Supply-Chain Operations Reference

Supply-Chain Operations Reference

Supply-Chain Operations Reference-model (SCOR(r)) is a process reference model developed by the management consulting firm PRTM and AMR Research and endorsed by the Supply-Chain Council (SCC) as the cross-industry de facto 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 in the Extended Enterprise.

SCOR(r) is a management tool, spanning from the supplier's supplier to the customer's customer. The model has been developed by the [ members] of the Council on a volunteer basis to describe the business activities associated with all phases of satisfying a customer's demand..

The model is based on 3 major "pillars":
* Process Modeling
* Performance Measurements
* Best Practices

The Process Modeling Pillar

By describing supply chains using process modeling building blocks, the model can be used to describe supply chains that are very simple or very complex using a common set of definitions. As a result, disparate industries can be linked to describe the depth and breadth of virtually any supply chain.

SCOR(r) is based on five distinct management processes: Plan, Source, Make, Deliver, and Return.

* "Plan" - Processes that balance aggregate demand and supply to develop a course of action which best meets sourcing, production, and delivery requirements.
* "Source" - Processes that procure goods and services to meet planned or actual demand.
* "Make" - Processes that transform product to a finished state to meet planned or actual demand.
* "Deliver" - Processes that provide finished goods and services to meet planned or actual demand, typically including order management, transportation management, and distribution management.
* "Return" - Processes associated with returning or receiving returned products for any reason. These processes extend into post-delivery customer support.

With all reference models, there is a specific scope that the model addresses. SCOR is no different and the model focuses on the following:

* All customer interactions, from order entry through paid invoice.
* All product (physical material and service) transactions, from your supplier’s supplier to your 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. Relationships between these processes can be made to the SCOR and some have been noted within the model. Other key assumptions addressed by SCOR include: training, quality, information technology, and administration (not supply chain management). These areas are not explicitly addressed in the model but rather assumed to be a fundamental supporting process throughout the model.

SCOR provides three-levels of process detail. Each level of detail assists a company in defining scope (Level 1), configuration or type of supply chain (Level 2), process element details, including performance attributes (Level 3). Below level 3, companies decompose process elements and start implementing specific supply chain management practices. It is at this stage that companies define practices to achieve a competitive advantage, and adapt to changing business conditions.

SCOR is a process reference model designed for effective communication among supply chain partners. As an industry standard it also facilitates inter and intra supply chain collaboration, horizontal process integration, by explaining the relationships between processes (i.e., Plan-Source, Plan-Make, etc.). It also can be used as a data input to completing an analysis of configuration alternatives (e.g., Level 2) such as: Make-to-Stock or Make-To-Order. SCOR is used to describe, measure, and evaluate supply chains in support of strategic planning and continuous improvement.

In the example provided by the picture the Level 1 relates to the Make process.This means that the focus of the analysis will be concentrated on those processes that relate to the added-value activities that the model categorizes as Make processes.

Level 2 includes 3 sub-processes that are “children” of the Make “parent”.These children have a special tag - a letter (M) and a number (1, 2, or 3).This is the syntax of the SCOR model. The letter represents the initial of the process. The numbers identify the “scenario”, or “configuration”.

M1 equals a “Make build to stock” scenario. Products or services are produced against a forecast.M2 equals a “Make build to order” configuration. Products or services are produced against a real customer order in a just-in-time fashion.M3 stands for “Make engineer to order” configuration. In this case a blueprint of the final product is needed before any make activity can be performed.

Level 3 processes, also referred to as the business activities within a configuration, represent the best practice detailed processes that belong to each of the Level 2 “parents”.

The example shows the breakdown of the Level 2 process “Make build to order” into its Level 3 components identified from M2.01 to M2.06.Once again this is the SCOR syntax: letter-number-dot-serial number.

The model suggests that to perform a “Make build to order” process, there are 6 more detailed tasks that are usually performed.The model is not prescriptive, in the sense that it is not mandatory that all 6 processes are to be executed. It only represents what usually happens in the majority of organizations that compose the membership base of the Supply Chain Council.

The Level 3 processes reach a level of detail that cannot exceed the boundaries determined by the industry- agnostic and industry-standard nature of the SCOR model.Therefore all the set of activities and processes that build - for instance - the M2.03 “Produce & test” process will be company-specific, and therefore fall outside the model’s scope.

The Performance Measurements PillarThe SCOR model contains more than 150 key indicators that measure the performance ofsupply chain operations.These performance metrics derive from the experience and contribution of the Council members.As with the process modeling system, SCOR metrics are organized in a hierarchical structure.Level 1 metrics are at the most aggregated level, and are typically used by top decision makers to measure the performance of the company's overall supply chain.Level 1 Metrics are primary, high level measures that may cross multiple SCOR processes. Level 1Metrics do not necessarily relate to a SCOR Level 1 process (PLAN, SOURCE, MAKE, DELIVER, RETURN).

The metrics are used in conjunction with performance attributes.The Performance Attributes are characteristics of the supply chain that permit it to be analyzed and evaluated against other supply chains with competing strategies. Just as you would describe a physical object like a piece of lumber using standard characteristics (e.g., height, width, depth), a supply chain requires standard characteristics to be described. Without these characteristics it is extremelydifficult to compare an organization that chooses to be the low-cost provider against an organization that chooses to compete on reliability and performance.

Associated with the Performance Attributes are the Level 1 Metrics. These Level 1 Metrics are the calculations by which an implementing organization can measure how successful they are in achieving their desired positioning within the competitive market space.

The metrics in the Model are hierarchical, just as the process elements are hierarchical. Level 1 Metrics are created from lower level calculations.(Level 1 Metrics are primary, high level measures that may cross multiple SCOR processes. Level 1 Metrics do not necessarily relate to a SCOR Level 1 process (PLAN, SOURCE, MAKE, DELIVER, RETURN).Lower level calculations (Level 2 metrics) are generally associated with a narrower subset of processes. For example, Delivery Performance is calculated as the total number of products delivered on time and in full based on a commit date.

The Best Practices Pillar

Once the performance of the supply chain operations has been measured and performance gaps identified, it becomes important to identify what activities should be performed to close those gaps. Over 430 executable practices derived from the experience of SCC members are available.

The SCOR model defines a best practice as a current, structured, proven and repeatable method for making a positive impact on desired operational results.

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