Discussion: SCOR Model

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About the Supply Chain Operations Reference Model

Peter was introduced to the Supply Chain Operations Reference model (SCOR) in the fall of 1996 as part of a newly formed corporate ‘‘internal consulting’’ team for Imation, which had just been spun off from 3M. He’d been using it in supply chain project work ever since. He has also been active in the Supply- Chain Council, involved in the process of improving SCOR, and teaching others how to use it.

So he’s heard all the questions. Among those most fre- quently asked are: What is the Supply-Chain Council? What is SCOR? How do I use SCOR? What is the value to my organiza- tion? How do I learn more about SCOR?

The Supply-Chain Council

The Supply-Chain Council (supply-chain.org) is an independent not-for-profit corporation formed in 1996 as a grassroots initia-

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EBSCO : eBook Collection (EBSCOhost) - printed on 9/20/2019 11:54 AM via SOUTH UNIV - SAVANNAH CAMPUS AN: 86788 ; Bolstorff, Peter, Rosenbaum, Robert.; Supply Chain Excellence : A Handbook for Dramatic Improvement Using the SCOR Model Account: soc1.main.eds

2 SUPPLY CHAIN EXCELLENCE

tive to develop a supply chain implementation model. Among those involved at the start were individuals from such organiza- tions as Bayer, Compaq, Procter & Gamble, Lockheed Martin, Nortel, Rockwell Semiconductor, Texas Instruments, 3M, Car- gill, Pittiglio, Rabin, Todd, & McGrath (PRTM), and AMR Re- search, Inc. In all, sixty-nine of the world’s leading companies participated in the council’s founding. Its mission today is to perpetuate use of the SCOR model through technical develop- ment, research, education, and conference events. By the end of 2001, the council’s technical community had released five sub- sequent versions of SCOR, providing updates to process ele- ments, metrics, practices, and technology.

The council has attracted about 750 members worldwide, with chapters in Europe, Japan, Korea, Latin America, Australia, New Zealand, and Southeast Asia. Membership is open to any organization interested in applying and advancing principles of supply chain management. There are five special-interest indus- try groups within the council: aerospace and defense, automo- tive, electronics, retail and consumer packaged goods, and pharmaceuticals. Members work in private-sector companies, academics, government, consulting firms, and technology ser- vice providers. In 2002, a corporate membership cost $2,000 a year and the educator’s fee was under $300. With permission, attached as Appendix A is the SCOR overview available in PDF form from the Supply Chain Council’s Web site.

The SCOR Framework SCOR combines elements of business process engineering, benchmarking, and leading practices into a single framework. Under SCOR, supply chain management is defined as these inte- grated processes: PLAN, SOURCE, MAKE, DELIVER, and RETURN—from the suppliers’ supplier to the customers’ cus- tomer, and all aligned with a company’s operational strategy, material, work, and information flows. (See Figure 1-1.)

Here’s what’s included in each of these process elements:

❑ PLAN. Assess supply resources; aggregate and prioritize de- mand requirements; plan inventory for distribution, produc-

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Figure 1-1. SCOR framework.

Supplier

PlanPlan

Customer Customer’s Customer

Suppliers’ Supplier

Make DeliverSource Make DeliverMakeSourceDeliver SourceDeliverDeliver

Internal or External Internal or External

Your Company

Source

Supply Chain Operations Reference Model

PlanPlanPlanPlanPlanPlanPlanPlan

ReturnReturn

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.

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.

tion, and material requirements; and plan rough-cut capacity for all products and all channels.

❑ SOURCE. Obtain, receive, inspect, hold, issue, and authorize payment for raw materials and purchased finished goods.

❑ MAKE. Request and receive material; manufacture and test product; package, hold, and/or release product.

❑ DELIVER. Execute order management processes; generate quotations; configure product; create and maintain customer database; maintain product/price database; manage accounts receivable, credits, collections, and invoicing; execute ware- house processes including pick, pack, and configure; create customer-specific packaging/labeling; consolidate orders; ship products; manage transportation processes and import/ export; and verify performance.

❑ RETURN. Defective, warranty, and excess return processing, including authorization, scheduling, inspection, transfer, warranty administration, receiving and verifying defective products, disposition, and replacement.

In addition, SCOR version 5.0 includes a series of enable ele- ments for each of the processes. Enable elements focus on infor-

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4 SUPPLY CHAIN EXCELLENCE

mation policy and relationships to enable the planning and execution of supply chain activities.

SCOR spans all customer, product, and market interactions surrounding sales orders, purchase orders, work orders, return authorizations, forecasts, and replenishment orders. It also en- compasses material movements of raw material, work-in-proc- ess, finished goods, and return goods. In version 5.0, SCOR specifically does not address sales processes, product develop- ment, and customer relationship management processes.

The SCOR model includes three levels of process detail. In practice, Level One defines the number of supply chains and how their performance is measured. Level Two defines the con- figuration of planning and execution processes in material flow, using standard categories like stock, to-order, and engineer-to- order. Level Three defines the business process used to transact sales orders, purchase orders, work orders, return authoriza- tions, replenishment orders, and forecasts.

The SCOR Project Roadmap While the framework seems simple, there are multiple levels of detail integrating more than sixty process steps, 200 metrics, fifty leading practices, and a hundred potential material flow configurations.

Simply having the dictionary does nothing to save money. You need to do something with it. That’s what the SCOR Project Roadmap is about. (See Figure 1-2.) In four distinct segments, the roadmap addresses operational strategy, material flow, and work and information flow. The segments are:

1. Analyze your basis of competition, which focuses on sup- ply chain metrics and operations strategy.

2. Configure supply chain material flow. 3. Align performance levels, practices, and systems—the in-

formation and work flow. 4. Implement the supply chain changes to improve perform-

ance.

Each segment is comprised of deliverables that help a com- pany understand and improve a specific dimension of supply

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Figure 1-2. SCOR project roadmap.

Material Flow

Operations Strategy

Analyze Basis of

Competition

Configure Supply Chain

Align Performance

Levels, Practices, and

Systems

Align Performance

Levels, Practices, and

Systems

Implement Supply-Chain

Changes

Implement Supply-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 •Supply Chain Strategy and Best Practice Analysis •TO BE Material Flow

Information and Work Flow

•AS IS Work/Information Map •Transactional Productivity Analysis •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

chain performance. The first segment helps to understand how many supply chains a company has and how they are performing compared to the competition. The second segment helps to opti- mize material flow inefficiency. The third helps to optimize transactional productivity. And the fourth helps to plan and im- plement supply chain improvements.

The SCOR Project Roadmap can be applied to projects of narrow scope, or broad-based initiatives that integrate many supply chains across multiple trading partners. It can work for manufacturers, distributors, retailers, value-added resellers, wholesalers, dealers, franchises, and service providers. It does well in a subordinate role within Six Sigma and Lean Enterprise infrastructures. And with a little creativity, the model can even be used to assemble sophisticated Internet-based trading net- works, exchanges, and portals.

Applying the SCOR Project Roadmap For all its power and flexibility, however, there are some es- sential success factors that are between the lines of the project roadmap—things like change management, problem-solving

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6 SUPPLY CHAIN EXCELLENCE

techniques, project management discipline, and business proc- ess engineering techniques. These are essential to a successful project and are not explicitly discussed. In other words, the roadmap can tell you where to go, but it can’t teach you how to drive the car. This book attempts to fill in the lines and provide a comprehensive guide to using SCOR. (See Figure 1-3.)

The phases of a SCOR project as detailed in this book are:

❑ Educate for support ❑ Discover the opportunity ❑ Analyze ❑ Design ❑ Develop and implement

Educate for Support

Chapter 2 examines this phase of a SCOR project. Find an ‘‘evangelist’’ in the company who has the passion to lead a sup- ply chain project and an executive to actively sponsor it. Both must be willing to invest personal time to learn SCOR. If an

Figure 1-3. SCOR 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

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executive delegates this initial learning, the organization will probably fail to sustain change over time.

With an evangelist and sponsor in place, the next step of educating for support is to establish a core business team to buy into the approach and commit to supporting a project with words and deeds.

Even as these steps are taking places, there is a larger learn- ing curve that every company must follow. It begins with general education about SCOR—how it works, the language in which it’s written, and the available tools to support it. This chapter provides a basic introduction, but is not enough to be considered a general education like the curriculum provided by the Supply- Chain Council.

The next educational step is conceptual application of SCOR to your own company. At this stage, a real supply chain in the company is researched and summarized as a business case. Then, in a classroom environment, a trip with the project road- map is simulated.

The third educational stage is to apply the roadmap to a real project, setting expectations and results. Using a formal SCOR coach helps to expand the learning process from individuals to the organizations by including necessary teams.

Finally comes implementation of the supply chain improve- ment projects.

Discover the Opportunity

Discovery (Chapter 3) helps to form the business case that justi- fies spending money on a supply chain project. It’s where the business team sorts out performance opportunities. The com- plexity of supply chain discovery can be visualized as a three- dimensional box of questions. The first dimension asks: At what performance level is your supply chain operating? The second dimension asks: Do we have the right strategy as well as the right work, information, and material flows to support the de- sired performance level? The third dimension asks: What other performance factors will impact the supply chain? These include organizational, process, and technology issues, in addition to

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8 SUPPLY CHAIN EXCELLENCE

understanding people-related factors such as skill, knowledge, and ability.

One of the key outcomes from the discovery step is a project charter, which organizes the supply chain opportunity into the approach, budget, organization, clear measures of successes, and communication plan.

The Analysis Stage

The analysis stage (Chapters 4 through 7) is where the value proposition is articulated in terms that the financial manage- ment of a company requires: cash-to-cash cycle time, inventory days, order fulfillment, and other performance factors. SCOR helps the team to prioritize and balance customer metrics with internal-facing metrics: delivery, reliability, flexibility/respon- siveness, cost, and assets. The resulting SCORcard provides a direct connection to the balance sheet.

Performance requirements are established with respect to your competition and are prioritized by both definitions of a supply chain—product and channel. These priorities will help in the design phase of a SCOR project. The SCORcard also summa- rizes actual performance against benchmark performance with a gap analysis that defines the value of improvements.

The Design Phase

The design phase is divided into material flow (Chapters 8 through 13) and work and information flow (Chapters 14 through 18).

Material flow and work/information flow are the two key components for defining AS IS flows, uncovering disconnects in your processes, and mapping out TO BE flows that eliminate these gaps. The basic questions addressed are: What are my ma- terial flow problems and what’s it worth to solve them? How efficient is my work and information flow and what’s it worth to change them?

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Develop and Implement

This book leads to development of a portfolio of projects (Chap- ter 19) with a projected return on investment. Developing and implementing each project follows industry standard practices of initiating, planning, executing, and formal closing. The de- tailed development, planning, and rollout of individual projects is the subject of another book.

The Value of a SCOR Initiative Using the SCOR approach is reliable and predictable with re- spect to project duration, cost, and benefits. SCOR projects have been carried out with such base metrics as stock price improve- ment, income statement and balance sheet improvement, pur- chase of technology through cash-flow improvements, cost reduction, and ERP optimization.

Implementation results include:

❑ An average of 3 percent as a percentage to total sales op- erating income improvement for the initial SCOR project portfolio derived from cost reduction and service im- provement

❑ Two- to six-times return-on-investment (ROI) within twelve months, often with cost-neutral quick-hit projects underway on a six-month timeframe

❑ Full leverage of capital investment in systems improving return on assets (ROA) for fixed-asset technology invest- ments

❑ Reduced information technology (IT) operating expenses through minimized customization and better use of stan- dard system functions

❑ Ongoing updates to a project portfolio, using continuous supply chain improvement to drive profit improvement at 1 percent to 1-to-3 percent per year

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Building Organizational Support for Supply Chain Improvement

Project planning: Educate for support.

Brian Dowell called out of the blue after getting my name from the Supply-Chain Council—which he had located through a web search on the topic. He was looking for some direction for his company, Fowlers Inc., and described enough motivation within the company to justify making a visit.

We showed up a week later, and Brian, the company’s chief operating officer, gave us a warm greeting and a quick overview that demonstrated Fowlers to be a well-run manufacturing con- glomerate with the seeds of a supply chain strategy already in place.

The strategy had been developed at the division level by David Able, vice president of operations in the technology prod- ucts group—one of the three operating units. He had pieced it together with just a little background in supply chain manage- ment and a whole lot of operating pain. His efforts had been encouraged by his boss, the division president, who had brought the strategy to the attention of other executives in the company.

They had become an informal ‘‘gang’’ with a common feeling

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11B UIL DIN G O RG ANI ZATIO NA L S UPP ORT FO R S UPP LY C HA IN I M PRO VE MEN T

that, while David’s ideas would solve some short-term issues, there had to be a way to solve the company’s supply chain prob- lems at a more strategic level. It didn’t take much prodding to get this gang to start sharing their thoughts.

‘‘Our products are good for a week, maybe ten days, in the store,’’ said Doris Early, president of the food products group. ‘‘We’ve got to move a lot of inventory around with a lot of speed. And if the FDA were to bring in the label from something we processed six months ago, we need to be able to identify the plant, the line, the day, and the names of everyone on the shift that produced it.’’

‘‘Our shelf life is short, but not that short,’’ added Martha Tekitch, president of the technology products group. ‘‘We also have some other things in common with the food group; we buy a lot of commodities. The prices we pay change day-to-day, but our customers won’t let us be quite that flexible.’’

Brian took over. ‘‘There’s some seasonality in our sales—and spikes that are harder to forecast.’’

It all came together as they spoke: many products that have short shelf life and short life cycles; price-sensitive customers sold through various and sophisticated channels with volatility on both ends—demand and supply.

‘‘The demands of our business tear us in every direction all the time,’’ offered Joe Farelong, president of the durable prod- ucts group. ‘‘And even at that, we’re a pretty good company. If we had a supply chain that was really good and really strong, nobody would be able to touch us in our markets.’’

The executives described how a chosen manager, David Able, had outlined the strategy and its main components. They then assigned the strategy to their direct reports in other divi- sions to make it happen.

Brian wasn’t quite ready to admit this at our first meeting, but it was clear what happened: The managers at the next level down thought they’d just been briefed on the latest program-of- the-month and did very little with the strategy. They did take some small steps, identifying a few projects and improving a metric here or there—at the expense of others. But after three months, Brian pushed Joe, Martha, and Doris to join him in looking for outside help.

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Without realizing it, Brian had already taken a few important steps to ensure a successful approach. Selling supply chain man- agement into an organization is tough. It’s an educational sell to everyone involved. Not only is the reality of an integrated supply chain complex; everyone has his or her own preexisting ideas of what supply chains are all about and how they fit in with opera- tional strategy.

SCOR, as an industry standard, makes the sell easier because it has gained credibility from a long list of successful case stud- ies. But the model can’t sell itself, and it can’t teach people who aren’t ready to learn. That’s why any SCOR project will depend on three key roles in the education process. These are the evan- gelist, an active executive sponsor, and the core members of an executive steering team. Without these, you can’t hope for a project’s success.

The Evangelist As is the case with any successful SCOR application, the people who brought SCOR to Fowlers started by educating the organi- zation to support the effort. Their first step was to develop an evangelist. This is the person who is best able to learn the SCOR model; who can sell it to upper management; who has the expe- rience to pilot a project and gain early results; who can become the executive-level project manager for spreading it throughout the business. If nobody steps up to this role, then a SCOR-based project probably cannot succeed.

The evangelist may be self-selected or appointed from above, and his or her first role in this position is typically as project manager of the first SCOR project.

At Fowlers, David Able, vice president of operations in the technology products group, placed himself into the role of evan- gelist based on his interest in supply chain integration, his di- verse background, and his reputation as an effective, influential manager. He was readily confirmed by Brian Dowell, the com- pany’s chief operating officer and the man who would quickly assume another important role as the executive sponsor. (See Figure 2-1.)

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Figure 2-1. Fowlers’ organization chart.

Sally Vesting CEO

Timothy Goodfriend Vice President, Sales

Brian Dowell COO

Amanda Messenger Vice President, Marketing

Jim Erp CIO

Martha Tekitch President, Technology

Products Group

Joe Farelong President, Durable Products

Group

Doris Early President, Food Products

Group

Director, Customer Service Director, Manufacturing Director, Purchasing Director, Logistics Director, Planning

Director, Computer Operations Director, Applications

Vice President, Sales and Marketing Controller David Able – Vice President, Operations

Vice President, Sales and Marketing Controller Vice President, Operations

Lisa Booker CFO

Corporate Treasurer Corporate Controller Director, Accounts Payable Director, Accounts Receivables General Counsel

Edward Row President, International

Group

President, Europe President, Latin America President, Asia

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