using scor model in a real collaborative sourcing · pdf file2 creating essentials scor...

creating essentials

Using SCOR modelin a real Collaborative Sourcing Scenario

EIPM , Annual conference - Dec 8 2006

Nando GalazzoVP Procurement – Borealis

creating essentials

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SCOR Borealis – Degussa Supply Chain Improvements SCOR Borealis-Degussa

Adding value in Procurement:

“Twist suppliers to the last drop ” ...

... Lopez was wrong !

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Sustained Value Creation and Dialogue...

... are a lot more fun

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Content

The strategic framework• The players

• The visionTools & Methodology

• Partnership excellence

• Supply Chain Reference Model (SCOR)The Opportunity

• The Degussa-Borealis business caseWhat’s different ?

Conclusions

• A New Dynamic

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Presenting the Players

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Borealis Degussa

5 B sales 11.7 B sales

Olefins and Polyolefins( PE/PP) Specialty Chemicals

EU/Global Global

Supplier Relationship Management Solutions to Customer program

Degussa seen as strategic supplier in 12 supply chains

Borealis seen as key customerfor 5 business units

Value Creation Through Innovation

Responsible-RespectExceed-Nimblicity

Research & Innovation are key elements in our sustainable

development growth strategy

Profile

Products

Reach

StrategicFit

ValuesFit

ExecutionFit SCOR + SRM + Proc Excell. SCOR + CRM + M&S Academy

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Creating a new collaborative vision

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Competitive advantage

low

low

high

high

Inno

vatio

n in

tens

ityStrategic framework:

Sustainable value creation through collaboration

TheMagic

Quadrant

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Innovate & differentiate

Create visibility on extended SC Opportunities

Extract value

Goals & objectives:

... and share €

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Presenting the Approach Tools and Methodology

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Why SCOR:If we had mapped processes the classical way:

SCOR SCOR start small & scale fast•Easy mapping

•Quick opportunities identification

•Commonly used methodology & language

+ =- Where is the burning platform ?

- Where to start ?

- How to start ?

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The Supply Chain Council (SCC) has developed and endorsed thThe Supply Chain Council (SCC) has developed and endorsed the e Supply Chain Operations ReferenceSupply Chain Operations Reference--model (SCOR) model (SCOR) as the crossas the cross--industry standard for supply chain management industry standard for supply chain management

The SCC is an independent, notThe SCC is an independent, not--forfor--profit, global corporation with profit, global corporation with membership open to all companies and organizations interestemembership open to all companies and organizations interested in d in applying and advancing in stateapplying and advancing in state--ofof--thethe-- art supply chain art supply chain management systems and practices.management systems and practices.

•• Over 1000 Company Members Over 1000 Company Members

•• CrossCross--industry representation industry representation

•• Chapters in Australia/New Zealand, Brazil, Europe, Japan, NortChapters in Australia/New Zealand, Brazil, Europe, Japan, North h America, Southern Africa, and South East Asia with petitions America, Southern Africa, and South East Asia with petitions for for additional chapters pending.additional chapters pending.

www.supplywww.supply--chain.orgchain.org

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SCOR: A Reference Model for a Supply Chain:5 core processes:

SOURCE MAKE DELIVER

PLAN

RETURNRETURNRETURN

Degussa&

other Borealis Suppliers

Degussa& Other Borealis

Customer

Common Building Block Approach

Processes MetricsBest Practices Technology

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Supply chain improvementsBorealis – DegussaUsing SCOR across enterprises

Case Study

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Initial project scope & complexity

• 3 continents, 8 countries

• 23 production sites

• 30 shipping points

• 27 receiving points

• 1600 deliveries/year

• 50,000 Tons shipped

• 7 major supply chains

• …

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Common & Simple methodology used

Analyze and map common SC

Prioritize and select a Pilot

Do & Implement Pilot

Scale to other areas

Share the benefits

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Project milestones: Fast & Furious

Analyze TO BEDesign

Implementation & ImprovementImplementation & Improvement

• Analyze Production, SC-Structure and Processes for Borealis and Degussa supply chains

• Measure current performance for identified product (high level)

• Identification of Measurements of Improvements

• Detailed Analysis Level 3• Configuration TO-BE• Detailed Improvements

TO BEValidationKick Off

• Implement & Communicate changes in : Organization, Processes and Performance Management Systems

• SCOR Concept• Methodology• Project

Approach• Define Scope

• Agree AS IS• Select the BU to focus on

with further process decomposition

• Present recommendations

• Define low level KPI’s& targets

• Define tasks & responsibilities

• Map changes and define change process

• Agree detailed design

• Train & Coach the organization

• Realize & sustain the benefits

0 1 2 3

Mgt. Team MeetingFeb 7th

Mgt. Team MeetingSeptember 29th

• Visioning workshop

• Develop common set of KPI’s

July 05 Sept 05 Feb 06

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Pero

xide

Overview Supply Chain PeroxidesLevel 2

Forecasts sent to Malmö & info sent to PullachWhy not to send straight to Pullach ?

Empty packaging --> opportunity to value waste ?

Standard LT could be reduced from 15 days to 8 days

SC today --> Degussa US (6 weeks LT)--> Pullach --> BambleWhy not : Degussa US --> Bamble. Elements to be considered :

Why not relocate product from US to Pullach plant

LT reduction opp Got --> Sten, in Got. Degussa keeps sales + Buffer some containers, in Sten, Borealis keptssome tons of safety stock. Do we really need GOT storage location ?

Combine shipments to optimize container fill-rate :use of planning calendar ?

Improved purch. Req. processing (collective by vendor)

Quit COA and promote SQCERS or invoicing plan --> potential ?

Realize strategic Vision PP%: Strategic Vision

OMF growing volume potential for consolidation transportation, for Polycom and Polymere

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Roadmap to improvements

1. Detailed Level 3 Analysis

2. Discussion Production and deliver strategy

3. Quantitative analysis of transportation costs

5. Judgment of benefits and implementation effort 4. Visioning workshop

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Impact/ Benefits

low

low

high

high

Solution portfolioEa

se o

f Im

plem

enta

tion

SC–Reconfiguration

medium

medium

SC–Reconfiguration

Direct shipment

Transport LoadOptimization

Portfolio & StrategicDevelopment

VMI

Lead Time reduction

Forecasting Process

Supply chain delivery performance

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One set of performance metrics : A novelty aspect

Overview Metrics SCOR Level 1 Metrics Total BU PE PPMedian Process Industry

Best in class Process Industry

(02/05)Delivery Performance (Commit date)

BOREALIS 95,5% n.c. n.c. 92% 99%DEGUSSA (per) 72,7%

Order Fulfillment Lead Time 18,5 [days]SOURCE (peroxides - MTF) 15 [days]

MAKE (MTF) 1 [days] 1 [days] 1 [days]DELIVER 3 [days] 3 [days] 3 [days]

Supply-Chain Flexibility 95 [days] 5 [days]SOURCE (per) ? [days]

MAKE 240 [days] 240 [days] 240 [days]DELIVER 0[days] 0 [days] 0 [days]

Total Supply Chain Management Cost 9% 11% 7% 10% 2%Cost of Goods Sold 91% 86% 94% 78% n.c.Value-Added Productivity per payroll € 2,7 [€] 3,7 [€] 3,2 [€] 2,3 [€] n.c.Days of coverage (per) 32,7 [days]Inventory Days Of Supply (RM) 3,8 [days] 7,4 [days] 1,8 [days]Inventory Days Of Supply (all) 29,5 [days] 45,9 [days] 19,9 [days] 51,3 [days] 40 [days]Days of Sales Outstanding 47,7 [days] 70 [days] 33,5 [days] n.c. n.c.Days of Payables 28,8 [days] 51,3 [days] 17,1 [days] n.c. n.c.Cash-To-Cash Cycle Time 48,4 [days] 64,6 [days] 36,3 [days] 55,1 [days] 40 [days]

Assets Asset Turns 3,6 turns 2,4 turns 5,3 turns 1,4 turns 4,5 turns

Supply Chain SCOR-Card (Level 1)

EXTE

RN

AL

INTE

RN

AL

Supply Chain Reliability

Responsiveness

Flexibility

Cost

Cash Cycle

DEGUSSA BOREALIS

Overview Metrics SCOR Level 1 Metrics Total BU PE PPMedian Process Industry

Best in class Process Industry

(02/05)Delivery Performance (Commit date)

BOREALIS 95,5% n.c. n.c. 92% 99%DEGUSSA (per) 72,7%

Order Fulfillment Lead Time 18,5 [days]SOURCE (peroxides - MTF) 15 [days]

MAKE (MTF) 1 [days] 1 [days] 1 [days]DELIVER 3 [days] 3 [days] 3 [days]

Supply-Chain Flexibility 95 [days] 5 [days]SOURCE (per) ? [days]

MAKE 240 [days] 240 [days] 240 [days]DELIVER 0[days] 0 [days] 0 [days]

Total Supply Chain Management Cost 9% 11% 7% 10% 2%Cost of Goods Sold 91% 86% 94% 78% n.c.Value-Added Productivity per payroll € 2,7 [€] 3,7 [€] 3,2 [€] 2,3 [€] n.c.Days of coverage (per) 32,7 [days]Inventory Days Of Supply (RM) 3,8 [days] 7,4 [days] 1,8 [days]Inventory Days Of Supply (all) 29,5 [days] 45,9 [days] 19,9 [days] 51,3 [days] 40 [days]Days of Sales Outstanding 47,7 [days] 70 [days] 33,5 [days] n.c. n.c.Days of Payables 28,8 [days] 51,3 [days] 17,1 [days] n.c. n.c.Cash-To-Cash Cycle Time 48,4 [days] 64,6 [days] 36,3 [days] 55,1 [days] 40 [days]

Assets Asset Turns 3,6 turns 2,4 turns 5,3 turns 1,4 turns 4,5 turns

Supply Chain SCOR-Card (Level 1)

EXTE

RN

AL

INTE

RN

AL


Responsiveness

Flexibility

Cost

Cash Cycle

COMBINED

Overview Metrics Shared SCOR Level 1 Metrics Actual"As-is"

"To-be"(progress)

"To-be"(success) Competition

Median Process Industry

Best in class Process Industry (02/05)

Delivery Performance (Requested Del. date)

73% 85% 95% 92% 90% 95%Forecast accuracy

65% 80% 90% 75% n.c n.cOrder Fulfillment Lead Time

SOURCE (peroxides - MTF) 15 [days] 8 [days] 10 [days] n.cSC Avg 2005 Inventory qty (Tons) - Peroxides 332 10%

reduction20%

reductionSC Avg 2005 Consumption qty (Tons/Month) - Peroxides 202

SC Inv days of supply (days) - Peroxides 50 [days]

INTE

RN

AL

Cash Cycle

Degussa - Borealis Supply Chain SCOR-Card (Level 1 & 2)

EXTE

RN

AL

Responsiveness


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Shared Supply Chain metrics (template)

Overview Metrics Shared SCOR Level 1 MetricsActual"As-is"2005

Actual"As-is"

Q1 2006

Actual"As-is"

Q2 2006

"To-be"(progress)

"To-be"(success)

CompetitionMedian Process Industry

Best in class Process Industry (02/05)

Delivery Performance (Requested Del. date)

65% 66% 69% 85% 90% 90% 95%Forecast accuracy

55% 58% 58% 70% 80% n.c n.cOrder Fulfillment Lead Time (days)

SOURCE (peroxides - MTF) 15 15 15 10 8 n.cSC Avg 2005 Inventory qty (Tons) - Peroxides

450 440 435 405 360 n.c n.c

SC Avg 2005 Consumption qty (Tons/Month) - Peroxides product mix

220 220 215 250 260 n.c n.c

SC Inv days of supply (days) - Peroxides 62 61 62 49 42 51 [days] 40 [days]

INTE

RN

AL

Cash Cycle

Degussa - Borealis Supply Chain SCOR-Card (Level 1 & 2)

EX

TER

NAL

Responsiveness


* Data only for illustration purpose

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Total identified SC savings & origin

Deliver Source

100 %

Source

Return Return

Deliver

Return Return

DeliverMake Source Make

Plan BorealisDegussa

Plan

Make Make

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Savings breakdown

Overview Metrics SC Value for improvement (K€)

Pilot

Investment cost (estimated K€)

Pilot

SC value scaled up to other

business line (K€)

Supply chain reliability 295 40 1690

Responsiveness 50 0 274

Cash cycle 74 10 423

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Change management issues in a collaborative scenario

Typical barriers:

Shared vision feeding mutual need & interest

Understanding about business concepts & opportunities

Trust & openness between partners while building reliable supply chain operations

Change management solutions:

Collaborative workshops Common definitions (Reference model)Commonly selected & shared metrics

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Time for conclusion

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Enhancing partner collaboration is key

SCOR

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Conclusions

PROCESS

SCOR toolkit applied to the extended SCSRM & CRM PRMTOOLS

GOALS

Create & Share value through SC collaborationA total of 2387 K€ savings identifiedBusiness growth (new prod. devpt.) estimated at 3800 K€

Foster partnership

Collaborative sourcing

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Competitive advantage

low

low

high

high

Inno

vatio

n in

tens

ityStrategic framework:

Landing to The Magic Quadrant

TheMagic

Quadrant

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VIB/ABCAL/PICS SC project of the year :

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Key take away message

Procurement is a viable source of value creation

Innovation, entrepreneurial spirit and creativity arekey attributes for procurement

The journey is not always long & difficult

Using simple tools & simple methodology boost project management

using scor model in a real collaborative sourcing · pdf file2 creating essentials scor...

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