Supply Chain

Excellence
ISSSP
SCOR Executive Brief
Peter Bolstorff
September 25, 2003

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Key Questions
? Who is the Supply Chain Council?
? What is SCOR?
? How do we use SCOR to improve supply
chain performance?
? How does Lean Six Sigma relate to SCOR?
? What are the most common next steps?

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The Supply Chain Council
? The Supply-Chain Council (SCC), www.supply-
chain.org, is an independent not-for-profit
corporation formed in 1996 as a grassroots initiative
to develop a standard supply chain framework.
? Founding companies included Bayer, Compaq,
Proctor & Gamble, Lockheed Martin, Nortel,
Rockwell Semiconductor, Texas Instruments, 3M,
Cargill, Pittiglio, Rabin, Todd, & McGrath (PRTM),
and AMR Research, Inc.

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The Supply Chain Council
? The SCC mission is to perpetuate the use of SCOR
through technical development, research, education,
and conference events.
? The SCC has 800 members worldwide, with
chapters in Europe, Japan, Korea, Latin America,
Australia/New Zealand, and Southeast Asia
? The SCC sponsors six SIG groups: Six Sigma,
Aerospace and Defense, Automotive, Electronics,
Retail and Consumer Packaged Goods, and
Pharmaceuticals
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What is SCOR?
? The Supply Chain Operations Level

Reference (SCOR) combines # Description Schematic

Supply Chain Operations Reference model

Plan

standard supply chain 1

Top Level
Source Make Deliver

processes, metrics, and world- (Process Types) Return

Return

class benchmarks in one 2

Configuration

reference document Level

(Process
Categories)
? SCOR analyzes over 100 3 Process
processes in three categories Element Level
(Decompose
Processes)

? Planning – MRP, DRP, MPS, P3.1

and Forecasting
Identify, Prioritize, and Aggregate
Production Requirements
P3.3 P3.4

Balance Production Resources with Establish Detailed

P3.2 Production Requirements Production Plans

? Execution – Purchase Orders,

Identify, Assess, and Aggregate
Production Resources

Work Orders, Sales Orders,

and return authorizations Not
4 Implementation
Level
in (Decompose
? Enabling – Policy, Master Data Scope Process
Elements)
(Item), and Teamwork

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 Level One Framework
SCOR defines supply chain as the integrated processes of Plan, Source, Make,
Deliver and Return, spanning your suppliers’supplier to your customers’
customer, aligned with Operational Strategy, Material, Work & Information
Flows.
Plan

Plan Plan Plan Plan

Deliver Source Make Deliver Source Make Deliver Source Make Deliver Source

Suppliers’ YOUR COMPANY Customer’s

Supplier Customer
Supplier Customer
Internal or External Return Internal or External

Supply Chain Operations Reference Model

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Level Three Framework
S1 Source M1 D1 R1 P2 ED
Stocked Product Make-to-Stock Deliver Stocked Return Defective Plan Source Enable Deliver
Product Product

S1.1 M1.1 D1.1 DR1.1 P2.1 ED.1

Schedule Product Schedule Production Process Inquiry & Quote Authorize Return Identify, Prioritize, and Manage
Deliveries Activities Aggregate Product Deliver Business Rules
Requirements
S1.2 M1.2 D1.2 DR1.2 P2.2 ED.2
Receive Product Issue Product Receive, Enter, & Validate Schedule Product Return Identify, Assess, and Assess Delivery
Order Aggregate Product Performance
Resources
S1.3 M1.3 D1.3 DR1.3 P2.3 ED.3
Verify Product Produce and Test Reserve Inventory and Receive Defective Balance Product Manage
Determine Delivery Date Product Resources with Product Deliver Information
Requirements
S1.4 M1.4 D1.4 SR1.4 P2.4 ED.4
Transfer Product Package Consolidate Orders Verify Defective Product Establish Sourcing Plans Manage
Finished Product
Inventories
S1.5 M1.5 D1.5 SR1.5 ED.5
Authorize Supplier Stage Product Plan and Build Disposition Defective Manage
Loads Product
Payment Deliver Capital
Assets
M1.6 D1.6 SR1.6 ED.6
Release Product to Route Shipments Return Replacement Manage Transportation
Deliver or Credit

D1.7 ED.7
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Select Carriers and Rate Manage
Standard Definitions
Process Element: Schedule Product Deliveries
Process Element Definition
Scheduling and managing the execution of the individual deliveries of product against an existing contract or
purchase order. The requirements for product releases are determined based on the detailed sourcing plan or
other types of product pull signals.
Performance Attributes
Reliability
Responsiveness
Flexibility
Cost
Assets
Best Practices
Utilize EDI transactions to reduce cycle time
and costs
VMI agreements allow suppliers to manage
(replenish) inventory
Mechanical (Kanban) pull signals are used to
notify suppliers of the need to deliver product
Consignment agreements are used to reduce
assets and cycle time while increasing the
availability of critical items
Advanced ship notices allow for tight
synchronization between SOURCE and MAKE
processes
Copyright 2003 SCE Limited
Process Element Number: S1.1
Metric
% Schedules Generated within Supplier’s Lead Time
% Schedules Changed within Supplier’s Lead Time
Average Release Cycle of Changes
Average Days per Schedule Change
Average Days per Engineering Change
Product Management and Planning Costs as a % of Product
Acquisitions Costs
None Identified
Features
EDI interface for 830, 850, 856 & 862 transactions
Supplier managed inventories with scheduling interfaces to
external supplier systems
Electronic Kanban support
Consignment inventory management
Blanket order support with scheduling interfaces to external
supplier systems
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Standard Organizational
Metrics
Performance Performance Attribute Definition Level 1 Metric
Attribute
Supply Chain The performance of the supply chain in Delivery Performance
Delivery Reliability delivering: the correct product, to the correct Fill Rates
place, at the correct time, in the correct Perfect Order Fulfillment
condition and packaging, in the correct
quantity, with the correct documentation, to
the correct customer.
Supply Chain The velocity at which a supply chain Order Fulfillment Lead Times
Responsiveness provides products to the customer.
Supply Chain The agility of a supply chain in responding Supply Chain Response Time
Flexibility to marketplace changes to gain or maintain Production Flexibility
competitive advantage.
Supply Chain Costs The costs associated with operating the Cost of Goods Sold
supply chain. Total Supply Chain Management
Costs
Value-Added Productivity
Warranty / Returns Processing
Costs
Supply Chain Asset The effectiveness of an organization in Cash-to-Cash Cycle Time
Management managing assets to support demand Inventory Days of Supply
Efficiency satisfaction. This includes the management Asset Turns
of all assets: fixed and working capital.

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What have others used SCOR
to accomplish?
? Cost Reduction – Productivity ? SKU Rationalization
Improvement ? Supply Chain Six Sigma and Lean
? Direct Enterprise
? Indirect ? Project and Candidate Selection
? Delivery Performance ? Organizational Learning
Improvement ? Continuous Improvement
? On Time In Full – Perfect Order ? Efficient Consumer Response
? Synchronize Lead-time ? Forecast Accuracy
? Application optimization ? Category Marketing
? Upgrade ? Collaborative Planning
? Under Utilization Forecasting and Replenishment
? Implement Operational Strategy CPFR
? Software Selection & ? Physical Network Analysis –
Implementation Material Flow Design
? Business Requirements ? Acquisition
? Due Diligence
? Integration

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How Do We Use SCOR?
? Phase 0 – Building Organizational Support for Supply Chain
Improvement
? Phase I – Discover the Opportunity
? Week One
? Phase II – Analyze Basis of Competition
? Weeks Two through Four
? Phase III – Design Material Flow
? Weeks Five through Ten
? Phase IV – Design Work and Information Flow
? Weeks Eleven through Seventeen
? Phase V – Implementation
? Lean Projects
? DMAIC Projects
? Software Implementation – Detail Solution Design, Configuration, Test, and
Go Live

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Supply Chain Definition

Geography - Customer or Market Channel

Supply Chain
Definition Matrix US Direct-to-
US Retail US Distributor US OEM - Key US US Home
Consumer International
Markets Markets Accounts Government Delivery
Markets

Food
Products
X X X X X
Product

Technology
Products
X X X

Durable
Products
X X

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SCORcard
Wal-Mart Stores, Inc. Fortune 36

Parity Advantage Superior

Performance Attribute or Walmart Actual Parity Gap
15-Aug-03 Level 1 Performance Metrics Median of Midpoint of parity 90th Percentile of Source
Category 2003 Parity - Actual
statistical sample and superior Population

Supply Chain Delivery Reliability Delivery Performance

External

Supply Chain Responsiveness Order Fulfillment Lead Time

Supply Chain Flexibility Supply Chain Response Time

Cost of Goods 77.1% 67.4% 61.5% 42.6% -9.7% Hoovers

Total Supply Chain Management

Supply Chain Cost
Cost
Internal

SG&A Cost 16.8% 17.1% 9.5% 4.2% 0.3% Hoovers

Cash-to-Cash Cycle Time 21.4 51.1 34.3 17.6 -29.7 Hoovers

Supply Chain Asset

Management Efficiency
Inventory Days of Supply 48.2 40.8 28.0 14.0 7.4 Hoovers

Asset Turns 2.6 1.0 1.9 2.9 1.5 Hoovers

Gross Margin 22.9% 32.6% 38.5% 57.4% -9.7% Hoovers

Shareholder

Profitability Operating Income 4.8% 7.6% 9.7% 20.3% -2.8% Hoovers

Net Income 3.4% 3.8% 6.3% 13.3% -0.4% Hoovers

Effectiveness of Return Return on Assets 12.3% 9.8% 12.2% 19.5% 2.5% Hoovers

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Industry Comparison
Fortune 36
Benchmark Brief
Prepared by SCE Limited
www.scelimited.com - the SCOR Users Cash-to-
Cost of
Resource Center SG&A Cash Cycle Inventory
August 15, 2003
Goods Sold Gross Profit Operating Net Profit Return on Days of
Revenue $M Expense as (Assuming Days of Asset Turns
as % of Margin Margin Margin Assets Receivables
% of Sales 30 Days Supply
Sales
Payables)

Wal-Mart Stores, Inc. 244524.0 16.8% 77.1% 21 48 2.6 22.9% 4.8% 3.4% 12.3% 3.1

General Motors Corporation 186763.0 12.6% 75.2% 290 26 0.5 24.8% 5.2% 0.9% 2.6% 293.9

Exxon Mobil Corporation 178909.0 6.9% 61.3% 40 27 1.2 38.7% 8.4% 6.3% 9.8% 43.2

International Business Machines

81186.0 28.9% 57.3% 118 25 0.8 42.7% 8.4% 6.6% 7.0% 123.0
Corporation

Ford Motor Company 163420.0 17.4% 67.3% 214 23 0.6 32.7% 6.0% 0.4% 3.4% 221.3

General Electric Company 130685.0 37.8% 35.9% 750 72 0.2 64.1% 21.7% 11.8% 4.9% 708.4

Dell Inc. 35404.0 9.9% 81.5% 1 4 2.3 18.5% 8.0% 6.0% 18.4% 26.7

AT&T Corp. 37827.0 21.1% 50.6% 23 0 0.7 49.4% 15.3% 2.2% 10.5% 52.7

Johnson & Johnson 36298.0 44.6% 24.2% 162 137 0.9 75.8% 26.7% 18.2% 23.9% 54.3

Albertson's, Inc. 35626.0 24.2% 68.1% 21 45 2.3 31.9% 5.0% 2.4% 11.7% 6.6

Industry Parity - 50th Percentile 54069.0 17.1% 67.4% 51 41 1.03 32.6% 7.6% 3.8% 9.8% 37.4

Industry Advantage - 70th Percentile 77851.4 9.5% 61.5% 35.5 28.0 1.86 38.5% 9.7% 6.3% 12.2% 26.9

Industry Superior - 90th Percentile 172713.4 4.2% 42.6% 17.6 14.0 2.90 57.4% 20.3% 13.3% 19.5% 5.5

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Total Supply Chain
Management Cost
? Order Management Cost 16
? Customer Service
? FG Warehouse 14
? Outbound Transportation 12
? Material Acquisition
? Purchasing 10

? RM Warehouse 8
? Inbound Transportation
6
? Planning Costs
? Demand Planning 4
? Supply Planning
2
? IT Cost for Supply Chain
? Inventory Carrying Costs 0
A u t o mo t i v e A p p lianc e & C o mp ut e r Te l e c o m Ele c t ro nic
Ele c t ro nic s Ind us t rial C o mp o ne n t s
Copyright 2001 Performance Measurement Group LLC and PRTM
Supply Chain World Europe – 9/25/01
BIC Median
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Material Flow Detail

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SCOR Best Practices

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Transactional Analysis
? Purchase Order ? Staple Yourself to an Order
? Process Steps (Level 4)
? Work Order
? Inputs and Outputs
? Sales Order ? Enabling Technology
? Return Authorization ? Business Rules
? Planning Event ? Transactional Productivity
? Volume
? Forecast
? Cycle Time
? Replenishment Order ? Event Time
? Elapsed Time
? Yield

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Transactional Productivity
S1.1 S1.2 S1.3 S1.4 S1.5 Assumptions
Volume
PO 3655 All Purchase Orders 2002
Receipts 12560 3.4 Lines per Receipt
QA Record 12560 1 QA Record per Line
Transfers (Lines) 12560 1 Transfer per Line
Invoices 12560 1 Invoice per Receipt
Event Time 49 4 5 18 6
Elapsed Time 4510 10 1440 10080 10080
Yield 71.0% 97.0% 92.1% 42.4% 46.3%

People Minutes w/ Yield 252246 51793.8 68186.8 533208 162765

124800 Minutes = 1 Person @ 1 Year
People Minutes w/o Yield 179095 50240 62800 226080 75360

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The SCOR Business Blue Print
D2.9 - Load
D2.2 -
D2.3 - Vehicle, D2.10 -
D2.1 - Receive, D2.7 - Select D
Reserve D2.4 - D2.8 - Pick Generate Receive & D2.11 - Test
Process Configure, D2.5 - Plan & D2.6 - Route Carriers & Invoice &
Resources & Consolidate Staged Shipping Verify & Install
Inquiry & Enter & Build Loads Shipments Rate Receive
Determine Orders Product Documentation, Product at Product
Quote Validate Shipments Payment
Delivery Date Verify Credit, Customer Site
Order
& Ship
Product

Customer
DR2.1 - DR2.2 -
DR2.3 - DR2.4 -
Authorize Schedule
Receive MRO Transfer MRO
MRO Product MRO Return
Product Product
Return Receipt

M2.1 - M2.6 -
M2.2 - Issue M2.3 - M2.5 - Stage
Schedule M2.4 - Release
Sourced/In-Process Produce and Finished
Production Package Finished
Product Test Product
Activities Product

SR2.1 - SR2.3 - SR2.4 -

SR2.2 - SR2.5 -
Identify MRO Request MRO Schedule
Disposition Return MRO
Product Return MRO
S2.1 - S2.5 - MRO Product Product
S2.2 - S2.4 - Condition Authorization Shipment
Schedule S2.3 - Verify Authorize
Receive Transfer
Product Product Supplier
Product Product
Deliveries Payment

Supplier

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Phase V: Implementation
? Detailed Design ? Lean Six Sigma
? Pilot Formalized Integration
? Rollout ? Project Portfolio
? Preliminary Charters
? Six Sigma Environment ? Metric Definition and
? Define Opportunity Analysis
? Measure ? Project Execution
? Analyze Methodology and overall
? Improve Program Management
? Control

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SCOR Project Portfolio

Description Cost Yr1 Yr2 Yr3 Savings ROI

Benefit Benefit Benefit
1 Poor Planning 2,200 3,956 6,330 15,825 26,111 11.9
2 Supply Management 150 690 1,102 2,757 4,549 30.3
3 Reactive Logistics Planning 250 598 956 2,390 3,944 15.8
and Execution
4 Disparate Systems 6,500 311 498 1,246 2,055 .3
5 Poor Data Integrity 1 533 853 2,134 3,520 3520
6 Hit-or-Miss Product Life Cycle 500 1,110 1,776 4,440 7,326 14.7
Management
7 Undisciplined Order 250 587 939 2,349 3,875 15.5
Management
8 No Formal Return 1,200 9,500 15,200 13,300 38,000 31.6
Management

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Effort – Impact
Ease Of Implementation
EASY TOUGH
B 1 8
I
G

P
B A
u Y
s
i O
n F
e F
s
s S
M
I A
m L 6
p L 2
a
c P
t A 5 7 3
Y

O 4
F
F

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Financial Impact
? High Impact, Short Duration, Self-funded Supply Chain Improvement
? Average ROI – 4X to 12X Within 12 months
? Average profit improvement as calculated through Economic Value
Add (EVA) – 3% to sales
? Better Utilization of Current Applications – Improved ROA
? Business Blue Print to Leverage Needed Upgrades – Reduce
operational cost for customizations
? Roadmap for Technology Investments – Buy the Right Modules
? Framework for Supply Chain Continuous Improvement – Six Sigma
and Lean Enterprise; Year on Year Supply Chain Management of
the project portfolio – 1% profit improvement per year

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How does SCOR relate to Six
Sigma?
? SCOR provides a top down ? Six Sigma Programs
analytical approach to your combine effective
supply chain processes leadership infrastructure
? Standardized Supply Chain with a systematic –
Measures education based execution
? Material Flow Efficiency approach
? Work and Information Flow ? Leadership Training
Productivity ? Project Results Tracking
? Organized Project Portfolio and Management
aimed at overall supply ? Human Resource
chain continuous Development – Reward
improvement System
? DMAIC – DMADV –
Process Management
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How does SCOR relate to Six
Sigma?
? SCOR when implemented under a Six Sigma
program yields bigger savings faster
? Typical Six Sigma project selection brainstorming
exercises may focus resources on the stacks of
pennies versus the dollar bills and potentially sub-
optimize processes
? Companies who have focused their Black Belt
resources on COGS reduction are now pointing to
the next area of cost – Supply Chain and want to
leverage “project selection lessons learned from the
past”
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How does SCOR add value to
Six Sigma?
? Supply Chain Definition – Program Scope and DMAIC Project
Charters
? SCOR Metrics – Operational Definition, CTQ, and COPQ
? Competitive Requirements for Delivery Performance, Flexibility
and Responsiveness, Supply Chain Cost, and Asset
Management Efficiency – Customer Requirements
? Standardized Process Definition for Material, Work, and
Information Flow – Data Analysis
? Process Mapping Techniques – Process Analysis and “Generate
Creative Solutions”
? Organized Project Portfolio – Project and Candidate Selection

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Six Sigma Value Adds
? Program Infrastructure (Leadership, Training, Formalized
Resource Plan) – SCOR Executive Sponsor, Steering Team,
Project Leader, and Design Team
? Data Collection Techniques (Stratification, Sampling, Sigma
Calculation, and Yield) – SCORcard Gap Analysis
? Data Analysis Techniques (Pareto Chart, Run Chart, Histogram,
Fishbone Analysis, FMEA, etc.) – Material, Work, and
Information Flow Disconnect Analysis
? Process Analysis Techniques (Process Maps, Value Stream
Maps, etc.) – Geographic Map and Swim Diagram

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Next Steps
? Learn more about SCOR and Six Sigma
Integration
? Identify candidate supply chains for analysis
? Introduce a “SC? R Certification”process to
select candidates from your Black Belt
resource list
? Start the train – do – review cycle
? Expect Short and Long Term Results
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ProEx – SC? R Certification
The AIT Group – www.theaitgroup.com

?
? R Champion Certification (12 weeks)
SC R
Deployment Teams SC

Supply Chain Thread #1

Prep Performance Baseline Business Design & Project Selection
Project Leader
Executive Team
Briefing Session 1 Session 2 Session 3 Certifications

Prep Train Review Train Review Train Review

Process Black Finance 2 weeks 5 days 1 day 4 days 1 day 4 days 1 day
Owners Belt
Apply Apply Apply

Supply Chain Thread #2 3 weeks 3 weeks 3 weeks

Project Leader
On-site & Remote Support On-site & Remote Support On-site & Remote Support

Session 1 - Deliverables Session 2 - Deliverables Session 3 - Deliverables

• Thought Process Map (TMAP) • Thought Process Map (TMAP) • Thought Process Map (TMAP)
Process Black Finance • Competitive Positioning • Geographic Map • Transactional Analysis
Owners Belt • Kano Analysis • Value Stream Map (Material Flow) • Value Stream Map (Work & Info Flow)
• Industry Comparison • As-Is Material Flow Map • As-Is Work & Info Flow Map
• Supply Chain Profile • Level 2 Metrics Definition / NEM • As-Is Productivity Summary
Demand Chain Thread #3 • Supply Chain Definition Matrix • Material Flow Performance Summaries • As-Is Swim Diagrams
Project Leader • SCOR Charter • Material Flow Disconnect Analysis • Level 3 Metrics Definition / NEM
• Level 1 Metrics Definition / NEM ?Brainstorming Summary • Level 3 Baseline Blueprint
• PMG Benchmark Survey ?Cause/Effect Analysis • To-Be Work & Info Flow Map
• SCORcards ?Failure Modes & Effects Analysis • To-Be Productivity Summaries
• Requirements Gap Analysis • To-Be Material Flow Map • Project Portfolio & ROI Analysis
• SCORcard & Gap Analysis Review • Disconnect Opportunity Assessment • Effort / Impact Assessment
• Quick Hit Project Charters • Portfolio Prioritization
Process Black Finance • Status Review • Deployment / Resource Plan
Owners Belt • Certification Review

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 Contact Information:

Rod Recker
Telephone: (530) 587-1575
Email: rrecker@theaitgroup.com

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