Supply Chain Council & Supply Chain Operations Reference (SCOR) Model Overview

Scott Stephens Chief Technology Officer

Supply-Chain Council, Inc. 303 Freeport Road Pittsburgh, PA 15215 USA www.supply-chain.org
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Supply Chain Management Changing Times

! Eighteen months ago boom ! Central issues ! Revenue Capture ! Demand forecast ! Speed ! One month ago bust ! Central Issues ! Cost ! Inventory ! Now Uncertainty ! Emerging Issues ! Just-in-case vs. just-in-time ! Consumer confidence ! Supply chain management is now a watchword in business, Wall Street, and in the news media

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Supply Chain Management & The Supply Chain Council

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 The SCC is an independent, not-for-profit, global corporation with membership open to all companies and organizations interested in applying and advancing state-of-the-art supply chain management systems and practices. Over 700 Company Members Cross-industry representation Chapters in Australia/New Zealand, Europe, Japan, Korea, Latin America, and South East Asia with petitions for additional chapters pending. Over 30 new members per month The Supply-Chain Council (SCC) has developed and endorsed the Supply Chain Operations Reference-model (SCOR) as the crossindustry standard for supply chain management
The SCC was organized in 1996 by Pittiglio Rabin Todd & McGrath (PRTM) and Advanced Manufacturing Research (AMR), and initially included 69 voluntary member companies Version 5.0a August, 2001

SCC Organization - Chapters and Staffing

Seoul, Seoul, Korea Korea

Korean Korean Management Management Assoc. Assoc. Tokyo, Tokyo, Japan Japan Hitachi Hitachi SingaporeSouthEast SingaporeSouthEast Asia Asia Intel Intel Sydney Sydney Australia Australia // New New Zealand Zealand Accantia Accantia

Pittsburgh, Pittsburgh, PA PA Bayer Bayer Headquarters Headquarters *Executive *Executive Director Director

AmsterdamAmsterdam- Europe Europe Siemens Siemens

Mexico Mexico City, City, Latin Latin America America EXEL EXEL

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Under Development: Hong Kong, India

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Membership
S CC M em ber Com pos ition
P racti ti oners S of tw are V endors C onsultants U ni versi ties/G ov. O rgs/A ssns. N orth A m erica E urope Japan O ther

S CC Members h ip by R egion

! 700+ SCC members, ! Composition

! ! ! !

40%: Practitioners 25%: Enabling Technology Providers 20%: Consultants 15%: Universities, Associations, Government Organizations

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Current Technical Committee Structure

Integration Committee C-Peter Bolstorff Pragmatek V-Larry Gray Cobre Group Plan Committee C-Katie Kaspar VC -Oscar Chappel Tech Connection Source Committee C-Dennis Zagrodnik Daimler/Chrylser VC -Paul Welch - Nokia Return Committee C- Major Scott Koster (USMC) Intel Siemens RosettaNet George Brown INTEL Herbert Heinzel - Siemens
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Make Committee C -Ed Biancarelli Washington Group VC -Irving Briks BellSouth Deliver Committee C - Dan Swartwood Pragmatek VC - Rick Hughes Lockheed Martin

Metrics Committee

Supply-Chain Operations Reference-model (SCOR) Overview

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What is a process reference model?

! Process reference models integrate the well-known concepts of business process reengineering, benchmarking, and process measurement into a cross-functional framework

Business Process Reengineering Capture the as-is Capture the as-is state of a process state of a process and the andderive derive the desired to-be desired to-be future futurestate state

Benchmarking

Best Practices Analysis

Process Reference Model Capture the as-is state of a process and derive the desired to-be future state

Quantify Quantifythe the operational operational performance of performance of similar companies similar companies and andestablish establish internal targets internal targets based on best-inbased on best-inclass results class results

Characterize Characterizethe the management management practices and practices and software solutions software solutions that thatresult resultin inbestbestin-class in-class performance performance

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-inclass performance

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SCOR is structured around five distinct management processes

Plan

Deliver Return

Source Return

Make

Deliver Return

Source Return

Make

Deliver Return

Source Return

Make

Deliver Return

Source Return

Suppliers Supplier

Supplier
Internal or External

Your Company

Customer
Internal or External

Customers Customer

SCOR Model
Building Block Approach Processes Best Practice
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Metrics Technology

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Supply-Chain Operations Reference-model (SCOR) 5.0 - Processes

Plan
P2 Plan Source P1 Plan Supply Chain P3 Plan Make P4 Plan Deliver P5 Plan Returns

Suppliers

Source
S1 Source Stocked Products

Make
M1 Make-to-Stock

Deliver
D1 Deliver Stocked Products

S2 Source MTO Products

M2 Make-to-Order

D2 Deliver MTO Products

S3 Source ETO Products

M3 Engineer-to-Order

D3 Deliver ETO Products

Return Source

Return Deliver

Enable
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Customers

SCOR Contains 3 Levels of Detail

Level # Description
Source

Schematic
Plan Deliver

Comments
Level 1 defines the scope and content for the Supply Chain Operations Reference model Here basis of competition performance targets are set A companys supply chain can be configured-toorder at Level 2 from approximately 24 core process categories. Companies implement their operations strategy through their unique supply chain configuration. Level 3 defines a companys ability to compete successfully in its chosen markets and consists of: Process element definitions Process element information inputs and outputs Process performance metrics Best practices, where applicable System capabilities required to support best practices Companies fine tune their Operations Strategy at Level 3

Supply Chain Operations Reference model

1 Top Level (Process Types) 2 Configuration Level (Process Categories) 3 Process Element Level
(Decompose Processes)
P3.1 Identify, Prioritize, and Aggregate Production Requirements

Make

Return

Return

P3.3 Balance Production Resources with Production Requirements

P3.4 Establish Detailed Production Plans

P3.2 Identify, Assess, and Aggregate Production Resources

Not in Scope

Implementation Level
(Decompose Process Elements)

Companies implement specific supply chain management practices at this level Level 4 defines practices to achieve competitive advantage and to adapt to changing business conditions

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Mapping material flow

(S1, D1) (SR1,DR1,DR3) Manufacturing Warehouse (S1, S2, M1, D1) (SR1,SR3,DR3)
Customer

Customer

(S1) (SR1,SR3) Warehouse (S1, D1) (SR1,DR1,DR3) Other Suppliers (D1) Warehouse (S1, D1) (SR1,DR1,DR3) Latin American Suppliers (D1)

European Supplier (S1) (D2) (SR1,SR3) (DR1)

Customer

Warehouse (S1, D1) (SR1,DR1,DR3)

Customer

(S1) (SR1,SR3)

(S1) (SR1,SR3)

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Mapping the processes

P1 P1 P1 P1 P1 P1

P2 P2

P3 P3 P4 P4

P3 P3 P2 P2 P4 P4

P2 P2 P4 P4

European European RM Supplier RM Supplier Key Other Key Other RM RM Suppliers Suppliers

S2

M2

D2

S1

M1

S2 D1 S1

M1

D1

S1

D1

S1

RM Suppliers

ALPHA

Alpha Regional Warehouses

Consumer Consumer

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Linking Supply Chain Performance Attributes and Level 1 Metrics

Performance Attribute
Supply Chain Delivery Reliability

Performance Attribute Definition

Level 1 Metric

The performance of the supply chain in delivering: the correct product, to the correct place, at the correct time, in the correct condition and packaging, in the correct quantity, with the correct documentation, to the correct customer. The velocity at which a at which a supply chain provides products to the customer. The agility of a supply chain in responding to marketplace changes to gain or maintain competitive advantage. The costs associated with operating the supply chain.

Delivery Performance Fill Rates Perfect Order Fulfillment Order Fulfillment Lead Times Supply Chain Response Time Production Flexibility Cost of Goods Sold Total Supply Chain Management Costs

Supply Chain Responsiveness Supply Chain Flexibility

Supply Chain Costs

Value-Added Productivity Warranty / Returns Processing Costs Supply Chain Asset Management Efficiency The effectiveness of an organization in managing assets to support demand satisfaction. This includes the management of all assets: fixed and working capital. Cash-to-Cash Cycle Time Inventory Days of Supply Asset Turns

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Supply Chain SCORcard & Gap Analysis

NEW Product Line
Supply Chain SCORcard
Overview Metrics Supply Chain Reliability EXTERNAL SCOR Level 1 Metrics
Delivery Performance to Commit Date Fill Rates

Performance Versus Competitive Population

Actual 50% 63% 0% 35 days 97 days 45 days 19%

Parity 85% 94% 80% 7 days 82 days 30 days 13%

Advantage 90% 96% 85% 5 days 55 days 25 days 8%

Superior 95% 98% 90% 3 days 13 days 20 days 3%

Value from Improvements

Perfect Order Fulfillment

$30M Revenue $30M Revenue Key enabler to cost and asset improvements

Responsiveness Order Fulfillment Lead times Flexibility

Supply Chain Response Time Production Flexibility Total SCM Management Cost

$30M Indirect Cost

INTERNAL

Cost

Warranty Cost

NA

NA

NA

NA

NA

Value Added Employee Productivity Inventory Days of Supply

NA 119 days 196 days 2.2 turns

$156K 55 days 80 days 8 turns

$306K 38 days 46 days 12 turns

$460K 22 days 28 days 19 turns

NA NA $7 M Capital Charge NA

Assets

Cash-to-Cash Cycle Time Net Asset Turns (Working Capital)

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Decomposing Metrics
Cycle Time Perfect Order Fulfillment

Revenue Accounts Receivable Cash Flow

Supplier on time delivery

Schedule Achievement

Perfect Order Fulfillment On Time On Time In Full Docs Damage Perfect Order Fulfillment D1 S1

Delivery Performance European European RM Supplier RM Supplier Key Other Key Other RM RM Suppliers Suppliers

In Full Docs

S2

M2

D2 S2

Damage Supplier on time delivery M1 S1 Alpha Regional Warehouses D1 S1

S1

M1

D1

RM Suppliers Version 5.0a August, 2001

ALPHA

Consumer Consumer

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Performance Measurement
Cycle Time

Revenue Accounts Receivable Cash Flow

Inventory Metrics Conflict

Supplier Supplier on time delivery on time delivery Actual 85% Delivery Delivery Performance Performance Actual 99%

Perfect Order Fulfillment Perfect Order Fulfillment Goal 95%

Schedule Schedule Achievement Achievement Actual 95%

Perfect Order Fulfillment Perfect Order On Time In Full Docs Fulfillment Perfect Order Actual 90% On TimeFulfillment Actual - 85% In Full Docs

European European RM Supplier RM Supplier Key Other Key Other RM RM Suppliers Suppliers

S2

M2

D2 S2

S1

M1

D1 S1

Damage Under-performance Damage Process Supplier Perfect Order on time delivery Fulfillment Systems Under-performance D1 M1 S1 D1 S1 Process Systems Alpha Regional Warehouses

RM RM Suppliers Suppliers Version 5.0a August, 2001

ALPHA

Consumer Consume Consumer r

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SCOR Project Roadmap

Analyze Basis of Competition Operations Strategy
Competitive Performance Requirements Performance Metrics Supply Chain Scorecard Scorecard Gap Analysis Project Plan

SCOR Level 1

Configure supply chain

Material Flow

AS IS Geographic Map AS IS Thread Diagram Design Specifications TO BE Thread Diagram TO BE Geographic Map

SCOR Level 2

Align Performance Levels, Practices, and Systems

Information and Work Flow

AS IS Level 2, 3, and 4 Maps Disconnects Design Specifications TO BE Level 2, 3, and 4 Maps

SCOR Level 3

Implement Implement supply chain supply chain Processes and Processes and Systems Systems Version 5.0a August, 2001

Develop, Test, and Roll Out

Organization Technology Process People

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SCOR Implementations

! Plan, development, and formation of a company to support a new product line (Complete) ! Re-engineering of supply chain processes for a corporation (138 divisions, 190 countries, 770 sites) (In process) ! Implementation of SCOR processes corporate-wide ! Level 1 Metrics used as executive evaluation criteria ! Re-organization of logistics groups into Plan, Source, Make, Deliver (Complete) ! Multiple organizations ! Collaborative forecasting ! Contracts and purchase orders

Thinking is easy, acting is difficult, and to put one's thoughts into action is the most difficult thing in the world. Goethe
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SCOR SCOR Projects Projects A A Wide Wide Range Range of of Adoption Adoption
! Consumer Foods ! Project Time (Start to Finish) 3 months ! Investment - $50,000 US ! 1st Year Return - $4,300,000 US ! Electronics ! Project Time (Start to Finish) 6 months ! Investment - $3-5 Million US ! Projected Return on Investment - $ 230 Million US ! Software and Planning ! SAP bases APO key performance indicators (KPIs) on SCOR Model ! Aerospace and Defense ! SCOR Benchmarking and use of SCOR metrics to specify performance criteria and provide basis for contracts / purchase orders

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Supply Chain Council Outreach

! SCOR Workshops (2000)

! ! ! ! ! ! ! ! ! !

Atlanta, January 20-21 Chandler, AZ (Intel), February 8-9 Fountainbleu, March 9-10 Oregon (Intel) March 28-29 Chicago, April 12-13 Sydney, May 4-5 Singapore, June 1-2 Detroit, June 22-23 London, July 11-12 Philadelphia (SAP), July 18-19

! ! ! ! ! ! ! ! ! ! !

Waldorf, Germany (SAP), August 1-2 Auckland, NZ, August 3-4 Singapore (SAP), August 8-9 Chandler, AZ (Intel) August Amsterdam, September 28-29 Tokyo, October 5-6 Mexico City, October 12-13 St. Louis, October 26-27 Sydney, November 6-16 (3 - public, SAP, CHH) Hanover, Germany November 9-10 Oslo, Norway Dec 3-5

!Currently

working with Intel to develop an instructor training course

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Supply Chain Council Outreach

! SCOR Workshops (2001) ! Events

! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! !

Anaheim, January 20-21 Singapore, February 20-21 Singapore (BASF), February 22-23 Cancun, Mexico March 7-8 New Orleans, April 5-6 Melbourne (BHP), April 20-22 Tokyo, April 23-24 Brussels (Medtronics), May 2-3 Gohteburg, May 9-10 Singapore, May 18-19 Charlotte, June 18-19 Albany, GA (USMC) September 6-7 Einhoven (Origin) Sept 19-19 Chicago, September 27-28 Berlin, October 4-5 Frankfurt (BASF), October 23-25 Washington DC, November 12-13 Gotheburg, December 4-5

! Supply-Chain World-Europe Berlin, Germany, Oct 1-3, 2001 ! Supply-Chain World-Japan Tokyo, Japan, Nov 1, 2001 ! SCOR Users Seminar Washington, DC, USA, Nov 14, 2001 ! SCC Winter Meetings Charlotte, North Carolina, USA, Jan 23-24, 2002 ! Senior Supply-Chain Executive Retreat Phoenix, Arizona, USA, Feb. 27 Mar. 1, 2002 ! Supply-Chain World-Latin America, Monterrey, Mexico, March dates TBD ! Supply-Chain World-North America New Orleans, Louisiana, USA, April 22-24, 2002 ! Supply-Chain World-South East Asia Singapore, May 15-16, 2002

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2000 - 2001 Technical Accomplishments

! Released Version 5.0

! Completed Return Processes ! Began updating the Models best practice (e-business) ! Began metrics restructure and glossary update ! (Note of caution to users previous to SCOR 5.0)
! Research

! Joint APICS research publication ! Continued support of Penn State / Manugistics Research ! Formation of Research Strategies Advisory Board
! Workshop material development and conduct

! 5 versions of workshop developed and delivered Over 500 members have attended SCOR Workshops with companies like Intel, HP, EDS, US Department of Defense, Compaq Baxter, SAP, hosting in-house Workshops

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SCOR Model Timeline - 6.0

! After completing Version 5.0 changes committees began working Version 6.0 - tentatively scheduled for release in Spring 2002

! Metrics Revision and Decomposition Trees ! Return Metrics and Best Practice Complete ! Best Practice and e-Business Improvement ! Collaboration

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SCOR Model Directions

! Changes anticipated to shift from structural issues to implementation issues ! Product Development ! Customer/Supplier Relationship Management ! Import / Export ! E-business ! Reverse logistics / warranty returns ! Inventory optimization ! Service environment ! Synchronizing advanced planning and business planning ! Special Industry Groups / International Chapters ! Finance and metrics ! Benchmarking regional issues

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SCC provides the forum - SCOR documents the learning

! Process Model provides a toolset for rapidly modeling and understanding the supply chain ! Metrics provide a toolset for evaluating the supply chain and rapidly identifying high value opportunities ! Best practices and features provide a candidate list of improvement options ! The SCOR Model is the only model of its type that links these elements and provides a means for assessment of the supply chain outside of the individual organization ! Council members have demonstrated dramatic implementation successes in virtually every industry in every region of the world. ! The pace and number of SCOR implementations is accelerating and more and more organizations are adopting SCOR as the framework for their supply chain improvements.

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The Bottom Line -

! Council members have demonstrated dramatic implementation successes in virtually every industry in every region of the world. ! The pace and number of SCOR implementations is accelerating and more and more organizations are adopting SCOR as the framework for their supply chain improvements.

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