© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 1 | 12 February 2013
JOSEPH FRANCIS Director Ejecutivo Supply Chain Council
RENOVACIÓN SCM
Modelo SCOR para la transformación
del negocio
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 2 | 12 February 2013
Leveraging SCOR for business transformation
Joseph Francis, Executive Director SCC
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 3 | 12 February 2013
Agenda
• Why Supply Chain • Three Keys to Success • Understanding Supply Chain & Finance • The System: SCOR Outline • Supply Chain Council • Benefits of SCOR • Case Studies • Call to Action
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 4 | 12 February 2013
A Bit of History: 1930-1950
• Bank Robber “Slick Willie” Sutton
• When asked why he robbed banks, Sutton simply replied
• "Because that's where the money is."
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 5 | 12 February 2013
Stock Market Volatility, Oil Prices, Labor, Political Instability, Security
Reducing Total Supply Chain Costs
Supply Chain Resiliency & Sustainability:
Risk Management & Green
Reducing Inventory/ Working Capital/ Asset Management
Competing in a Global Market
Providing Superior & Consistent Customer Service While Increasing
Revenue & Margin
What Keeps You Up at Night?
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 6 | 12 February 2013
Supply Chain is Dominant Company Cost Driver
• 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 and as of 2010-11 have recovered from the recession and are growing fast worldwide
• 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 companies 2 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
Fortune-10 Company Supply-Chain Cost as % of Total Costs 2
GM 94%
Ford 93%
Conoco 90%
Wal-Mart 90%
Chevron 88%
IBM 77%
Exxon 75%
GE 63%
Citi1 0%
AIG1 0%
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 7 | 12 February 2013
SCM Value Differential – 2:1 cost advantage
7 SAPICS 2009 - Financial Knobs & Levers with SCOR
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
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 8 | 12 February 2013
THREE KEYS TO SUCCESS
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 9 | 12 February 2013
1000 Global SCM Organizations: Themes
Management Upgrade ‘I don’t get no Respect’
Get With the/a System ‘Any Process Will Do’
Managing Complexity: Islands of Profit in Seas of Red Ink
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 10 | 12 February 2013
MANAGEMENT UPGRADE
“I DON’T GET NO RESPECT” RODNEY DANGERFIELD
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Key 1: Focus on the Team
• Continuous Investment/Upgrade of SCM Skills › APICS/CPIM › PMI › Lean/Six-Sigma › SCOR
• Focus on Talent Development/Talent Management • Frees SCM Management to focus on Business Strategy
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 12 | 12 February 2013
Philip Morris International: Asia-Pacific
• Three Years Management Skill Upgrade: › APICS › Lean/Six-Sigma › SCOR
• Most profitable segment of Philip Morris • 99+% DIFOT • Lowest Inventory • SCM Integrated with
Marketing and Business Strategy
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 13 | 12 February 2013
GET WITH THE/A SYSTEM
“A BAD PROCESS IS BETTER THAN NO PROCESS” MICHAEL HAMMER
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Key 2: System, any System
• Not Standardizing Business Processes, Standardizing Management
• Process over Function • Integration of Strategy, Tactics, Operations • CMMI • Cult of Personality
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Boeing Land Systems
• Loss of Key Government Contract • Refocus on Process, Framework, and Central
“Excellence” driving performance • Keen focus on Supply Chain and KPI’s, not departments
and individuals • Multibillion Dollar Contracts Kept • “Takes over” Struggling Business Units
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 16 | 12 February 2013
MANAGING COMPLEXITY WHEN IT COMES TO SUPPLY CHAINS, HAVING TWO IS BETTER THAN
ONE, AND THREE OR MORE MAY BE BEST OF ALL! ISLANDS OF PROFIT IN A SEA OF RED INK BYRNES, J..L..S. SR. LECTURER MIT
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 17 | 12 February 2013
Key 3: Differentiated Strategy
Managing Differentiated Strategy? Three Words:
Digital
Virtual
Networked
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Dupont
• 7 year process • SCM COI with digital/virtual process and performance
model division by division • Centralized Reporting, Benchmarking, and visibility to
strategic objectives • Gradual rollout of complexity • Vast improvement on Working Capital • Successful refocus on Reliability
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 19 | 12 February 2013
SCOR® AND SUPPLY CHAIN FINANCIAL PERFORMANCE
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 20 | 12 February 2013
Supply Chain is Directly Connected to Company Value
• Improve customer service and response
• Optimize inventory flow, utilization & productivity
• Best-in-class customer relationships
• Differentiated service capabilities
• Best-in-class strategic supplier partnerships
• Leverage of outsourcing of business processes
• Unique supply chain models
The Supply Chain Impacts . . .
& Shareholder Value
Profit
Capital Efficiency
Value
The Knobs & Levers
Revenue
Expense
Working Capital
Fixed Capital
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 21 | 12 February 2013
SCOR KPI’s Help Measure Performance…
& Shareholder Value
Profit
Capital Efficiency
Value
The Knobs & Levers
Revenue
Expense
Working Capital
Fixed Capital
Perfect Order Fulfillment
Order Fulfillment Cycle Time
Supply Chain Flexibility
Supply Chain Adaptability†
Supply Chain Management Cost
Cost of Goods Sold
Cash-to-Cash Cycle Time
Return on Supply Chain Fixed Assets
Return on Working Capital
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 22 | 12 February 2013
… And to Diagnose Root Cause Issues
Level-3 Diagnostic Level-2 Diagnostic Level-1 KPI
Delivery Item Accuracy % Orders Delivered in Full
Perfect Order Fulfillment
Delivery Quantity Accuracy
Date Achievement Delivery Performance to Commit Date
Location Achievement
Shipping Documentation Accuracy Accurate
Documentation Billing Documentation Accuracy
% Orders Received Damage-Free
Perfect Condition
Profit
Capital Efficiency
Value
Revenue
Expense
Working Capital
Fixed Capital Example:
How might we analyze improvements in Delivery Accuracy
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 23 | 12 February 2013
The Dupont Model
Example: What would be the impact of a strategy to increase delivery reliability?
Net Sales
Accounts Receivable
Other Currents Assets
Inventory Expenses
Inventory
Fixed Expenses
$ 100
$ 60
$ 12
$ 4
$ 16
$ 8
$ 2
$ 18
COGS
Variable Expenses
3 %
2.27
Net Profit Margin
Asset Turnover
divided by
$ 3.00
$ 100
$ 100
$ 44
Net Profit
Sales
Sales
Total Assets
$ 40
$ 34
$ 3
$ 26
$ 18
Gross Profit
Total Expenses
Current Assets
Fixed Assets
Taxes ROA
6.8 % 11
Financial Leverage
74.91 %
Return on net worth
Assumption: Financial Leverage is a company-wide constant = Total Assets / Shareholder Equity
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 24 | 12 February 2013
Comparison: SC Change to Sales Change
SC Change -1% Net Sales 100 Gross Profit 40.6 Net Profit 3.76 NPM 3.76% ROA 8.58%
COGS 59.4 Total
Expenses 33.84 Sales 100 Asset
Turnover 2.28 Leverage 11 Vairable
Expenses 11.88 Taxes 3 Sales 100 Return 94.34% Fixed
Expenses 18 Current Assets 25.84
Total Assets 43.84
Inventory Expenses 3.96 Fixed Assets 18 Inventory 15.84
AR 8 Other Assets 2
Sales Change 3%
Net Sales 103.3 Gross Profit 41.32 Net
Profit 3.825 NPM 3.70% ROA 8.54%
COGS 61.98 Total
Expenses 34.396 Sales 103.3 Asset
Turnover 2.30 Leverage 11 Vairable
Expenses 12.396 Taxes 3.099 Sales 103.3 Return 93.93% Fixed
Expenses 18 Current Assets 26.792
Total Assets 44.792
Inventory Expenses 4 Fixed Assets 18 Inventory 16.528
AR 8.264 Other Assets 2
In this model, every 1% of Supply Chain Cost Reduction is equivalent to a more than 3% increase in sales. A 10% supply chain reduction is equivalent to a more than 40% increase in sales staff.
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 25 | 12 February 2013
Practice Maturity and Supply Chain Performance
Early Stage Mature
© Copyright 2006 The Performance Measurement Group, LLC, a PRTM Company
Discrete supply chain processes and data flows well documented and understood
Resources managed at department level and performance measured at functional level
Stage 2: Internal Integration
Stage 1: Functional Focus
Company-wide process and data model continuously measured at the company, process, and diagnostic levels
Resources managed at both functional and cross-functional levels
Strategic partners throughout the global supply chain collaborate to:
• Identify joint business objectives and action plans
• Enforce common processes and data sharing
• Define, monitor, and react to performance metrics
IT and eBusiness solutions enable a collaborative supply chain strategy that:
• Aligns participating companies’ business objectives and associated processes
• Results in real-time planning, decision- making, and execution of supply chain responses to customer requirements
Stage 3: External Integration
Stage 4: Cross-Enterprise Collaboration
50 Companies 50 Companies
PRTM analyzed data from about 100 companies that submitted practice maturity and quantitative performance data
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 26 | 12 February 2013
Stage of maturity correlates with performance, profitability, and sales growth
Local Customers
Manufacturing Facilities
Customer Service and Warehousing
Suppliers
Analysis Results:
Mature companies have a 1–2% advantage in Total Supply Chain Management Costs (as % of total revenue)
Mature companies have 10% higher Unit Forecast Accuracy
Mature companies have a 10% advantage in Delivery Performance to Commit Date
Mature companies have a 30% advantage in Upside Production Flexibility
Mature companies have 4.5% lower COGS (as a % of total revenue)
Mature companies demonstrated a 4.8% year over year net decrease in COGS
Supply Chain
Note: Results based on performance data from discrete companies which included: Consumer Goods, Electronic Equipment, Industrial, Telecom, Computers, and Aerospace & Defense.
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 27 | 12 February 2013
SCOR®
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 28 | 12 February 2013
It’s a FAN!
It’s a WALL!
It’s a ROPE!
It’s a TREE!
It’s a SNAKE!
It’s a SPEAR
!
Supply Chain/Service Chain
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 29 | 12 February 2013
About SCOR – A Process Framework
• Process frameworks deliver the known concepts of business process reengineering, benchmarking, best practices and organizational design in a cross-functional framework: › Standard processes; Plan, Source, Make, Deliver, .. › Standard metrics: Perfect Order Fulfillment, Cash-to-Cash Cycle Time,
Total Cost to Serve,.. › Standard practices: EDI, CPFR, S&OP, Cross-Training, .. › Standard job skills: Lean, Accounting, Solicitation, ..
• Pre-defined relationships between metrics, processes, practices and
skills
29
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 30 | 12 February 2013
About SCOR – A Process Framework
• Combining 4 techniques into a single integrated approach
Business Process Re-engineering
Performance Benchmarking
Best Practices Analysis
Organizational Design
Capture the ‘as-is’ business activity and design the future ‘to-be’ state
Quantify relative performance of similar supply chains and establish internal targets
Identify practices and software solutions that result in significantly better performance
Assess skills and performance needs and align staff and staffing needs to internal targets
Process Reference Framework Processes Performance
(metrics) Practices People
(skills)
30
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 31 | 12 February 2013
About SCOR – Supply Chain
• Viewing a company as processes (domains)
Custom
er processes Supp
lier p
roce
sses
Product/Portfolio Management
Supply Chain
SCOR ®
Product Design
DCOR™
Sales & Support
CCOR™
Custom
er processes Supp
lier p
roce
sses
Product & Portfolio Management
Supply Chain
SCOR ®
Product &
Process Design DCOR™
Sales & Support
CCOR™
31
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 32 | 12 February 2013
About SCOR – Supply Chain
• SCOR defines supply chain as:
“ The processes that plan and execute the acquisition of materials, transformation of materials in sellable products, delivery and return of products and services in support of customer orders ”
Whether from Cow to Cone, Crude to Car or from Rock to Ring, SCOR is not limited by organizational boundaries SCOR can be applied to supply chains in any industry and to any organization in the chain
32
Supplier Customer Suppliers’ Supplier
Source
Internal or External Your Organization
Return Deliver Make Source
Return
Plan Deliver
Return Source Return
Make Source Return
Plan Deliver
Return
Deliver Make
Plan
Return Return
Customers’ Customer
Enable
Internal or External
Enable Enable
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 33 | 12 February 2013
M4SC – Management For Supply Chain
Supply Chain Resources Feedback
Drives Supply Chain Process Feedback
Drives
Business Strategy
Supply Chain Network Feedback
Drives Supply Chain Strategy
Drives
Feedback
Using SCOR to Segment business into supply chains, determine performance
Using SCOR to Optimize network for strategic performance requirements
Using SCOR to Manage processes towards strategic network goals
Using SCOR to continuously align resources to meet process goals
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 34 | 12 February 2013
How Many Supply Chains?
• We use a tool called the Supply Chain Definition Matrix to define the supply-chains within an enterprise
• Column Generation: › The columns in the matrix are
focused on demand e.g. channels or segments or customers
• Row Generation: › The rows in the matrix are
focused on supply e.g. business lines or products or locations or suppliers
Region 1 Region 2
Segment A
Segment B
Segment C
Segment D
Group 1 X X X
Group 2 X
Group 3 X
Group 4 X X X
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 35 | 12 February 2013
• 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?
What’s Your Strategy?
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 36 | 12 February 2013
Supply Chain Strategy in 5 Minutes
Build Strategy Model Lifecycle Likely Priority
Buy 1. Assets 2. Cost
Make ETO 1. Reliability 2. Response
BTO 1. Assets 2. Reliability
BTS Start 1. Flexibility 2. Response
Middle 1. Cost 2. Reliability
Commodity 1. Cost 2. Assets
EOL 1. Assets 2. Cost
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 37 | 12 February 2013
Cus
tom
er
Inte
rnal
Strategic Attributes & Metrics: Level 1 KPI’s
Attribute Strategic metric
Cus
tom
er
Reliability RL.1.1 Perfect Order Fulfillment
Responsiveness RS.1.1 Order Fulfillment Cycle Time
Agility AG.1.1 Upside Supply Chain Flexibility
AG.1.2 Supply Chain Upside Adaptability
AG.1.3 Supply Chain Downside Adaptability
AG.1.4 Overall Value at Risk (VaR)
Inte
rnal
Cost CO.1.1 Supply Chain Management Cost
CO.1.2 Cost of Goods Sold
Assets AM.1.1 Cash-to-Cash Cycle Time
AM.1.2 Return on Supply Chain Fixed Assets
AM.1.3 Return on Working Capital
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 38 | 12 February 2013
Cascading Metrics Architecture
Supply-Chain SCORcard S/A/P Level-1 Metric Level-2 Metric Level-3 Metric Summary
Exte
rnal
Reliability S Perfect Order Fulfillment Perfect Order Fulfilment
Reliability % Orders Delivered in Full % Orders Delivered in Full
Reliability Delivery Item Accuracy Delivery Item Accuracy
Reliability Delivery Quantity Accuracy Delivery Quantity Accuracy
Reliability Delivery Performance to Commit Date
Delivery Performance to Commit Date
Reliability Date Achievement Date Achievement
Reliability Location Achievement Location Achievement
Reliability Accurate Documentation Accurate Documentation
Reliability
Shipping Documentation Accuracy
Shipping Documentation Accuracy
Reliability
Billing Documentation Accuracy
Billing Documentation Accuracy
Reliability Perfect Condition Perfect Condition
Reliability
% Orders Received Damage-Free
% Orders Received Damage-Free
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 39 | 12 February 2013
• 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
Where Are Your Goals?
Attribute SAP Metric (level 1) You Parity Adv Superior Gap
Reliability S Perfect Order Fulfillment 95% 92% 95% 98% 3%
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
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 40 | 12 February 2013
Gulf Region Network
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 41 | 12 February 2013
Where are the Problems?
D1.3 Reserve Inv.
Calculate Date
mp3
HQ
m
p3 F
acto
ry
Reta
il, in
c.
D2.2 Receive, Enter, Validate Order
D2.3 Reserve Inv.
Calculate Date
S1.1 Schedule Prod.
Deliveries
Customer P.O. Delivery Commit
S2.1 Schedule Prod.
Deliveries
D1.2 Receive, Enter, Validate Order
Inter-Company P.O.
C.O. = Customer Order, Inv. = Inventory, P.O. = Purchase Order, Prod. = Product
C.O. C.O.
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 42 | 12 February 2013
Lean, Six-Sigma, Constraints All Techniques combined
0
5
10
15
20
25
30
35
Sched Delivery Receive Product Verify Product Transfer Product Payment
sS1.1 sS1.2 sS1.3 sS1.4 sS1.5
Idle Time
Transact Time
Transact Time
Idle Time
Transact per Hour FTE Rework/Da
y PCE Yield Waste
sS1.1 Sched Delivery 5 5 3 0.5 5 50.00% 79.17% 20.83% sS1.2 Receive Product 5 1 5 0.5 3 83.33% 92.50% 7.50% sS1.3 Verify Product 1 5 5 0.5 1 16.67% 97.50% 2.50% sS1.4 Transfer Product 15 15 2 1 1 50.00% 93.75% 6.25% sS1.5 Payment 1 2 5 0.25 1 33.33% 97.50% 2.50%
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 43 | 12 February 2013
From Reactive to Proactive
• Accelerates change • Focuses on Real Issues • Creates Valuable Change • SCOR binds
› Strategy › Network › Process › Resource
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 44 | 12 February 2013
SUPPLY CHAIN COUNCIL, INC.
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 45 | 12 February 2013
About Supply Chain Council
• Formed in 1996 to create and evolve a standard industry process reference model for 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
• SCC continually advances its tools and educates members about how companies are capitalizing on those tools
› With membership open to all interested organizations
› Global presence, volunteer driven
• Offering public and in-house trainings and certification
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 46 | 12 February 2013
Industry Membership Scope
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 47 | 12 February 2013
SCOR-P Certification
• The Council has focused on establishing verifiable levels of competency with SCOR as a key goal to improve SCOR implementations and disseminate SCOR knowledge
• Intended for All SCC Membership • Based on Testing Only
› 2-Hour 60 questions › All questions multiple-choice
• Candidates: › Must have completed current SCOR Framework and
Implementation classes › Cost of testing embedded in Framework/Implementation classes
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 48 | 12 February 2013
SCOR-S Certification
• Target › Under-graduate
students/programs › Addition to existing SCM
program › International program – roll out
to be determined › Academic year 2010/2011
• Eligibility
› SCC members only › Existing SCM program › Existing documented process
and facility
• Process › University joins program,
forecasts number of students to enroll
› SCC provides student registration
› Lecture by SCC certified instructor @ university (comparable to Framework training)
› SCOR-S exam – computer based, school procotred
› SCC grades results, certifies students
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 49 | 12 February 2013
Benchmarking
Boeing - SCOR Executive Overview
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 50 | 12 February 2013
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%
Boeing - SCOR Executive Overview
1Poluha (2007) Application of the SCOR Model in Supply Chain Management New York, USA
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 51 | 12 February 2013
Typical Potential Improvements1
Area Improvement Raw materials purchase cost 25%
Cost of Distribution 35% Total resource deployed 50%
Manufacturing space 50% Investment in Tooling 50%
Order cycle time 60% New product development cycle 60%
Inventory 70% Paperwork and Documentation 80%
Quality Defects 100%
Boeing - SCOR Executive Overview
1Hughes & Michels (1998) Transform your supply chain. Releasing value in business. London, UK
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 52 | 12 February 2013
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%
Boeing - SCOR Executive Overview
1Stephens (2000) 1997 Comparative Study Pittsburg, USA
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 53 | 12 February 2013
SCM Asset Returns: Superior Valuation
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 54 | 12 February 2013
SCOR®: CASE IN POINT
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 55 | 12 February 2013
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
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 56 | 12 February 2013
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
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 57 | 12 February 2013
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
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 58 | 12 February 2013
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 Metric Improvement
Sales per employee
20%
COGS % 10%
Inventory days of supply
20%
Cash to cash cycle (days)
15%
Shareholder returns
$4.1 million IRR 300% EV Uplift= $12.1m
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 59 | 12 February 2013
Typical Potential Improvements1
Area Improvement
Raw materials purchase cost 25%
Cost of Distribution 35%
Total resource deployed 50%
Manufacturing space 50%
Investment in Tooling 50%
Order cycle time 60%
New product development cycle 60%
Inventory 70%
Paperwork and Documentation 80%
Quality Defects 100%
1Hughes & Michels (1998) Transform your supply chain. Releasing value in business. London, UK
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 60 | 12 February 2013
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
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 61 | 12 February 2013
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
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 62 | 12 February 2013
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
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 63 | 12 February 2013
Even More Companies
$200M Cost Improvements Single Division
US$2.3B Savings supported with Merger
$5B Working Capital
$66M Revenue/Inventory
€2M Improvements Single Division (Peroxides)
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 64 | 12 February 2013
CALL TO ACTION
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 65 | 12 February 2013
Successful Exploitation of SCC
• Training the Champions › Develop fundamental support capability
• Train the Team › Transform a business segment; develop internal case for change
• Train the Company › Implement the “System” For SCM
• Develop Certification Program • Get involved in research programs as company maturity
grows • Ask questions
© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2013 SCC Overview | 66 | 12 February 2013
Thanks!
[email protected] www.supply-chain.org