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SCOR: Open Standards for Supply Chain Management. Supply Chain Council, Inc. What Keeps You Up at Night? . Stock Market Volatility, Oil Prices, Labor, Political Instability, Security. Reducing Inventory/ Working Capital/ Asset Management. Reducing Total Supply Chain Costs.

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SCOR: Open Standards for Supply Chain Management

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SCOR: Open Standards for Supply Chain Management

Supply Chain Council, Inc.


What Keeps You Up at Night?

Stock Market Volatility, Oil Prices, Labor, Political Instability, Security

Reducing Inventory/

Working Capital/ Asset Management

Reducing Total Supply Chain Costs

Supply Chain Resiliency & Sustainability:

Risk Management

& Green

Competing in a Global Market

Providing Superior & Consistent Customer Service While Increasing Revenue & Margin

Business As Usual Has Been Cancelled…Now What?

SCC & SCOR HRdergi Conference 2010


Superior Supply Chain Management (SCM) has Long Been a Source of Competitive Advantage

% of Revenue

Best-in-class Companies’ Outperform Their Median Competitors with a 50% Cost Advantage

Source: PRTM/The Performance Measurement Group

SCC & SCOR HRdergi Conference 2010


But SCM is Paramount in Times of Economic Uncertainty

  • In 2007, US business logistics costs rose to an all time high of $1.4 trillion (10.1% of US nominal Gross Domestic Product ) 3

  • Supply-chain generally accounts for between 60% and 90% of all company costs1

  • A 2% improvement in process efficiency for supply-chain processes has 3000% - 5000% the impact of a 2% improvement in efficiency for… IT… HR… Finance1… Sales…

1 Exclusive of Financial Services companies2 Source: Hoovers 2006 Financial Data, Supply-Chain Council 2006 SCM Benchmark data on SCM cost for discrete & process industries

3 CSCMP 19th Annual State of the Logistics Industry

Focused initiatives in Supply Chain Management can result in 30-35% cost reductions, liberation of working capital, and revenue increases of 3-5%!

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And SCM Improvement Creates Shareholder Value

The Supply Chain Impacts . . .

All Financial Metrics . . .

& Shareholder Value

Liberate Working Capital

  • Improve customer service and response

  • Optimize inventory flow, utilization & productivity

Improve Capital Efficiency

Reduce

Fixed Capital

  • Best-in-class customer relationships

  • Differentiated service capabilities

Increase

Shareholder Value

Increase Revenue and Margin

Increase

Profit

  • Best-in-class strategic supplier partnerships

  • Leverage of outsourcing of business processes

  • Unique supply chain models

Optimize

Cost Model

Effective Supply Chain Management can increase a Return on Capital Employed by 30% and More!

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THE ROLE OF THE SCOR MODEL IN OPTIMIZING SUPPLY CHAIN PERFORMANCE

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What is a Supply Chain?

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What is a Supply Chain

Supplier processes

Product Management

Customer processes

Product Design

DCOR™

Sales & SupportCCOR™

Supply Chain SCOR™

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Plan

What is SCOR®?

Supply Chain

Supply Chain

Process, arrow indicates material flow direction

Process, no material flow

Information flow

Source

Make

Deliver

Supplier processes

Customer processes

Customer processes

Supplier processes

Return

Return

  • SCOR is a supply chain process reference model containing over 200 process elements, 550 metrics, and 500 best practices including risk and environmental management

  • Organized around the five primary management processes of Plan, Source, Make, Deliver and Return

  • Developed by the industry for use as an industry open standard - Any interested organization can participate in its continual development

9

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The SCOR® model – a cross-industry open standard

Plan

Return

Return

Source

Deliver

Return

Return

Return

Return

Return

Return

  • The five integrated processes provide a boundary-free view of the true end-to-end Extended Supply Chain

  • Supports intra- and cross-enterprise optimization of arbitrary scale

Make

Deliver

Source

Make

Deliver

Source

Deliver

Make

Source

Customer’sCustomer

Your Company

Supplier

Customer

Suppliers’Supplier

Internal or External

Internal or External

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SCOR Processes – Five Levels of Decomposition

EDI

Supply-Chain

Source

S1Source Stocked Product

S1.2Receive Product

XML

Standard SCOR definitions

Company/Industry definitions

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Supply Chain Balanced SCORcard

Standard Strategic (Level 1) Metrics

Customer

Internal

† upside and downside adaptability metrics

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SCOR Benefits Companies

SCOR can be used to describe supply chains that are very simple or very complex using a common set of definitions and enabling a common understanding

It helps companies:

  • Form an integrated measured strategy which translates overall business objectives clearly and comprehensively to all operational business entities

  • Create a common balanced scorecard by which customers can measure their performance and by which SCC members can measure suppliers’ performance

  • Compare the performance of supply chain and related operations within their company or against other companies

  • Determine what processes to improve and by how much to improve them either eliminating waste, or by improving process reliability

  • Guide the consolidation of internal supply chains (which results in significant cost reductions from eliminating duplicative assets)

  • Create standard processes and common information systems across business units (which generates major cost savings, cycle-time and quality improvements)

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SCOR®: CASE IN POINT

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ADVA Optical Networking

The Challenge

  • €370.2M Revenue Enterprise1

  • Rapid growth in demand for storage, voice & data transport

  • Focus on capturing this growth while maintaining profitability

  • Needed to identify inventory drivers and optimize inventory levels to enable ADVA to reach inventory reduction targets whilst improving customer satisfaction in Order Fulfillment Cycle Time (OFCT) and On-time Delivery (OTD)

  • Created a transformation plan that would allow ADVA to proactively plan, drive and manage the inventory levels and better achieve the balance of cost and service

The Solution

  • Using SCOR, ADVA identified performance gaps in key metrics between current and required to reach parity status

  • Also using SCOR, identified process disconnects, drivers of inventory and projects required for improvement

  • Grouped and prioritized proposed projects based on potential impact and amount of effort/risk

  • Agreed to project list including:

    • New S&OP Process

    • Supplier scorecards and quarterly business reviews with suppliers,

    • Information transparency and others

      Benefits Achieved

  • Gross inventory reduced from €59 million to €38 million in 10 months

  • Inventory days of supply reduced 47% from initial scorecard

1Hoovers.com

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Core Value1

  • Improvement of operating results of an average of 3% in the initial SCOR implementation phase by means of cost reduction and improvement in customer services

  • Increase in profitability (between 2x and 6x) with regards to project investments costs within first 12 months of implementation

  • Reduction in IT costs through minimizing system customization and making better use of standard functionality

  • Continuous actualization of process change portfolio by continuous conversion of Supply Chain improvements with the objective of increasing annual profits by 1% to 3%

1Poluha (2007) Application of the SCOR Model in Supply Chain Management New York, USA

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Douglas Pharmaceuticals Limited

The Challenge

  • Significant growth from 2003 to 2007

    • 300% increase in new product development

    • 122% growth in production volume

    • 61% growth in employees

  • Created the “perfect storm” of supply chain issues

  • Converted to new ERP in August 2006

  • “Burning Platform”:

    • Customer DIFOT (Export) Down to 20%

    • Product Lead Times Up to 8 months

    • New Product Introduction Lead Times Up to 9 months

    • Stock Turns Down to 2.1x

    • YTD Sales Down 30%

  • Available Spare Capacity Unknown

  • Customer complaints impact new licensing opportunities and future earnings growth

  • Impact on 2007/8 earnings and shareholder value:

    • EBIT (15.9%)

    • Enterprise Value ($25.2M)

The Solution

  • “Turning point” for organization – DIY not always best

  • Board mandated review at its April 2007 meeting

  • Process established to evaluate options

  • SCE program initiated using SCOR

  • 17 week SCE program between May and September 2007

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Douglas Pharmaceuticals Limited – continued

The Solution

  • Benchmarking and Defect Analysis:

    • Established emphasis on reliability and supply chain cost

    • Confirmed size and relative importance of current performance gaps

    • Provided early direction on root causes

    • Generated basis for calculating opportunity cost

    • Created immediate visibility over supply chain performance

    • Built confidence to move onto Phase Two

  • 24 problem areas impacting reliability and COG

  • Portfolio of 50 improvements addressed key problem areas

  • “Drive Chain” now forms basis of an enterprise wide transformation program

Benefits Achieved

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Typical Potential Improvements1

1Hughes & Michels (1998) Transform your supply chain. Releasing value in business. London, UK

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SAAB AB

Challenge

  • US$3.1B Aerospace Technology Enterprise1

  • Three strategic business segments: aeronautics, defense and security solutions, systems and products

  • Challenged to execute profitable and customer adapted logistics intensive businesses

    • The degree of coordination of logistics operations highly impact Saabs cost level for logistics

    • Coordination enables CEL processes to ensure delivery to customers demands

  • Needed to build competitive operations, planning, logistics, and support

  • To do so, wanted to move to a full lifecycle-based support concept

The Saab Common Solution

  • One backbone system (today based on ERP and/or Best of Breed)

  • Cross-functional collaboration and common trust

  • Increased Interoperability

  • Align SCM Strategy with Corporate Strategy

  • Key Enablers

    • Common Supply Chain Frameworks and Roadmaps

    • Standardization

    • Codification

    • Information Systems

1Hoovers.com

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SAAB Coordinated Effective Logistics (CEL)

Solution

  • Step by step approach - no “big bang”

  • Multiple supply chains and methods

  • Lack of structured methods and processes

  • Knowledge tied to individuals

  • Lack of information sharing

  • Use of the SCOR model

    • Common definitions and process mapping

    • Sustainable and structured methodology being used as framework for realization of all logistics and SCM activities within Project CEL throughout all of its phases; from cradle to the grave

  • Project management

  • Change management

  • Engineering technique

Benefits Achieved

  • Creating a Saab Common Logistics and Supply Chain Management Framework

    • Delivering incremental capabilities

    • Using SCOR Methodology, Processes and Metrics hierarchy

  • Initial business cases have identified savings of 73 FTEs and a total of US$15M

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Raytheon IDS

The Challenge

  • US$4.7B subdivision of US$23.1B Defense Services Provider1

  • Rapid growth but antiquated processes and procurement focus in supply chain left IDS facing non-competitive operating costs

  • No skills within existing team to background and skills for transformational change required

The Solution

  • SCOR/Six-Sigma program assessing all supply chain processes within IDS, with focus all SCOR process areas

  • 8550 people within Raytheon IDS, and 7600 supplier partners went through transformation for accomplishing five key challenges:

    • Improving world-class performance

    • Connecting every employee to the business

    • Creating purposeful, collaborative partnerships

    • Accelerating top-line, double-digit growth

    • Achieving predictable, best-in-class bottom-line performance

      Benefits Achieved

  • 37 Percent reduction in headcount but increase of college-educated population to 66%

  • 75% reduction in transactional processing for material acquisition

  • 25% improvement in SC Cost-to-Sales

  • $57M in bottom-line savings

  • 98% supplier conformance to contract

1Hoovers.com

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Comparative Data1

1Stephens (2000) 1997 Comparative Study Pittsburg, USA

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SASOL Supply Chain Optimization

The Challenge

  • US$16B annual South African Petrochemical Concern 1

  • Embarked on Supply Chain Optimization to identify synergies and improvement opportunities across multiple business units

  • Complex changing political environment and introduction of substantial Managerial class without deep experience

The Solution

  • The SASOL Supply Chain Optimization Journey

  • Awareness – identified SCOR as a tool (2004)

  • Embarked on SCOR pilot project – tackling problem area to show benefits and understand process

  • First in-house project (to build internal success)

  • Approval for permanent Center of Excellence (CoE) competency

  • Prioritization of supply chain projects (project demand exceeds supply)

  • Project 2, 3, 4…..X

  • Embraced “The SCOR Way” (2007)

    Benefits Achieved

  • Ongoing CoE for supply chain optimization

  • Sample project generated IRR of 139% over the project lifetime

  • Estimated US$1B cost improvements over 3 year period

1Hoovers.com

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Even More Companies

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Even More Companies

40-Point spread between SCOR Companies and Major US Indices

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SUPPLY CHAIN COUNCIL, INC.

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SCC: An independent, non-profit global association

  • Formed in 1996 to create and evolve a standard industry process reference modelof the supply chain for the benefit of helping companies rapidly and dramatically improve supply chain operations

  • SCC has established the supply chain world’s most widely accepted framework – the SCOR® process reference model – for evaluating and comparing supply chain activities and their performance

    • It can be used to describe supply chains that are very simple or very complex using a common set of definitions and enabling a common understanding

    • It lets companies quickly determine and compare the performance of supply chain and related operations within their company or against other companies

  • SCC continually advances its tools and educates members about how companies are capitalizing on those tools

    • With membership open to all interested organizations

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Global Scope With Over 800 Member Organizations

Member Distribution

Member Affiliation

Also developing chapters in India and the Middle East

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Industry Membership Scope

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SCC Benefits Companies

  • Accelerates application of the SCOR open standard to all supply chain management practices

  • Provides resources in addition to SCOR for characterizing and measuring supply chain comparative performance

  • Supports knowledge networks of successful applications among participating companies

  • Facilitates continuous improvement of the SCOR open standard to keep it relevant and applicable across industry

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SCC Benefits Individuals

  • Provides comprehensive training in the framework and its application in supply chain management

  • Provides professional credentials in the application of the SCOR standard

  • Provides research forums for individuals to learn and participate in advanced supply chain management practice

  • Supports event and virtual networking with accomplished professionals

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SCC Benefits Academia

  • Supports access to the only universal supply chain management foundation and language for students

  • Provides credentialing through SCOR-S certification program to accelerate student placement in industry

  • Is the global language of supply chain research, cited in over 3000 academic papers and programs

  • Facilitates access to thousands of companies for research and collaboration worldwide

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SCC Benefits Software and Consulting

  • Provides uniform standards and practices for consulting skills and software capabilities across industry

  • Facilitates the development of a global market for software and services focused on universal standards

  • Creates the ability for “off the shelf” business services methodology for small and large organizations

  • Provides uniform credentialing for skills of service providers in supply chain improvement programs

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Call to Action - Possibilities

  • National

    • Development of a Turkish Language version of SCOR

    • Turkish Industry based benchmarking database

    • Training and Education in SCOR for Turkish Industry

  • Industry

    • Looking at value SCC and SCOR may bring to your company

    • Participation in European Leadership Team

  • Individual

    • SCOR briefing materials

    • Discussion with SCM Company Leadership

    • Education and Evangelism

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Many Thanks

For this presentation

www.supply-chain.org/event/136

info@supply-chain.org


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