Supply-Chain Benchmarking with SCOR

A Webinar to Get Your Benchmarking Program Started

Joseph (Joe) Francis CTO, Supply-Chain Council Marisa Brown Sr. Program Manager, APQC
This presentation is the exclusive property of the Supply Chain Council. Copyright Supply Chain Council. 2006. All rights reserved. The marks SCOR, CCOR, DCOR and SCOR Roadmap are the exclusive property of the Supply Chain Council.

Todays Seminar
Introductions & Assumptions Supply-Chain Definition Supply-Chain Prioritization Supply-Chain Strategy Supply-Chain Performance Sources of Data & The Benchmark Questions and Close

Copyright Supply Chain Council. 2006. All rights reserved.

SCOR for Benchmarking

Supply-Chain Council
The SCC is an independent, not-for-profit, global corporation with membership open to all companies and organizations interested in applying and advancing stateof-the-art supply chain management systems and practices.
Founded in 1996 Over 800 Company Members Cross-industry representation Chapters in Australia/New Zealand, Brazil, Europe, Japan, North America, South Africa, South East Asia, and China with petitions for additional chapters pending.

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.
Copyright Supply Chain Council. 2006. All rights reserved.

SCOR for Benchmarking

Widely Used

3M Abbott Laboratories Agilent Technologies Inc. Air Products & Chemicals Amazon.com AMD American Electric Power American Greetings Corp. Arrow Electronics, Inc ArvinMeritor, Inc. Avnet, Inc. Banta Global Turnkey Bausch & Lomb Bayer AG Becton Dickinson Boeing Brown-Forman C.R. Bard, Inc. Canon Cisco Systems, Inc. Coca-Cola Company Colgate Palmolive Co. Cytec Industries

Dow Chemical Eastman Kodak Company Entergy Corporation Exxon Mobil Corporation FedEx GE General Motors Corporation Genzyme Corporation Hershey Foods Corporation Hewlett-Packard Company Honeywell International Inc. IBM Corp. Intel Corporation International Paper Company Johnson & Johnson KPMG Consulting, Inc. Lennox International, Inc. Lockheed Martin Lockheed Martin Corporation LSI Logic Corporation Lucent Technologies McKesson Corporation MeadWestvaco Corporation

Medtronic, Inc. Shell Merck & Co., Inc. Siemens Corporation Microsoft Corporation Snap-On Incorporated Millennium Chemicals Inc. Sonoco Products Company Nabisco, Inc. Sony National Semiconductor Sprint Communications NCR Japan, Ltd. Nortel Networks SPX Corporation Northrop Grumman Sun Microsystems, Inc. Oracle Corporation Target Corporation Owens Corning Teradyne, Inc. PeopleSoft, Inc. Textron Inc. PepsiCo, Inc. Pfizer Inc. The Home Depot, Inc. Pharmacia Corporation The Walt Disney Company Philips TMP Worldwide, Inc. Pioneer Toshiba Corporation PPG Industries, Inc. Unilever Progress Energy, Inc. PSS World Medical, Inc. Unisys Corporation Quantum United Defense Industries Rockwell International United Parcel Service Ryder System, Inc. United Technologies SAP AG Volvo Schering-Plough Whirlpool Corporation Science Applications International

Copyright Supply Chain Council. 2006. All rights reserved.

SCOR for Benchmarking

SCOR Processes
Five distinct management processes link together (the chain in supply-chain) seamlessly from supplier to customer
Plan

Deliver Return

Source Return

Make

Deliver Return

Source Return

Make

Deliver Return

Source Return

Make

Deliver Return

Source Return

Suppliers Supplier

Supplier
Internal or External

Your Company

Customer
Internal or External

Customers Customer

SCOR Model

Copyright Supply Chain Council. 2006. All rights reserved.

SCOR for Benchmarking

Metrics
SCOR metrics: Standard Level 1 Metrics

Attribute

Metric (level 1)
Perfect Order Fulfillment Order Fulfillment Cycle Time Supply Chain Flexibility Supply Chain Adaptability

Customer

Reliability Responsiveness Agility (Flexibility) Cost

Supply Chain Management Cost Cost of Goods Sold Cash-to-Cash Cycle Time Return on Supply Chain Fixed Assets Return on Working Capital

Internal

Assets

upside and downside adaptability metrics

Copyright Supply Chain Council. 2006. All rights reserved.

SCOR for Benchmarking

Training & Certification

Level
SCOR Scholar (SCOR/S)* SCOR Professional (SCOR/P) SCOR Expert (SCOR/E)

Key Requirements
SCOR University Curriculum SCOR Level 0 Exam SCOR Framework SCOR Implementation SCOR Level 1 Exam SCOR/P SCOR Project Case Study SCOR Project Peer Review SCOR Level 2 Exam SCOR/E 5 years SCM Experience
2 in SCOR Areas

By Ma nd a t e f r om t h e Boa r d of Dir e ct or s By Ma nd a the s r om teh e e d urpon Dir e ct or s a f conf r r Boa d of h a s conf e r r e d u pon

JJoh n Doe oh n Doe

SCOR Master (SCOR/M)

Having compl e t e d t h e r e qu ir e me nt s of and Having compl e t e d t h e r e qu ir e me nt s of and r e ce iving t h e t it l e of r e ce iving t h e t it l e of

Ce rrt tif ie dd SCOR Mas t tee r Ce if ie SCOR Mas r

Give n a t Wa s h ingt on, D.C. Th is 1 s t s tDa y of Give n a t Wa s h ingt on, D.C. Th is 1 Da y of Nove mb e r 2006 Nove mb e r 2006
Ch ie f Te ch nol ogy Of f ice r Ch ie f Te ch nol ogy Of f ice r

2 years SCOR Experience SCOR Practicum Instruction Workshop SCOR Level 3 Exam Positive Training Evaluations SCOR Subject Master (SSM in) SCOR/M Subject Training Positive Subject Training Evaluation

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SCOR 8.0 Convergence Training SCOR 8.0 Convergence Training

| |

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*reserved for University Students in SCM Studies

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SCOR for Benchmarking

Benchmarking

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SCOR for Benchmarking

The Value of Using SCOR1

www.pcor.com/scor

Copyright 2006 Process Core Group Research SCOR company share performance

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SCOR for Benchmarking

Value of Using SCOR1

Area Raw materials purchase cost Cost of Distribution Total resource deployed Manufacturing space Investment in Tooling Order cycle time New product development cycle Inventory Paperwork and Documentation Quality Defects Improvement 25% 35% 50% 50% 50% 60% 60% 70% 80% 100%

1Hughes

& Michels (1998) Transform your supply chain. Releasing value in business. London, UK

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Assumptions
Understand the concept of Supply-Chain and the major business processes involved Understand the concept and purpose of quantitative benchmarking May be considering Benchmarking, or have had difficulty in performing Benchmarking Benchmarking is performed within a complete SupplyChain performance improvement program Interested in a simple and effective framework for linking Supply-Chain Strategy, Performance Metrics, and Benchmark Data

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Basic Steps to Benchmarking

Supply-Chain Definition
Identification of Supply-Chains

Supply-Chain Prioritization
Discriminating between different supply-chains based on company priorities

Supply-Chain Strategy
Ranking the Five key Performance Attributes

Supply-Chain Scorecard
Creating a Balanced SCORcard

Sourcing Data and Performing Benchmark

Pulling it all together and interpreting the result

Questions and Close

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Supply-Chain Definition
We use a tool called the Supply Chain Definition Matrix to define the supply-chains within an enterprise The Supply Chain Definition Matrix helps determine the number and size of supply chains Rules for Column Generation:
The columns in the matrix are focused on demand e.g. channels or segments or customers The lowest level entry in a column is a billable entity The columns should total your revenue Ask your Sales or Marketing functions for customer segmentation information The rows in the matrix are focused on supply e.g. business lines or products or locations or suppliers The lowest level of detail in a row is a SKU The rows should total your costs Ask product divisions for product hierarchy data

Rules for Row Generation:

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Example:

Air Conditioning Company

Columns are Retail/Commercial, and sub-segmented Rows are the Major Product Lines
Geography Customer or Market Channel Supply-Chain Definition Matrix Retail Big-Box Retailer Internet Direct Commercial Building Commercial Commercial Major Acct

Big AirCo

x x x

Small Airco Product

Custom Industrial Standard Industrial

x x x
SCOR for Benchmarking | 14

Copyright Supply Chain Council. 2006. All rights reserved.

Finalizing the Matrix

Each X represents a possible supply-chain Some supply-chains are not unique For each group of supply-chains, group together if
Share planning systems or Share logistics network or Share manufacturing sites or Are managed together

Do not group together if

Are distinct supply-chain types e.g. build-to-order, build-tostock Are in different geographies e.g. Europe vs Asia

Each group is considered a logical supply-chain for further work

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Example: ComfyCo
Continuing Information on our Example Company, what are the distinct supply-chains

Geography Customer or Market Channel Supply-Chain Definition Matrix Retail Big-Box Retailer Internet Direct Commercial Building Commercial Commercial Major Acct

Big AirCo

x x
Commercial SC Commercial SC

x
Small Air SC Small Air SC

Big Air SC Big Air SC

Small Airco Product

Custom Industrial Standard Industrial

x x x
SCOR for Benchmarking | 16

Copyright Supply Chain Council. 2006. All rights reserved.

Supply Chain Prioritization

We use a tool called the Supply Prioritization Definition 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.

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Supply Chain Priority

Supply-Chain Selection Decision Matrix
Gross Margin & Rank 20 Number of SKUs & Rank 20 Unit Volume & Rank 20 Strategic Value & Rank 20

Criteria

Revenue & Rank

Supply Chain Big Air

Overall Rating 100

Weight

20

20

40

20

20

20

Small Air Comml

200 Weighted Result

40

20

40

40

40

300

60

60

60

60

60

Copyright Supply Chain Council. 2006. All rights reserved.

Ranking

SCOR for Benchmarking

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Supply Chain Strategy

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 Responsiveness Flexibility Cost Assets

Our system allows for 1 Superior (S) feature, Two Advantage (A) features, and two Parity (P) rankings.
Superior: performance in top-10% of all supply chains studied Advantage: performance at midpoint between top-10% and median of all supply chains studied Parity: performance at median of all supply chains studied

Copyright Supply Chain Council. 2006. All rights reserved.

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Attributes/Metrics
SCOR metrics: Standard Level 1 Metrics

Attribute

Metric (level 1)
Perfect Order Fulfillment Order Fulfillment Cycle Time Upside Supply Chain Flexibility Supply Chain Adaptability

Customer

Reliability Responsiveness Flexibility Cost

Supply Chain Management Cost Cost of Goods Sold Cash-to-Cash Cycle Time Return on Supply Chain Fixed Assets Return on Working Capital

Internal

Assets

upside and downside adaptability metrics

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Supply-Chain Strategy Matrix

Competitive Requirements
Big Airco Small Airco

Performance Attribute or Category

Comml

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

Reliability

S A A P P

Responsiveness

Flexibility

Cost

Asset Management

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Supply-Chain Performance
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
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SCORcard Generation
We suggest the following procedure:
For each Feature or Attribute, choose at least 1 relevant Level-1 Metric For each Superior Metric
Identify the Level-2 metrics driving Level-1 performance Break each Level-2 metric down to Level-3 metrics driving Level2 performance, and select 1 or more relevant drivers

For each Advantage Metric

Identify the Level-2 metrics driving Level-1 performance

For each Parity Metric

No further breakdown is necessary

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SCORcard Generation
Attribute Reliability S/A/P
S

Metric (level 1)
Perfect Order Fulfillment

Metric (Level 2)

Metric (Level 3)

% Orders Delivered in Full Delivery Item Accuracy Delivery Quantity Accuracy Delivery Performance to Customer Commit Date Customer Commit Date Achievement Time Customer Receiving Delivery Location Accuracy Accurate Documentation Shipping Documentation Accuracy Billing Documentation Accuracy Perfect Condition % Orders Received Damage-Free

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SCORcard Generation (2)

Attribute Responsiveness S/A/P
A

Metric (level 1)
Order Fulfillment Cycle Time

Metric (Level 2)

Metric (Level 3)

Source Cycle Time Make Cycle Time Deliver Cycle Time

Flexibility Cost Assets

P P A

Ups. Supply Chain Flexibility Supply Chain Mgmt Cost Cash-to-Cash Cycle Time Days Sales Outstanding Days Payable Outstanding Inventory Days of Supply

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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

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SCORmark
Once the SCORcard is defined, and data for most metrics are gathered Data are submitted electronically to the SCORmark system With days or weeks, an electronic report is returned with the results of comparison against selected demographic groups The principal function of the Benchmark is to determine the gap between actual performance and performance corresponding to desired strategic positioning. The Benchmark is a component of Phase I and II of the SCOR Implementation Roadmap

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Interpreting the Benchmark

Attribute Reliability Responsiveness Flexibility Cost Assets S/A/P
S

Metric (level 1)
Perfect Order Fulfillment

You 97% 14 days 62 days 12.2% 35 days

Parity 92% 8 days 80 days 10.8% 45 days

Adv 95% 6 days 60 days 10.4% 33 days

Superior 98% 4 days 40 days 10.2% 20 days

Target Gap 1% 8 Days 0 1.4% 2 Days

Order Fulfillment Cycle Time

P P A

Ups. Supply Chain Flexibility Supply Chain Mgmt Cost Cash-to-Cash Cycle Time

Used for choosing target performance Critical to understand Performance in a particular Demographic Can be internal (competing against other supplychains in same company) Aligns Strategy, Performance, and Performance Goals

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Closing and Questions

Supply-Chain Definition Supply-Chain Prioritization Supply-Chain Strategy Supply-Chain Performance Data and Benchmarking 1-2 Day workshop 1 Day Data Gathering 1 Day workshop 1 Day workshop Days/Weeks

SCC/APQC will be hosting half-day Industry-Focused workshops to give 1:1 coaching for execution of each of the five phases including template documents to use Oil & Gas Event: www.apqc.org/oil Questions?

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www.supply-chain.org

For additional questions on SCORmark, please contact: Joe Francis jfrancis@supply-chain.org Marisa Brown mbrown@apqc.org Hands-on SCOR training for the oil & gas industry in Houston www.apqc.org/oil

This presentation is the exclusive property of the Supply Chain Council. Copyright Supply Chain Council. 2006. All rights reserved. The marks SCOR, CCOR, DCOR and SCOR Roadmap are the exclusive property of the Supply Chain Council.