SCOR - Supply Chain Operations Reference Model

Understanding the SCOR Diagram

SCOR captures the Council’s consensus view of supply chain management. It provides a unique framework that links business process, metrics, best practices and technology into a unified structure to support communication among supply chain partners and to improve the effectiveness of supply chain management and related supply chain improvement activities. SCC membership is open to all companies and organizations interested in applying and advancing the state-of-the-art in supply-chain management systems and practices.

Role of Supply Chain Council

a. Formation and Evolution of the SCC

The SCC was organized in 1996 and initially included 69 practitioner companies meeting in an informal consortium. Subsequently, the council’s companies elected to form an independent not-for-profit trade association. The majority of the SCC’s members are practitioners and represent a broad cross-section of industries, including manufacturers, distributors, and retailers.

Equally important to the Council and the advancement of the SCOR Model are the technology suppliers and implementers, the academicians, and the government organizations that participate in Council activities and the development and maintenance of the Model. At the time of this release, the Council has approximately 800 corporate members worldwide and has established international chapters in Australia/New Zealand, Latin America, Greater China, Europe, Japan, Southeast Asia, and Southern Africa with additional requests for regional chapters pending.

b. Collaboration Through Supply Chain Operations Reference Model

The Supply-Chain Council is interested in providing the widest possible dissemination of the Supply Chain Operations Reference Model. The widespread use of the Model results in better customer-supplier relationships, software systems that can better support members through common measurements and terms, and the ability to rapidly recognize and adopt best practices no matter where they originate. SCC requests that all who use the SCOR Model provide attribution to the Supply-Chain Council.

Introduction to Analytic and Implementation of SCOR

a. SCOR Supply Chain Guide for New and Experienced Users

This introduction is provided to assist new users of the Supply Chain Operations Reference Model to begin analytic and implementation projects. It is intended to remind experienced users of the framework and structure of the Model when tackling more complex applications of the Model for their businesses. Finally, it is provided to orient members to the changes between Version 9.0 and Version 10.0.

b. New Changes in Supply Chain Model

Version 10.0 of the Supply Chain Model is the twelfth revision since the Model’s introduction in 1996.xRevisions of the Model are made when it is determined by Council members that changes should bexmade to facilitate the use of the supply chain operations model in practice. Specific changes in Version 10.0 are outlined later in this Introduction.

SCOR Supply Chain Framework

Plan, Source, Make, Deliver, and Return

The SCOR has been developed to describe the business activities associated with all phases of satisfying a customer’s demand. The SCOR model supply chain itself contains several sections and is organized around the five primary management processes. They are:

• Plan,
• Source,
• Make,
• Deliver, and
• Return.

By describing supply chains using these process building blocks, the supply chain operations model can be used to describe supply chains that are very simple or very complex using a common set of definitions. As a result, disparate industries can be linked to describe the depth and breadth of virtually any supply chain. The Model has been able to successfully describe and provide a basis for supply chain management improvement for global projects as well as site-specific projects.

Capturing Customer and Market Dynamics

SCOR spans all customer interactions (order entry through paid invoice), all physical material transactions (supplier’s supplier to customer’s customer, including equipment, supplies, spare parts, bulk product, software, etc.), and all market interactions (from the understanding of aggregate demand to the fulfillment of each order). It does not attempt to describe every business process or activity. Specifically, the supply chain operations model does not address:

• Sales and marketing (demand generation),
• Product development,
• Research and development, and
• Some elements of post-delivery customer support.

Scope of the SCOR Model Supply Chain

It should be noted that the scope of the SCOR model in supply chain has changed and is anticipated to change based on Council member requirements. With the introduction of Return, the Model was extended into the area of post-delivery customer support (although it does not include all activities in that area).

As shown in Figure, the Model is designed and maintained to support supply chains of various complexities and across multiple industries. The Council has focused on three process levels and does not attempt to prescribe how a particular organization should conduct its business or tailor its systems / information flow. Every organization that implements supply chain improvements using the Supply Chain Model will need to extend the Model, at least to Level 4, using organization-specific processes, systems, and practice.

Limitations of the SCOR Model in Supply Chain

The Supply Chain Model is silent in the areas of human resources, training, and quality assurance. Currently, it is the position of the Council that these horizontal activities are implicit in the Model and other highly qualified organizations are chiefly concerned with how an organization should train, retain, organize, and conduct their quality programs. Just as the Council recognized the requirements for marketing and sales in commercial organizations, the Council is not minimizing the importance of these activities. Still, they are currently out of the scope of the Supply Chain Operations Reference Model.

Four Levels of Analysis in the SCOR Model

SCOR Model is designed and maintained to support supply chains of various complexities across multiple industries. A pyramid of four levels represents the path that a company takes to improve its supply chain.

• Level One is the Top Level, and it includes the process types.
• Level Two is Configuration Level, where each process is broken down into process categories.
• Level Three is the Process Element Level, which decomposes the processes and identifies the strategic elements within each process.
• Level Four is the Implementation Level, which further decomposes and defines the process elements by creating a flow of tasks and activities within each element.

We will review each of the Levels in more detail:

Level 1: Top-Level: Process Types

• Companies establish basic strategic objectives regarding the areas of their operation.
• Scope and content for SCOR are defined, and the basis of competition performance targets are set.

Level 2: Configuration Level (Process Category)

• Companies configure their supply chains and implement their operations strategy through the configuration.

Level 3: Process Element Level: Decompose Process

Each process category of Level 2 is presented in detail. This Level defines a company’s 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 and;
• Systems and tools.

Here, the company learns about:

• Inputs information needed for each Process Element and;
• Outputs to expect.

Level 4: Implement Level (Decompose Process Elements)

Specific supply chain management practices of companies are implemented. This level defines the following:

• Practices to achieve,
• Competitive advantage, and,
• How to adapt to changing business conditions.

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Structure of the SCOR Model

The purpose of SCOR model supply chain is to describe the process architecture in a way that makes sense to key business partners. Architecture gives a way that:

• How processes interact?
• How they perform?
• How they are configured? and;
• Skills of the staff operating the process.

SCOR supply chain model consists of the following 4 major components:

• Performance: Standard metrics to describe process performance and define strategic goals.
• Processes: Standard descriptions of management processes and process relationships.
• Practices: Management best practices that produce significant better process performance; and;
• People: Standard definitions for skills required to perform supply chain processes.

We will discuss each of these components in more details.

1st Component: Performance

It consists of two types of elements:

• Performance Attributes; and;
• Strategic Metrics.

a. Performance Attributes

It is a grouping of metrics used to express a strategy. An attribute itself cannot be measured, but it is used to set strategic direction.

• Reliability, Responsiveness, and Agility in agile supply chains are considered “Customer-focused”; and;
• Cost and Asset Management Efficiency are considered “Internal Focused”.

b. Strategic Matrices

They measure the ability of a supply chain to achieve the strategic attributes. Now, let us understand some important Attributes and Matrices:

i. Reliability

It shows the performance of the supply chain in delivering:

• 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.

ii. Responsiveness

It is the speed at which a supply chain provides products to the customer.

iii. Agility

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

iv. Cost

It is associated with managing the supply chain operations.

v. Assets Management

It is the “Effectiveness” of an organization in managing all fixed assets and working capital to support demand satisfaction.

2nd Component: Process

This section of the SCOR framework provides a set of predefined descriptions for activities that companies perform, to effectively execute their supply chains. Five macro-level SCOR processes that is: Plan, Source, Make, Deliver, and Return, are well-known. The supply chain operations reference model identifies two more levels of process

• Level-3 process is focused on a more detailed activity.
• Level-1 process spans multiple level-3 processes.
• Level-2 process categories determine the capabilities within the level-1 processes.

For Example

The key level-2 processes are:

Make-to-Stock vs. Make-to-Order vs. Engineer-to-Order for Source, Make and Deliver processes and Defective vs. MRO vs. Excess for the Return process.

3rd Component: Practices

This section consists of best practices organized by original objective, such as SCOR, Green SCOR in green supply chain, and supply chain risk management. SCOR improves overall supply chain operational performance by focusing on Reliability, Responsiveness, Agility, Cost, and/or Asset Management Efficiency.

• Green SCOR improves the environmental footprint of the supply chain.
• Risk Management improves the risks of an undesired event by improving the ability to recover from it.

4th Component: People

In this section, SCOR incorporates a standard for describing skills and recognizes five commonly accepted competency levels.

• Novice: An untrained beginner with no experience who requires and follows detailed documentation.
• Beginner: Performs the work with limited situational perception.
• Competent: Understands the work and can determine priorities to reach goals.
• Proficient: Oversees all aspects of the work and can prioritize based on situational aspects and;
• Expert: Has intuitive understanding and can apply experience patterns to new situations.

These competency levels are also used at process or practice maturity levels.

5 Phases in the SCOR Model

Since the inception of the SCOR model companies have looked at how to best utilize the rich content of Supply Chain Model. Supply Chain Council has supported and continuous to support practitioners by offering training focused on the interpretation and use of Supply Chain Operations Reference Model. Experience tells us that SCOR model as a tool needs to be integrated into existing project methodologies used, where they exist. Effective supply chain organizations have learned that using the Supply Chain Model is not a business goal; it is a tool to reach the true business goal: An integrated supply chain, meeting market requirements.

A typical Supply Chain Operations Reference Model project comprises the following phases:

Phase-1. Understand the Scope:

The scope of a Supply Chain Operations Reference Model project is defined by the following components – Business: Understanding the markets the supply chain serves, the products and/or services the supply chain delivers, and competitive landscape for each product and market;

a. Configuration

Understanding the high-level processes. Develop geographic maps and thread diagrams to understand material flows and supporting processes.

b. Performance

Understanding the areas of underperformance. Companies develop scorecards and may organize benchmarks to understand how their supply chains perform in comparison to similar supply chains.

c. Opportunity

Defining the improvement opportunity. Setting the scope of the effort. Focus on one or few supply chains and one or few metrics per supply chain.

Phase-2. Investigate Causes

Determine where the root causes are: Metrics decomposition: For each problem metric identify the diagnostic metrics and collect the data to calculate these diagnostic metrics. Determine the the problem metric or metrics. Repeat this process until no more diagnostic metrics can be identified;

a. Process Problem Discovery

For all diagnostic metrics, determine the associated processes. For each process collect information about how the process operates. (‘operates’ not ‘is supposed to operate’). Collect relevant information about who performs the work, sources or lack of relevant information to perform the work, rules and regulations that apply, tools and software supporting the process. Collect observed performance information from those who perform the work.

b. Classify the Problems

Group relevant observed process and performance problems together and determine how this impacts the overall problem. (Cause and Effect).

Phase-3: Identify Solutions:

Review different ways to solve the individual observed problems and the overall problem.

a. Research Better Practices

Determine how others have solved similar problems. Identify best practices, leading practices and software and tools that may address individual problems and/or the overall problem;

b. Develop What-If Scenarios

Using information about alternative practices, new technology, internal knowledge and external resources* describe new ways to configure and organize the processes.

• External resources can be paid consultancies, peers in other industries or peers in other business units in the same company.
• Internal resources and knowledge refer to workers in or close to the process. Some IT resources may qualify as internal resources;

c. Review and Select

• Review each scenario.
• Weigh improvement impact against estimated cost, risk, effort, lead-time, and feasibility.
• Select the appropriate (or best) solution scenario for each problem.

The collection of these solutions is the supply chain strategy to resolve the overall problem.

Phase-4 Design Solutions:

Document the new processes, technologies, and organizations. Describe the To-Be state.

a. Document Processes

• Develop detailed transactional information.
• Develop detailed process flows and descriptions.
• Document how the process is organized, who does what, and what information is used and created in each process step.

b. Develop Detailed Work Instructions

Document how the work is done. Develop Standard Operating Procedures (SOPs) for new processes. Update SOPs for all processes impacted by the change.

c. Document Organizational Designs

• Develop detailed job descriptions.
• Document authority, responsibility, and span of control.
• Document training needs and develop training if needed.
• Document metrics, describe how the processes (and process owners) will be measured upon implementation of the new process.

d. Document Technology Requirements

Describe how existing and/or new technology will support the new process. A business requirements document will enable internal and/or external technology providers to match their tools to the process needs. Solution design may require significant resources and time for projects with large dependencies on technology and may be considered separate IT projects.

e. Document Transitions

Describe the dependencies and restrictions related to the change. Estimate resource needs

Phase 5: Plan and Launch Change Projects

Create a roadmap to implement the changes.

a. Define Projects

Define unique projects for implementation. Combine changes that impact the same technology, organizations, products, and processes as required. Note: Not all projects are equal: Large scope changes need managed projects, and small changes may need a memo to a manager with documentation.

b. Critical Path and Dependencies

Document the interdependencies of projects.

• “Project D requires Project K to be completed”.
• “Project F can start at any time”.

c. Manage the Project Portfolio

Prioritize projects based on expected return, business strategy and other relevant projects. Allocate resources; people, funds, time.

c. Launch and Oversee the Projects

Make sure the project management deliverables result in the desired change.

Supply Chain Council recognizes that not every Supply Chain Operations Reference Model project is the same. Some projects require all or most detailed activities listed to take place to ensure the project outcomes. Most projects however do not. For example: Supply chains that have previously identified realistic improvement targets do not necessarily require another round of benchmarking. Or, if the changes do not require changes to software, do not spend months on documenting the technology requirements.