2010may-dmsca
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Supply Chain Management
Shashank Kapoor
Contents
DMSCA 2010 - Supply Chain Measurement
PART-1WHAT IS SCM
DMSCA 2010 - Supply Chain Measurement
SCM: Defination
SCM: Different viewpoints in different companies
Supply Chain Drivers: Innovation
DMSCA 2010 - Supply Chain Measurement
Supply Chain Drivers: Extended Products
DMSCA 2010 - Supply Chain Measurement
Supply Chain Drivers: Globalization
DMSCA 2010 - Supply Chain Measurement
Supply Chain Drivers: Flexibility
DMSCA 2010 - Supply Chain Measurement
Supply Chain Drivers: Process Centered Management
DMSCA 2010 - Supply Chain Measurement
Supply Chain Drivers: Collaboration
DMSCA 2010 - Supply Chain Measurement
Supply Chain Drivers: Summary
Superior Supply Chain Management (SCM) has Long Been a Source of Competitive Advantage
Total Supply Chain Management Costs (% of Revenue)
9.2%
12.3%
10.7%10.0%
10.7%
9.1%
6.6%7.4%
4.8%5.5%5.3%
4.2%3.5% 3.6%
5.4%
3.4%
0.0%2.0%
4.0%6.0%
8.0%10.0%
12.0%14.0%
Automotive Industrial Chemical &Advanced Materials
Computer Consumer Goods Pharmaceutical Semiconductor TelecommunicationsEquipment
Best-in-ClassMedian
Source: PRTM/The Performance Measurement Group
% o
f Rev
enue
Best-in-class Companies’ Outperform Their Median Competitors with a 50% Cost Advantage
DMSCA 2010 - Supply Chain Measurement
The SCOR FrameworkSupply Chain Council Resources
DMSCA 2010 - Supply Chain Measurement
The Enterprise: Role of Supply Chain
DMSCA 2010 - Supply Chain Measurement
Sup
plie
r pro
cess
es
Product DesignDCOR™
Custom
er processes
Supply Chain SCOR™
Sales & SupportCCOR™
Product Management
What is SCOR®?
16
Customer processesSu
pplie
r pro
cess
es Supply Chain
Customer processesSu
pplie
r pro
cess
es Supply Chain
Process, arrow indicates material flow directionProcess, no material flow Information flow
DeliverMakeSourc
e
Return
Return
Plan
• 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
DMSCA 2010 - Supply Chain Measurement
The SCOR® model – a cross-industry open standard
• 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
DMSCA 2010 - Supply Chain Measurement
Supplier
Plan
Customer Customer’sCustomerSuppliers’
Supplier
Make DeliverSource Make DeliverMakeSourceDeliver SourceDeliver
Internal or External Internal or External
Your Company
Source
Return Return Return Return Return Return Return Return
SCOR Processes – Five Levels of Decomposition
Level 1 Level 2 Level 3 Level 4 Level 5
Scope Configuration Activity Workflow Transactions
Differentiates Business
Differentiates Complexity
Names Tasks Sequences Steps Links Transactions
Defines Scope Differentiates Capabilities
Links, Metrics, Tasks and Practices
Job Details Details of Automation
Sets Strategy First Tier Diagnostics
Second Tier Diagnostics
Industry or Company Specific
Technology Specific
DMSCA 2010 - Supply Chain Measurement
S1Source
Stocked Product
Supply-ChainSource
S1.2Receive Product
Standard SCOR definitions Company/Industry definitions
EDIXML
Supply Chain Balanced SCORcard
Standard Strategic (Level 1) Metrics
Attribute Metric (Strategic)Reliability Perfect Order Fulfillment
Responsiveness Order Fulfillment Cycle Time
Agility Supply Chain Flexibility
Supply Chain Adaptability†
Cost Supply Chain Management Cost
Cost of Goods Sold
Assets Cash-to-Cash Cycle Time
Return on Supply Chain Fixed Assets
Return on Working Capital
DMSCA 2010 - Supply Chain Measurement
† upside and downside adaptability metrics
Cust
omer
Inte
rnal
SCOR 10 - Skills
• Baseline Capabilities
– Essential skills required for job – “non-starter” gaps
• Critical Capabilities
– Difference between adequate and superior performance
• Performance
– Key incentives for process execution
• Credentialing
– Training and validation of capabilities
DMSCA 2010 - Supply Chain Measurement
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
•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)
DMSCA 2010 - Supply Chain Measurement
Supply Chain MeasurementThe SCOR Reference Process
DMSCA 2010 - Supply Chain Measurement
Configuring a Supply Chain Architecture
Process Layer Focus Planning Horizon
Scope Define MarketsDefine Products & Services Business Changes
Configuration Define StrategyDefine Governance Market Changes
ActivityDefine ProcessesDefine PracticesDefine Skills
Performance Changes
DMSCA 2010 - Supply Chain Measurement
Measurement and Benchmarking
• Qualitative Benchmarking– Comparing best practices among organizations– Maturity Assessments
• Quantitative Benchmarking– Comparing levels of measured performance– Assessment of Performance Gaps
• Competitive Benchmarking– Quantitative Benchmarking between companies– Identifies superior relative performance
DMSCA 2010 - Supply Chain Measurement
7 Steps of a Benchmarking Program
• Supply Chain Definition• Supply Chain Prioritization• Supply Chain Strategy• Selecting Metrics• Sourcing Data• Creating a Balanced SCORcard™• Performing Benchmark
DMSCA 2010 - Supply Chain Measurement
Supply-Chain Definition
• Supply Chains are the Totality of processes spanning operations from supplier to end-customer, focused on material, work and information flow
• We use a tool called the Supply Chain Definition Matrix to define the supply-chains within an enterprise
• The Supply Chain Definition (i/o Matrix) Matrix helps determine the number and size of supply chains
• Columns: Customers (Output)• Rows: Products (Input)• The intersection of each column and row – if the goods or
services flow to the customer – is a supply chain
DMSCA 2010 - Supply Chain Measurement
• Columns are Retail/Commercial, and sub-segmented• Rows are the Major Product Lines
Example: Air Conditioning Company
DMSCA 2010 - Supply Chain Measurement
Supply Chain Prioritization
• We use a tool called the Supply Chain Prioritization Matrix to order the supply-chains according to relevance
• Each supply chain can be ranked by a number of features• We suggest:
– size (revenue, volume, and margin),– complexity (# SKUs)– strategic importance
• You can also look at them by– Cash Consumption– Risk– Volume variability– Etc.
DMSCA 2010 - Supply Chain Measurement
• We use a tool called the Supply Chain Strategy Matrix to Identify priority strategic features or attributes of supply-chains.
• Each supply chain strategy is indicated by a collection of ranked features:
Reliability On time? Complete? Undamaged?
Responsiveness From Customer Request to final acceptance
Flexibility How long to scale up? How expensive to scale down?
Cost Cost of Processes? Cost of Goods Sold?
Assets Working Capital? Return on Investments?
Supply Chain Strategy
DMSCA 2010 - Supply Chain Measurement
Supply Chain Strategy in 5 Minutes
Build Strategy Model Lifecycle Likely Priority
Buy 1. Assets2. Cost
Make ETO 1. Reliability2. Response
BTO 1. Assets2. Reliability
BTS Start 1. Flexibility2. Response
Middle 1. Cost2. Reliability
Commodity 1. Cost2. Assets
EOL 1. Assets2. Cost
DMSCA 2010 - Supply Chain Measurement
• Each unique combination of ratings defines Your Supply Chain Strategy for the channel
• Think of the rating as a desired state, NOT where you want to improve the most
Supply-Chain Strategy Matrix
DMSCA 2010 - Supply Chain Measurement
S
A
A
P
P
The SCORcard
• We use a tool called the Supply Chain SCORcard™ to Identify performance characteristics of supply-chains.
• Each SCORcard™ is built from a subset of hundreds of SCOR metrics.
• For supply-chain benchmarking we generally use only Level 1, 2 and 3 metrics
• The SCOR Manual provides all necessary definitions
DMSCA 2010 - Supply Chain Measurement
• SCOR metrics: Standard Strategic (Level 1) Metrics
Performance Metrics
DMSCA 2010 - Supply Chain Measurement
† upside and downside adaptability metrics
Attribute Metric (Strategic)Reliability Perfect Order Fulfillment
Responsiveness Order Fulfillment Cycle Time
Agility Supply Chain Flexibility
Supply Chain Adaptability†
Cost Supply Chain Management Cost
Cost of Goods Sold
Assets Cash-to-Cash Cycle Time
Return on Supply Chain Fixed Assets
Return on Working Capital
Cust
omer
Inte
rnal
Philosophy• You need to have the most data where performance is
most critical• You need to have least data where performance is least
critical
For Every Superior Advantage ParitySelect Level 1 Metric Level 1 Metric Level 1 Metric
and Level 2 Metric Level 2 Metric
and Level 3 Metric
SCORcards in 5 Minutes
DMSCA 2010 - Supply Chain Measurement
A Metrics Architecture
DMSCA 2010 - Supply Chain Measurement
D1.3Reserve Inv.
Calculate Date
Result: The Workflow Diagramm
p3 H
Q(C
uper
tino)
mp3
Fac
tory
(S
henz
hen)
Reta
il, in
c.(A
mst
erda
m)
D2.2Receive, Enter, Validate Order
D2.3Reserve Inv.
Calculate Date
S1.1Schedule Prod.
Deliveries
Customer P.O. Delivery Commit
S2.1Schedule Prod.
Deliveries
D1.2Receive, Enter, Validate Order
Inter-Company P.O.
C.O. = Customer Order, Inv. = Inventory, P.O. = Purchase Order, Prod. = Product
C.O. C.O.
DMSCA 2010 - Supply Chain Measurement
Planning Data Gathering: Sources of Data
• Financial Data– 10-K data, Company Annual Reports, Cost Center Reports– Must be Verified by Financial Team (Controller)
• Non-Financial Data– Customers
• Delivery Performance• Total Cycle-Time Performance
– IT Systems• Process-to-Process Transactions• Planning System Parameters (Lead Times)
– Suppliers– 3PL Providers
DMSCA 2010 - Supply Chain Measurement
• Look at who owns the data• Consider where the transactions may be• Organize to alert data owners to gather data• Collect and assess Data Quality• Use SCOR Metrics Definition as a guide
Metric Process Owner Due Date Status
On-Time Delivery D1.16 Logistics 2/2/2008 Complete
Undamaged D1.17 3PL Provider 2/15/2008 50% Collected
Order Fulfillment Cycle Time
D1.1 – D1.17 Deliver Team 2/22/2008 Not started
Etc…
Data Gathering Plan
DMSCA 2010 - Supply Chain Measurement
Interpreting the Data
• Used for choosing target performance• Critical to understand Performance in a particular Demographic• Can be “internal” (competing against other supply chains in same
company)• Aligns Strategy, Performance, and Performance Goals
DMSCA 2010 - Supply Chain Measurement
Attribute SAP Metric (level 1) You Parity Adv Superior Gap
Reliability S Perfect Order Fulfillment 97% 92% 95% 98% 1%
Response A Order Fulfillment Cycle Time 14 days 8 days 6 days 4 days 8 Days
Flexibility P Ups. Supply Chain Flexibility 62 days 80 days 60 days 40 days 0
Cost P Supply Chain Mgmt Cost 12.2% 10.8% 10.4% 10.2% 1.4%
Assets A Cash-to-Cash Cycle Time 35 days 45 days 33 days 20 days 2 Days
Continuous Top Down Supply Chain Integration
Scope
Configuration
Activities
DMSCA 2010 - Supply Chain Measurement
AssesBusiness
Gaps
AssessBusiness
Performance
IdentifyProcessNeeds
CreateStrategy
AssessBusinessMarket
AssessProcess
Performance
DeployChanges
CreateTo-Be
Programs
IdentifyProcessGaps
IdentifyProcessNeeds
DefineAs-IsState
AnalyzeRoot
Cause
CreateTo-Be
Projects
CreateTo-Be
IdentifySolutions
IdentifyProcessGaps
SCC: An independent, non-profit global association
• Formed in 1996 to create and evolve a standard industry process reference model of 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
DMSCA 2010 - Supply Chain Measurement
Industry Membership Scope
DMSCA 2010 - Supply Chain Measurement
Typical Company Benefits
$200M Cost Improvements Single Division
US$2.3B Savings supported with Merger
$5B Working Capital
$66M Revenue/Inventory
€2M Improvements Single Division (Peroxides)
DMSCA 2010 - Supply Chain Measurement
SUPPLY CHAIN COUNCIL, INC.
DMSCA 2010 - Supply Chain Measurement
Comparative Data1
Improvement Area Range
Delivery performance 16% - 28%Inventory Cost Reduction 25% - 60%
Reduction in order fulfillment cycle time 30% - 50%Improvement to forecast accuracy 25% - 80%
Increase in overall productivity 10% - 16%Lower supply chain costs 25% - 50%Improvement of fill rates 20% - 30%
Improved capacity realization 10% - 20%
DMSCA 2010 - Supply Chain Measurement
1Stephens (2000) 1997 Comparative Study Pittsburg, USA
Many Thanks
jfrancis@supply-chain.org
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