE Material Flow

Informationand Work Flow

•AS IS Work/Information Map•Transactional Analysis•Design Specifications•TO BE Work/Information Map•Prioritized List of Changes

Implementation •Master Schedule of Projects•ROI Analysis•Technology Selection•Detail Requirements, Solution Design, Configuration, Test & Go Live


Applications of SCOR

Software Selection & Implementation Business Requirements

Cost Reduction – Productivity Improvement Direct Indirect

Application optimization Upgrade Utilization

Implement Operational Strategy

Network Analysis – Material Flow Design

SKU Rationalization Delivery Performance

Improvement OTIF – Perfect Order Synchronize Lead-time

Supply Chain Six Sigma and Lean Enterprise Continuous Improvement Organizational Learning

Efficient Consumer Response Forecast Accuracy Category Marketing CPFR


Implementation Results

2X to 6X ROI within 12 months Stock price improvement Income statement and balance sheet

improvement Self fund technology investments

Fully Leverage Capital Investment in Systems Utilization of current applications Business blue print to leverage needed upgrades Roadmap for e-investments

Framework for supply chain process management and continuous improvement

PRAGMATEK Consulting Group, Ltd. 2001 pragmatek.com

How Do I Use SCOR?to Improve Supply Chain Performance


Performance Improvement

Strategy Design Measurement

Organization

Process

Jobs/People

Technology


Project Approach

• Performance Metrics

• Benchmarks• SCORcard• Competitive

Requirements

3-4 Months 6+ Months1-2 Weeks

Discover Analyze Design Develop Implement

Opportunity Strategy Solution Prototype Install

• Material Flow Design

• Disconnect Analysis

• Work and Information Flow Design

• Application Architecture

• Preliminary Implementation Plan

Educate

Support

1 Week

• Workshops• Executive

Briefings• Customized

Training• SCOR Boot

Camp for Project Managers

• Prioritized Supply Chain Changes

• Opportunity Analysis• Master Schedule of Projects• Supply Chain Project Office-

Continuous Improvement Plan• Detailed Design• Technology Selection• “Conference Room” Pilot

• Discovery Checklist

• Project Charter• Stakeholder

Interviews


Educate for Support

Key Points Develop an

“Evangelist” Establish Core

Team Buy IN Enroll an Active

Executive Sponsorship

Deliverables General SCOR

Workshops Customized Workshops Executive Briefings SCOR Boot Camp for

Project Managers Supply Chain

Management for Dummies, Oct 2000, SCTN; Supply Chain University, April 2001 SCTN; Spreading the Word, Oct 2001, SCTN


Discover the Opportunity

Key Points Uses a checklist to collect

appropriate information to paint an appropriate business context

Actively involves your entire business team – key stakeholders

Scopes your project respecting all supply chain factors

The Project Charter is the critical output

Deliverables Business Context

Summary Project Charter

• Scope• Organization• Plan

A Model of Project Management, Sep/Oct 1999, SCTN; Scale versus Scope, Dec 2001, SCTN


Business Context

Strategic Background• Strengths Weaknesses

Opportunities Threats (SWOT)

• Value Proposition• Critical Success Factors• Critical Business Issues• Competitive Analysis

Business and Financial Information

• Profit and Loss Statement

• Balance Sheet

Internal Profile• Organization• Physical Locations• Other Key

Performance Indicators

External Profile• Market/Customers• Suppliers


Supply Chain Scope

Project is defined by the unique combination of Geography Customer(s) Item(s) or Products Process(es) Supplier(s)


ALPHA – Definition Matrix

US - Distributor US - Direct-to-Consumer

NEW X

MATURE X

Geography - Customer or Market Channel

Pro

duct

Supply Chain Definition Matrix


Project Charter

I. Introduction Maintenance of the

Project CharterII. Project Overview

Scope Business Objectives Project Objectives

III. Project Approach Methodology Project Schedule Project Milestones &

Deliverables Dependencies

IV. Project BudgetV. Project Organization

Organization Chart Project Resources Roles and Responsibilities

VI. Measures of Success Stakeholder Expectations Benchmarks Benefit Analysis

VII. Project Communication Communication Plan Control Procedures


Content SME

BU Advisory/Steering Committee

Experienced Project Manager

BU Extended Team

BU Design Team

BU Project Sponsor

Project Organization

BU Project Manager


Analyze to Align Strategy

Key Points Balances Customer,

Internal, and Shareholder Facing Metrics

Incorporates multiple sources of useful benchmarks

SCORcard data queries “Hot Links” to the P&L

Provides the foundation for strategy, priority, and cascading goals

Deliverables SCOR v5.0 Metrics Competitive

Performance Requirements

SCORcard www.pmgbenchmarking

.com, www.marketguide.com

Target the Impact, Cut the Risk, June 2000, SCTN; How to SCOR with Six Sigma, September 2001, SCTN

http://www.pmgbenchmarking.com/


http://www.marketguide.com/


SCOR v5.0 MetricsPerformance Attribute

Performance Attribute Definition Level 1 Metric

Delivery Performance Fill Rates

Supply Chain Delivery Reliability

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.

Perfect Order Fulfillment

Supply Chain Responsiveness

The velocity at which a supply chain provides products to the customer.

Order Fulfillment Lead Times

Supply Chain Response Time Supply Chain Flexibility

The agility of a supply chain in responding to marketplace changes to gain or maintain competitive advantage.

Production Flexibility

Cost of Goods Sold Total Supply Chain Management Costs Value-Added Productivity

Supply Chain Costs The costs associated with operating the supply chain.

Warranty / Returns Processing Costs Cash-to-Cash Cycle Time Inventory Days of Supply

Supply Chain Asset Management Efficiency

The effectiveness of an organization in managing assets to support demand satisfaction. This includes the management of all assets: fixed and working capital.

Asset Turns


Competitive Requirements

Superior

Legend

Advantage Parity

Delivery Reliability

Flexibility/ Responsiveness

Supply Chain Cost

Asset

PerformanceAttribute

Supply Chain 1

Supply Chain 2

*Performance vs.

Competition

*From your Organization’s Point of View


SCORcardPerformance Attribute or Category Level 1 Performance Metrics Actual

ParityMedian of

statistical sample

AdvantageMidpoint of parity

and superior

Superior90th Percentile of

Population

Parity GapParity - Actual

Requirements Gap

Delivery Performance 68.4% 74.7% 85.0% 95.0% -6.3% -26.6%

Fill RatesSubstitute Line Item Fillrate here 91.0% 92.0% 95.5% 99.0% -1.0% -8.0%

Perfect Order Fulfillment 35.0% 74.0% 81.0% 88.0% -39.0% -53.0%

Supply Chain Responsiveness Order Fulfillment Lead Time 5 days 10 days 6.5 days 3 days 5 days 5 days

Supply Chain Response Time 90 days 60 days 45 days 29 days -30 days -30 days

Production Flexibility 61 days 42 days 26 days 10.8 days -19 days -19 days

Cost of Goods 86% 69% 61% 53% -17% -25%

Total Supply Chain Cost 17.0% 9.5% 6.7% 3.9% -7.5% -10.3%

SG&A Cost 7% 17% 12% 7% 10% 5%

Warranty / Returns Processing Costs 1.5% 1.5% 1.0% 0.5% 0.0% -0.5%

Cash-to-Cash Cycle Time 197 97.9 63.8 29.7 -99.1 -99.1

Inventory Days of Supply 91 74 48 23 -17.4 -17.4

Asset Turns 1.5 2.5 4.7 7.0 1.0 1.0

Gross Margin 14% 31% 39% 47% -17% -8%

Operating Income 7% 14% 19% 23% -7% -5%

Net Income 4% 5% 8% 11% -2%

Effectiveness of Return Return on Assets 10.7% 11% 15% 20% -0.4%Shar

ehol

der

Inte

rnal

Exte

rnal

Supply Chain Delivery Reliability

Supply Chain Flexibility

Supply Chain Cost

Supply Chain Asset Management Efficiency

Profitability


Design Material Flow

Key Points Includes all Internal &

External Physical Locations

Incorporates P/N classification SCOR L2

• Stock versus To Order• RM versus FG versus WIP

Illustrates “P/N” Routes• Transportation Cost• Inventory Level• Leadtime

Disconnect Analysis drives savings opportunity

Deliverables AS IS Material Flow Disconnect Analysis

• List and Group• Quantify• Prioritize

TO BE Material Flow When Performance is

no Joking Matter, April 2000, SCTN


Cust

omer

s

Supp

liers

Plan

Source Make Deliver

S1 Source Stocked Products

M1 Make-to-Stock

M2 Make-to-Order

M3 Engineer-to-Order

D1 Deliver Stocked Products

D2 Deliver MTO Products

D3 Deliver ETO Products

S2 Source MTO Products

S3 Source ETO Products

Classify Items

Return

R1 Return Defective ProductR2 Return MRO Product

R3 Return Excess Products


Physical Material Flow

Warehouse

Factory

As Is Material Flow

Factory

Warehouse

Suppliers

= Inbound

= Outbound

Warehouse

DealersDistributors

Suppliers

Factories

Warehouse

Distributor

Dealer

Suppliers

Factories

Warehouses

Distributors

Dealers

Australia Suppliers

Factory

Factory

Warehouse

Far East Suppliers

Factory

3rd Party Supplier

Dealers

Distributors

Suppliers

Warehouse

Factory

Distributors

Dealers

Distributors

Dealers

DistributorsDealers

DistributorsDealers


Disconnect Analysis

Identify individual disconnects (brainstorm) Group disconnects using an Affinity

Diagram approach Quantify Disconnects

Analyze Cause and Effect with Disconnect Group using Fishbone Analysis

Estimate Performance Opportunity using Test Scenarios for each Fishbone

Validate Savings


Fishbone Analysis

DesignComponentof MATURE

Product adds90 days to

sourceleadtime

Supplierphysicallocation

is inJapan

The supplierdoes not

carryinventory inthe NA this

p/n

The Bill ofMaterials for thisproduct has not

changed

The lab didnot invest in aredesign priorto theoutsourcedecision

Product Quality perceived as acompetitive advantage

Marketing didnot assess

designrequirements


TO BE Material Flow

Identifies appropriate leading practices to improve material flow CPFR, cross-dock, VMI, rapid

replenishment, supplier agreements, product rationalization

Eliminates inefficiencies identified in disconnect analysis Transportation cost, inventory turns,

lead-time, delivery performance


Design Work & Information Flow

Key Points Integrates the work and

information flow which moves the material

Incorporates application modules and sub-modules

Organization roles illustrated using “Swim Diagram”

Blueprints the impact of “e” to your business

Focuses performance on transactional productivity

Deliverables AS IS Work & Information

Flow Revised Disconnect Analysis

• Productivity• Quality

TO Be Work & Information Flow

SCOR Cheat Sheet Before You Buy, Re-connect,

February 2000; Slow Down to Speed Up, Nov/Dec 1999; Putting the “e” in Enterprise, August 2000, SCTN; How to Design a Business Blueprint, August 2000, SCTN


Transactional Analysis

Purchase Order Work Order Sales Order Return Authorization Planning Event

Forecast Replenishment

Order

Staple Yourself to an Order Process Steps (Level 4) Inputs and Outputs Enabling Technology Business Rules Transactional Productivity

• Volume• Cycle Time

– Event Time– Elapsed Time

• Yield


Transactional AnalysisPROCESS:

M1.2 Make (Stocked Product) : Issue Material

INPUT / OUTPUT:

PROCESS STEPS: 1. Locate Components 2. Wand Components out of Warehouse 3. Move components to in process staging area 4. Sequence components based on schedule

TECHNOLOGY USED: Oracle Manufacturing, , Manual, RF, Excel

VOLUME: 1300 pcs / hr CYCLE TIME: Event 1 hr / Elapsed = 4 hrs YIELD: 85 %

BUSINESS RULES: 1. Don’t let the production line stop. DISCONNECTS: 1. Pull materials from receiving area.

Pull Instruction

Production Schedule Staged Components

M1.2


SCOR Level 3 – SourceS

uppl

ier

Pur

chas

ing

War

ehou

seA

P

S1.1 Schedule

Product Deliveries

S1.2 Receive Product

S1.3 Verify

Product

S1.4 TransferProduct

S1.5 Authorize

Supplier Payment

D1.10 D1.13D1.2

PurchaseOrder

PurchaseOrder

ProductPacking

Slip

Receiptof Purchase

Order

Invoice

Payment


Plan Element RelationshipsP1 Plan Supply Chain

P2 Plan Source

P3 Plan Make

P4 Plan Deliver

S1.1 Schedule Product Deliverie

s

M1.1 Schedule

Manufacturing Activities

D1.3 Reserve Inventor

y & Promise

Date

D1.5 Plan & Build Loads


Custom e

rService

M arketin

g

Plann ing

Executive

Logistics

SCOR Level 3 Supply ChainProcess Map

M anufacturin

g

Purchasing

Supplier

D1.1 ProcessInquiry & Quote

D1.2 R eceive,Enter, & Validate

Order D1.3 ReserveInventory &

Determ ine DeliveryDate

D1.4 ConsolidateOrders

D1.5 Plan & BuildLoads

D1.6 RouteShipm ents

D1.7 Select Carriers &Rate Shipm ents

D1.8 ReceiveProduct

D1.9 PickProduct

D1.10 LoadVehic le,

Generate ShipDocs & Ship

D1.13 Invoice &Receive Paym ent

M1.3Manufactcure &

TestM1.4 Package M 1.5 S tage

ProductM1.6 R elease

Produc t to D eliver

S1.2 ReceiveProduct

S1.4 Trans ferProduct

P ick List

Picked Load

ShipConfirm ation

Quote

BookedOrder

Confirm ed,A llocated

Order

Shipm ent

Replenishm ent S hipm ent

Plan Supply Chain (P1)Quarterly, ProductFam ily Requirem ents Resources Balance

Plan Source (P2)M onthly, SKU Requirem ents Resources Balance

LeadershipReview

Plan M ake (P3)M onthly, SKU Requirem ents Resources Balance

Plan Deliver (P4)M onthly, SK U Requirm ents Resources Balance

PlannedM aterials

Planned Orders

InventoryNeeds

Strategy, Goals,Annual Business P lan, P& L

Updated Annual BusinessPlan w / P&L action p lan

DailyOrders

Quarterly, Product Fam ily

Planned Orders

M aterialNeeds

W eekly, SK UL

D1.10 Load Vehicle ,Generate Ship Docs &

Ship

Invoice,Paym ent

AvailableInventory

M1.2 IssueProduct

M1.1 ScheduleManufacturing

Activities

S1.3 VerifyProduct

S1.1 ScheduleProduct

Deliveries

D1.2 Receive,Enter, & Validate

Order

S1.5 AuthorizePaym ent

PO

Available Inventory

Scheduleof Jobs

D1.13 Invoice &R eceive Paym ent

ShipConfirm ation

Invoice,Paym ent

PO, R eceipt

Business Blue Print


Productivity Improvement

S1.1 S1.2 S1.3 S1.4 S1.5 TotalsSchedule Product

Deliveries

Receive Product

Verify Product

Transfer Product

Authorize Supplier Payment

Volume 5900 y 15300 y 44000 y 78600 y 40600 y 178400 yEvent Time 9 h 1.86 h 1.13 h 0.16 h 0.6 h 12.75 h

Elapsed Time 29.6 h 3.45 h 39.9 h 2 h 48.8 h 123.75 hYield 83% 95% 98% 83% 93% 90%

Event Time 1 h 1 h 0.565 h 0.16 h 0.16 h 2.885 hElapsed Time 1 h 2 h 24 h 0.75 h 24 h 51.75 h

Yield 99.9% 99.9% 100% 100% 98% 99.56%Event Time 8 h 0.86 h 0.565 h 0 0.45 h 9.876 h

Elapsed Time 28.6 h 1.45 h 15.9 h 1.25 h 24.8 h 72 hYield 16.9% 4.9% 2% 17% 5% 9.16%

AS IS Productivity Consolidated

Source (S1) - Purchase Order

TO BE Productivity Consolidated

Improvements


Prioritize Disconnects


Develop Integrated Solution

Key Points Recommendations address

all factors of performance Portfolio of Projects

managed as a whole; initiates ROI analysis

Integrates with Application Detailed Business Requirements Definition and Solution Design

Transition Teams from “Design” to “Implementation”

Deliverables Master Schedule of

Projects ROI Schedule Implementation

Organization Keeping Your Focus,

December 2000; and Who SCORed my Cheese?; February 2001, More Faster, Less Later, June 2001, SCTN


Balanced Project Mix

Pace of Change

Fast Measured

Scop

e of

Cha

nge

Tactical

Strategic

Focused Improvemen

t

Continuous Improvemen

t

Focused Restructurin

g

Business Process Innovation

Balanced Project Mix


TYPE PROJECT NAME START SCOR PROJECT MANAGER RESULTS PLAN END JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DECSUPPLY CHAIN SCOPE

Strategic Available to Promise Service Flexibility 02/08/00 Deliver Joe Smith Cost Assets 12/31/00

Strategic Make-to-Order Service Flexibility 10/01/99Make David Harris Assets 06/30/00

Strategic Outsource Reconfiguration Service Flexibility 12/03/99Source Deb Larue Cost Assets 12/31/00

Deficiency Non Working Inventory Reduction 07/19/99 Deliver Jay Jones Assets 04/30/00

Deficiency Integrated Supply Chain Planning Service Flexibility 08/16/99 Plan Peter Brinkman Cost Assets TBD

Deficiency Texas Consignment Service Flexibility Determine ScheduleSource Joe Williams Cost Assets

Strategic Eff icient Material Acquisition Determine Schedule Source Elaine Randall Cost

Strategic Direct to Consumer Transportation Service Flexibility 03/01/00 2001 planDeliver Sandy Levee Assets 12/31/00

CompleteCapital Plan Complete Test

BrainstormingSession

QuarterlyActionPlan

Complete 2ndQuarter Plan

Complete 3rdQuarter Plan

Complete 4thQuarter Plan

CompleteImplementation

Process DesignValidation

Process Cutover

PlanningReview

NWIData Integration

DisconnectsReviewed

Action Plan

Monthly Action Plan Reviews - Plants

BrainstormProject Objectives;

Set Strategy

Master Project Schedule


Projected Net Earnings Impact

4.2%4.5% 4.6% 4.7%

5.9%6.7%

5.3%

6.9%

10.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Net E

arni

ngs

FY '01 FY '02 FY '03

Low Diff iculty Projects Low + Medium Diff iculty Projects Low + Medium + High Diff iculty Projects


Implement the Changes

ProjectManagement

Office

ProjectManagementMethodology

Initiate

AssignProject

Manager

GenerateStatement of

Work andFundingRequest

StakeholderApproval

Plan

Create Project Charter

Create Project Plan

Create Budget Spreadsheet

Create CommunicationPlan

Establish Roles andResponsiblities

Create Risk Plan

Create Project Charter

Create ProcurementPlan

Plan PlanExecute/Control

Maintain Project PlanManage Change

Report PerformanceManage IssuesCost Control

Quality ControlManage Risks

Manage Procurement andContracts

MonthlyStatusReport

Close

DocumentProject

Performance

CloseProject

Contracts

PrepareProject

Close Report

Annual Budget& BusinessStrategy

OngoingBusinessRequests

MonthlyProjectReview

MaintainMaster

Schedule


Toro Adoption Progress

1st SCOR Project Enterprise SCOR Phase 1 Implemented


Discover Analyze Design Develop Implement

• Discovery Checklist• Customized Training• Project Charter• Detailed SCORcard

w/Benchmarks• Opportunity Assessment

BusinessCase

To Be SolutionsRecommendations

for Change

2X to 6XROI within 12 months

1 Week 4 Weeks 8-12 Weeks 24 - 32 Weeks

Project Life Cycle – Adoption

• AS IS & TO BE Material Flow

• Detailed Disconnect Analysis

• Design Specifications

• AS IS & TO BE Work and Information Flow

• Prioritized List of Supply Chain Changes

• Technology Selection

• Master Schedule of Projects

• ROI Analysis• Technology Selection • Detail Design

(Requirements) and Configure

• Pilot (Test) and Roll Out or Go Live


Resources

www.supply-chain.org www.supplychaintech.com www.forbes.com www.pmgbenchmarking.com www.Toro.com - 3Q Earnings

Announcement (NYSE:TTC) – 5 by Five Initiative

www.pragmatek.com

http://www.supply-chain.org/

http://www.supplychaintech.com/

http://www.forbes.com/


http://www.toro.com/

http://www.pragmatek.com/

supply chain improvement_supply chain operations reference (scor) model

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