Reference Educator: AMERICAN PRODUCTION AND INVENTORY CONTROL SOCIETY (APICS)
• Are you aware of SCOR?
• Are you applying SCOR’s principles?
• What exactly is SCOR?
• How can SCOR help you?
Supply Chain Operations Reference (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 (MTS) or Make-to-Order (MTO) SCOR is used to describe, measure, and evaluate supply chains in support of strategic planning and continuous improvement
Supply Chain Operations Reference (SCOR) model is a process reference model developed and endorsed by the Supply Chain Council as the cross-industry, standard diagnostic tool for supply chain management, according to the APICS Dictionary (14th ed.). The SCOR model describes the business activities associated with satisfying a customer’s demand, which include plan, source, make, deliver, and return. Use of the model includes analyzing the current state of a company’s processes and goals, quantifying operational performance, and comparing company performance to benchmark data.
SCOR has developed a set of metrics for supply chain performance, and Supply Chain Council members have formed industry groups to collect best practices information that companies can use to elevate their supply chain models. This reference model enables users to address, improve, and communicate supply chain management practices within and between all interested parties in the extended enterprise .
SCOR Management Process
SCOR was developed in 1996 by the management consulting firm PRTM, now part of PricewaterhouseCoopers LLP (PwC) and AMR Research, now part of Gartner, and endorsed by the Supply-Chain Council (SCC), now part of APICS, as the cross-industry de facto standard strategy, performance management, and process improvement diagnostic tool for supply chain management.
SCOR is based on six distinct management processes: Plan, Source, Make, Deliver, Return, and Enable.
• 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.
• Enable – New process since Version 11 (Dec 2012).
The Supply Chain Operations Reference model (SCOR) is the world’s leading supply chain framework, linking business processes, performance metrics, practices and people skills into a unified structure.
Employ the SCOR framework at your organization and:
1. Increase the speed of system implementations: create a Gantt or milestone Chart with accountabilities/responsibility and dates.
2. Support organizational learning goals: KPIs/mission statement
3. Improve inventory turns: Calculation: A frequently used method is to divide the Annual Cost of Sales by the Average Inventory Level.
Example: Cost of Sales = $36,000,000. Average Inventory = $6,000,000.
$36,000,000 / $6,000,000 = 6 Inventory Turns
Level 1: Processes included in SCOR.
Level 1 Metrics/KPIs included in SCOR
• Perfect ( 98-100% daily) order fulfillment
• Order fulfillment cycle/turn around time
• Upside Supply Chain Flexibility is a discrete measurement defined as the amount of time it takes a supply chain to respond to an unplanned 20% increase in demand without service or cost penalty.
• Upside Supply Chain Adaptability is the maximum sustainable percentage increase in quantity delivered that your business entity can achieve in 30 days. (When calculating this metric, consider that 30 days is an arbitrary number provided for benchmarking purposes.
• Downside Supply Chain Adaptability is the maximum percentage reduction in quantities ordered that your business entity can sustain at 30 days prior to delivery with no inventory or cost penalties. (When calculating this metric, consider that 30 days is an arbitrary number provided for benchmarking purposes. For some industries and some organizations 30 days may be in some cases unobtainable or in others too conservative. The calculation of downside supply chain adaptability requires the calculation to be based on the least reduction sustainable when considering Source, Make, and Deliver components
• Overall value at risk: Value at risk (VaR) is a statistical technique used to measure and quantify the level of financial risk within a firm or investment portfolio over a specific time frame. … VaR calculations can be applied to specific positions or portfolios as a whole or to measure firm-wide risk exposure.
• Total cost to serve customers/bottom line. Sum of the supply chain cost to deliver products and services to customers.
Cost to Plan + Cost to Source + Cost to Make + Cost to Deliver + Cost to Return
• Cash-to-cash cycle time: Cash to Cash Cycle Time (C2C) The duration between the purchase of a firm’s inventory and the collection of accounts receivable for the sale of that inventory. (Duration measured in days). Usually a company acquires inventory on credit, which results in accounts payable.
Days Sales of Outstanding + Inventory Days of Supply – Days Payables Outstanding
• Return on Supply Chain fixed assets: Return on Supply Chain fixed assets is calculated
(Supply Chain Revenue – COGS (Cost of Goods Sold) – Supply Chain Management Costs) / Supply-Chain Fixed Assets
• Return on Working Capital: Working capital is a measure of both a company’s efficiency and its short-term financial health. Working capital is calculated as:
Working Capital = Current Assets – Current Liabilities
Spice Maker McCormick and Company is using SCOR to build a world-class Supply Chain to meet the following goals:
• Enable collaboration across functions to create a seamless end-to-end Supply Chain.
• Establish a global standard for Sales and Operations Planning (S and OP).
• Empower and develop employees across the organization.
• Optimize and continuously improve Supply Chain operations
Audience: APICS has some excellent classes on SCOR. Can you see how you can implement SCOR and reap some excellent benefits as a Supply Chain professional, like McCormick and Company is doing?