Basics of Supply Chain Management and SCOR

Agenda 1.Introduction to Supply Chain Management 2.Manufacturing Planning and Control from APICS 3.Overview of SCOR model 4.SCOR model for SMEs in Singapore 5.A Case Study using SCOR m

Albert Tan

Associate Director (Industry Research) The Logistics Institute – Asia Pacific

Basics of Supply Chain Management and

SCOR

Winner for Best Educational Course Provider 2003-2010

A Collaboration Between

The Logistics Institute – Asia Pacific

 Established in Nov 1998

 An initiative of

 A collaboration between

Economic Development Board of Singapore

 National University of Singapore

 Georgia Institute of Technology

 Mission: To be the premier institute in Asia Pacific nurturing logistics

excellence in research and education

Agenda

1.Introduction to Supply Chain

Management

2.Manufacturing Planning and Control

from APICS

3.Overview of SCOR model

4.SCOR model for SMEs in Singapore

5.A Case Study using SCOR model

1  4

Supply Chain Management Definitions

• Supply chain: The global network used to deliver

products and services from raw materials to end

customers through an engineered flow of information,

physical distribution, and cash.

• Supply chain management: The design, planning,

execution, control, and monitoring of supply chain

activities with the objective of creating net value, building

a competitive infrastructure, leveraging world-wide

logistics, synchronizing supply with demand, and

measuring performance globally.

─APICS Dictionary

1  5

Basic Supply Chain: External

Manufacturer

Consumers Dominant flow of goods and services

Dominant flow of demand and design information

Dominant flow of cash

External supply chain from a manufacturer’s perspective

Returns and reverse logistics

1  6

Traditional Internal Supply Chain View

Raw Materials

Customers

Lowest purchase

price

Inventory buffers

High utilization % Long runs – minimize changeovers

Low unit costs Safety stocks

Full truckload quantities Best shipping rate Safety stocks

1  7

Cross-Functional Supply Chain View

Develop

Products

and

Services

Manage Procurement

Produce Products

Supply chain processes

 The value chain consists of the value-adding processes that enable a

company to take its products from conception to market

 The internal supply chain is a subset of the value chain

 Support processes are important but are not considered value chain

processes

Manage Customer Orders and Reverse Logistics

Manage Distribution

Perform Marketing and Sales

Manage Finance

Manage Human Resources

Key support processes:

1  8

Conflicts in Traditional Supply Systems

Finance Marketing Operations

Inventory investment

Traditional

Objective

Customer service

Production efficiency

Increase profit and cash flow, reduce investment

Increase revenue/

satisfy customers

Reduce manufacturing cost

8

9

7

1  9

Role of Materials Management

1  10

Objectives of Manufacturing

• The right products

• Of the right quality

• In the right quantities

• At the right time

• At minimum cost (right price)

1  11

Why Plan?

• To satisfy customer demand and ensure

the availability of resources

– Material

– Capacity

Demand Resources

1  12

1  12

These are questions of priority and capacity.

A Good Planning and Control System

What must

we get and when?

1  13

Manufacturing Planning and Control

Order Sequencing

Input/Output Control

Master Scheduling

Capacity Requirements Planning (CRP)

Sales & Operations Planning

Business Planning

Master Planning

Resource Planning (RP) Rough-Cut Capacity Planning (RCCP)

Material Requirements Planning (MRP)

Production Activity Control (PAC)

© APICS CONFIDENTIAL AND PROPRIETARY

1  14

Evolution from MRP to ERP

MRP

MRP Closed Loop

MRP II ERP

MRP Processor

Closed-Loop Feedback

Best Practice Processes

Common Database

Sales and Operations

Planning

Total Cross-Functional

Software Process Integration

© APICS CONFIDENTIAL AND PROPRIETARY

Supply Chain Council

&

Supply Chain Operations Reference

(SCOR) Model Overview

16

• 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

cross-industry 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

Membership

• 700+ SCC members,

• Composition

– Practitioners

– Enabling Technology Providers

– Consultants

– Universities, Associations, Government

Organizations

SCC Member Composition

Practitioners Software Vendors Consultants Universities/Gov

Orgs/Assns

SCC Membership by Region

North America Europe Japan Other

The Value of SCOR

Index Summary 2003-2005

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

Period

DJIA S&P 500

SCOR

Companies with formal process management

• Are 780% more profitable than peers 1

• Exhibit greater share growth than leading market indicators 2

1 Supply-chain Council 2003 – profit and revenue analysis

2 PCOR Research 2006 – SCOR company share performance – whitepaper in 2007

Supplier

Plan

Customer Suppliers’

Supplier

Internal or External Internal or External

Your Company

Source

SCOR is structured around five distinct

management processes

SCOR Model

Return Return Return

Building Block Approach

Best Practice Technology

P1 Plan Supply Chain

Plan

P2 Plan Source P3 Plan Make P4 Plan Deliver

S1 Source Stocked Products M1 Make-to-Stock

M2 Make-to-Order

M3 Engineer-to-Order

D1 Deliver Stocked Products

D2 Deliver MTO Products

D3 Deliver ETO Products S2 Source MTO Products

S3 Source ETO Products

Supply-Chain Operations Reference-model (SCOR)

Return

Source

P5 Plan Returns

Return Deliver

Enable

22

SCOR Hierarchy

Level 1 Level 2 Level 3 Level 4 Level 5

Scope Configuration Activity Workflow Transactions

Differentiates

Business

Differentiates Capabilities

Transactions Defines Scope,

Enterprise

Strategy

Differentiates Supply-chain Strategies

Links, Metrics, Tasks and Practices

Automation Framework

Language

Framework Language

Framework Language

Industry or Company Specific Language

Technology Specific Language

S1 Source Stocked Product Supply-Chain

Source

S1.2 Receive Product

Standard SCOR definitions Company/Industry definitions

EDI XML

24

Performance

Attribute

Performance

Attribute

Performance

Attribute

Performance Attribute Definition Level 1 Metric

Supply Chain

Delivery Reliability

Supply Chain

Delivery Reliability

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 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

Delivery Performance Fill Rates Perfect Order Fulfillment Supply Chain

Responsiveness

Supply Chain

Responsiveness

The velocity at which a at which a supply chain provides products to the customer

The velocity at which a at which a supply chain provides products to the customer

Order Fulfillment Lead Times Supply Chain

Flexibility

Supply Chain

Flexibility

The agility of a supply chain in responding to marketplace changes to gain or maintain competitive advantage

The agility of a supply chain in responding to marketplace changes to gain or maintain competitive advantage

Supply Chain Response Time Production Flexibility Supply Chain Costs The costs associated with operating the supply

chain

The costs associated with operating the supply chain

Cost of Goods Sold Total Supply Chain Management Costs

Total Supply Chain Management Costs

Value-Added Productivity Warranty / Returns Processing Costs

Warranty / Returns Processing Costs

Supply Chain Asset

Management

Efficiency

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

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

Linking Supply Chain Performance Attributes and

Level 1 Metrics

Lesson 2/ Wk 3 25

The SCOR Project Roadmap

Phase Name Deliverable Resolves

Initial BUILD • Organizational Support Who is the sponsor?

I DISCOVER • Supply-Chain Definition • Supply-Chain Priorities

• Project Charter

What will the program cover?

II ANALYZE • Scorecard • Benchmark

• Competitive Requirements

What are the strategic requirements of your supply-chain?

III MATERIAL • Geo Map • Thread Diagram

• Disconnect Analysis

Initial Analysis – where are the problems?

• Best Practices Analysis

Final Analysis – where are the solutions?

V IMPLEMENT • Opportunity Analysis • Project Definition

SCOR Projects – A Wide Range of Adoption

• Consumer Foods

– Project Time (Start to Finish) – 3 months

– Investment - $50,000 US

– 1 st 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 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

SCOR for SMEs in Singapore

Apply scale to the SCOR model

Example of Scoring

The Solution

E-SCM incentives for SMEs

The Logistics Institute – Asia Pacific

National University of Singapore

21 Heng Mui Keng Terrace, #04-01

Singapore 119613 Tel: (65) 6516 4842  Fax: (65) 6775 3391 E-mail: albertan@nus.edu.sg  Website: www.tliap.nus.edu.sg