Supply Chain Management and the SCOR Model
What is the supply-chain?
Due to its wide scope, supply-chain management must address complex interdependencies; in effect creating an “extended enterprise” that reaches far beyond the factory door. Today, material and service suppliers, channel supply partners (wholesalers / distributors, retailers), and customers themselves, as well as supply-chain management consultants, software product suppliers and system developers, are all key players in supply-chain management.
Why is the supply-chain important?
Manufacturing quality — a long-time competitive differentiator — is approaching parity across the board, so meeting customers’ specific demands for product delivery has emerged as the next critical opportunity for competitive advantage.
Companies that learn how to improve management of their supply-chain will become the new success stories in the global marketplace. Benchmarking studies show significant cost differences between organizations that exhibit best-in-class performance and those with average performance.
What challenges do companies face as they try to improve supply-chain management?
Industry has long lacked a standard way to measure supply-chain performance. Because of this, manufacturers and service providers were unable to use a common assessment tool — benchmarking — in the effort to improve their performance. Moreover, the lack of a common means to describe supply-chain processes rendered software selection difficult and usually expensive.
Instead of finding the right tools for improving specific competitive gaps, businesses often made huge investments in software that failed to address their particular problem. All too often, available software products forced companies (often unwittingly) to revamp their supply-chain processes to suit some default criteria.
How is the Supply-Chain Council helping companies improve their supply-chain efficiency?
The wide-spread use of the Model results in better customer-supplier relationships, software systems that can better support members through the use of common measurements and terms, and the ability to rapidly recognize and adopt best practice no matter where it originates.
The Supply-Chain Council was organized in 1996 by Pittiglio Rabin Todd & McGrath (PRTM) and AMR Research, and initially included 69 voluntary member companies. The Council now has over 750 members world-wide and has established international chapters in Europe, Japan, South East Asia, Southern Africa, Australia / New Zealand and Brazil with additional requests for regional chapters pending.
The majority of the Supply-Chain Council’s members are practitioners and represents a broad cross-section of industries, including manufacturers, distributors, and retailers. Equally important to the Council and the advancement of the SCOR Model are the technology suppliers and implementers, the academicians, and the government organizations that participate in Council activities and the development and maintenance of the SCOR Model.
What is the Supply-Chain Operations Reference Model (SCOR)?
What is a Process Reference Model?
A Process Reference Model can:
- 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” results
- Characterize the management practices and software solutions that result in “best-in-class” performance
A Process Reference Model contains:
- Standard descriptions of management processes
- A framework of relationships among the standard processes
- Standard metrics to measure process performance
- Management practices that produce best-in-class performance
- Standard alignment to software features and functionality
Once a complex management process is captured in standard process reference model form, it can be:
- Implemented purposefully to achieve competitive advantage
- Described unambiguously and communicated
- Measured, managed, and controlled
- Tuned and re-tuned to a specific purpose
How is SCOR used?
By describing supply-chains using these process building blocks, SCOR can be used to describe supply-chains that are very complex (or very simple) 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 has been able to successfully describe and provide a basis for supply-chain improvement for global projects as well as site-specific projects.
What is the Scope of SCOR?
Customer interactions (order entry through paid invoice)
Physical material transactions (supplier’s supplier to customer’s customer) including equipment, supplies, spare parts, bulk product, software, etc.
Market interactions (from understanding of aggregate demand to the fulfillment of each order
SCOR does not attempt to describe every business process or activity. Specifically, SCOR does not address sales and marketing (demand generation), product development, research and development, or post-delivery customer support.
SCOR is designed and maintained to support supply-chains of various complexities and across multiple industries. Supply-Chain.Org has focused on three process levels and does not attempt to prescribe how a particular organization should conduct its business or tailor its systems / information flow.
Every organization that implements supply-chain improvements using the SCOR Model will need to extend the model to at least Level 4, using organization-specific processes, systems, and practices.
Does the SCOR Model change?
Additionally, there is significant technical activity underway that is likely to lead to the evolution of the SCOR model into post-delivery customer support.
It is important to note that the SCOR Model describes processes, not functions. In other words, SCOR focuses on the activity involved, not the person or organizational element that performs the activity.
What is the SCOR Model structure?
- Execution, and
- Enable (formerly Infrastructure)
A Planning element is a process that aligns expected resources to meet expected demand requirements. Planning processes balance aggregated demand across a consistent planning horizon. Planning processes generally occur at regular intervals and can contribute to supply-chain response time.
Execution processes are triggered by planned or actual demand that changes the state of products. They include scheduling and sequencing, transforming materials and services, and moving product. Enable processes prepare, maintain, and manage information or relationships upon which planning and execution processes rely.
The SCOR Model contains seven basic sections:
The Plan and Execution (Source, Make, Deliver, & Return) sections are the heart of the SCOR Model while the Glossary provides a listing of the standard process and metrics terms that are used within the model.
The Plan, Source, Make, and Deliver & Return sections are organized similarly. At the beginning of each section, there are graphics that provide a visual representation of the process elements, their relationships to each other, and the inputs and outputs that are germane to each process element. Following the graphics are text tables that identify:
- Standard name for the process element
- Notation for the process element
- Supply-Chain.Org’s “standard” definition for the process element
- Performance attributes that are associated with the process element
- Metrics that are associated with the performance attributes
- Best practices that are associated with the process (candidates, not necessarily an exhaustive list), and
- Features (generally technologically related) that can contribute to heightened performance of the process
Supply Chain Industry
What is the supply chain industry?
There are three main areas of a company’s supply chain. They include:
- Procurement or the “buying” process.
- This includes the purchasing of the raw materials needed to make the products.
- Production or the “making” process.
- This includes the manufacturing or assembling of the raw components into the finished goods or parts.
- Distribution or the “movement” process.
- This includes everything involved in the logistical flow of getting the products from one point to the next.
- The distribution portion of the supply chain is also called “logistics” and involves aspects such as warehouse management, materials handling, inventory control, packaging and transportation.
What is involved in the transportation function?
A company can chose from a variety of different modes or ways of transporting its products. These include by sea, air, land and railway and can be executed by the company’s own resources, such as its private fleet of trucks and truck drivers, or outsourced to a logistics supplier.
If they choose to outsource, a company can hire an independent carrier or a company known as a third party logistics provider.
Independent carrier companies range in size from small owner/operators (a person who drives the truck they own) to larger companies that own as many as 10,000+ trucks. New Dimension Logistics is a third party logistics provider.
What is a third party logistics provider?
Some 3PLs can do much more than just strictly manage a company’s transportation. For instance, they may also have a cold storage facility in which they warehouse the company’s products. Other 3PLs, strictly manage the physical transportation of the company’s products.