Introduction to Supply Chain 

Introduction to Supply Chain

Operations Reference‐model (SCOR)

Lim Yeong Chuan

Lim Yeong Chuan
Certified SCOR trainer
 What Keeps You Up at Night?  

Stock Market Volatility, Oil Prices,

Labor,, Political Instability,
y, Security
y

Reducing Inventory/
Working Capital/ Asset Reducing Total Supply
Management Chain Costs

Supply Chain
Resiliency &
Competing in a
Sustainability:
Global Market
Risk Management
& Green
Providing Superior & Consistent
Customer Service While
Increasing Revenue & Margin

Business As Usual Has Been Cancelled…Now What?

2 AMR 2009 ‐ SCC & SCOR Executive Overview
 Superior Supply Chain Management (SCM) has Long Been 
a Source of Competitive Advantage 
p g
Total Supply Chain Management Costs (% of Revenue) Best-in-Class
Median
14.0%
12.3%
12.0% 10.7% 10.7%
%
10.0%
Revenue
e

10.0% 9.2% 9.1%

8.0% 7.4%
6.6%
% of R

5 5%
5.5%
6.0%
% %
5.4% 5.3%
4.8%
4.2%
3.5% 3.6%
4.0% 3.4%

2 0%
2.0%
0.0% Automotive Industrial Chemical & Computer Consumer Goods Pharmaceutical Semiconductor Telecommunications
Advanced Materials q p
Equipment

Best-in-class Companies’ Outperform Their Median Competitors with a

50% Cost Advantage
Source: PRTM/The Performance Measurement Group

3 AMR 2009 ‐ SCC & SCOR Executive Overview
 But SCM is Paramount in Times of Economic Uncertainty 
Fortune-10 Company
• In 2007, US business logistics costs rose to an all  Supply-Chain Cost as
time high of $1.4 trillion (10.1% of US nominal
time high of $1.4 trillion (10.1% of US nominal  % of Total Costs 2
Gross Domestic Product ) 3 GM 94%
Ford 93%
• Supply‐chain generally accounts for between 60%  Conoco 90%
and 90% of all company costs1 Wal-Mart 90%
• A 2% improvement in process efficiency for supply‐ Chevron 88%
chain processes has 3000% 5000% the impact of a 
chain processes has 3000% ‐ 5000% the impact of a IBM 77%
2% improvement in efficiency for… IT… HR…  Exxon 75%
Finance1… Sales… GE 63%

1 Exclusive of Financial Services companies

Citi1 0%
2 Source: Hoovers 2006 Financial Data, Supply-Chain Council 2006 SCM
Benchmark data on SCM cost for discrete & process industries
AIG1 0%
3 CSCMP 19th Annual State of the Logistics Industry

Focused initiatives in Supply Chain Management can result in 30-35% cost

reductions, liberation of working capital, and revenue increases of 3-5%!

4 AMR 2009 ‐ SCC & SCOR Executive Overview
 And SCM Improvement Creates Shareholder Value
p
The Supply Chain All Financial & Shareholder
Impacts . . . Metrics . . . Value
• Improve customer service and Liberate
Working
response Capital
• Optimize inventory flow,
flow Improve
utilization & productivity Capital
Reduce Efficiency
Fixed
• Best in class customer
Best-in-class Capital
relationships Increase
• Differentiated service Increase Shareholder
capabilities Revenue Value
andd Margin
M i
• Best-in-class strategic supplier Increase
partnerships Profit
• Leverage of outsourcing of Optimize
p
business processes Cost Model
• Unique supply chain models

Effective Supply Chain Management can increase a Return on

Capital Employed by 30% and More!
5 AMR 2009 ‐ SCC & SCOR Executive Overview
 SUPPLY CHAIN COUNCIL, INC.

6 AMR 2009 ‐ SCC & SCOR Executive Overview
 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 
pp y p g p p y
dramatically improve supply chain operations
• SCC has established the supply chain world’s most widely accepted framework 
– the SCOR
the SCOR® process reference model 
process reference model – for evaluating and comparing supply 
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
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
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
i it li i th t l
– With membership open to all interested organizations 

7 AMR 2009 ‐ SCC & SCOR Executive Overview
 Global Scope With Over 800 Member Organizations

Member Distribution

Australia/Ne South Africa

w Zealand
China Latin
America
Southeast
North Asia
America
Japan Member Affiliation

Europe Government

SME

End User

Enabling Technology

Consultant
Also developing
chapters in India and Non-Profit/Academic
the Middle East
0% 10% 20% 30% 40% 50%

8 AMR 2009 ‐ SCC & SCOR Executive Overview
 Industry Membership Scope

9 AMR 2009 ‐ SCC & SCOR Executive Overview
 THE ROLE OF THE SCOR MODEL IN 
THE ROLE OF THE SCOR MODEL IN
OPTIMIZING SUPPLY CHAIN 
PERFORMANCE 

10 AMR 2009 ‐ SCC & SCOR Executive Overview
 What is a Supply Chain?

11 AMR 2009 ‐ SCC & SCOR Executive Overview
 What is a Supply‐Chain?

Product Management

Customer p
C
Supplier processes

Product Design Sales & Support

processes
DCOR™ CCOR™

Supply Chain SCOR™

12 AMR 2009 ‐ SCC & SCOR Executive Overview
 What is SCOR®?  

• SCOR is a supply chain 
process reference model
process reference model 

Custom
C
Supply Chain

er proccesses
containing over 200 process 
elements, 550 metrics, and  Plan

mer pro
500 best practices including
500 best practices including 
risk and environmental 
management  Source Make Deliver

Suppliier

ocessess
• Organized around the five 
f
primary management 
processes of Plan, Source,  Return Return

M k D li
Make, Deliver and Return
dR t

• Developed by the industry for 
Process, arrow indicates material flow direction
use as an industry open 
y p Process no material flow
Process, Information flow
standard ‐ Any interested 
organization can participate 
p
in its continual development

13
13 AMR 2009 ‐ SCC & SCOR Executive Overview
 The SCOR® model – a cross‐industry open standard 

• The five integrated processes provide a boundary‐free view of the true 
end‐to‐end
end to end Extended Supply Chain
Extended Supply Chain
• Supports intra‐ and cross‐enterprise optimization of arbitrary scale

Plan

Deliver Source Make Deliver Source Make Deliver Source Make Deliver Source

R t
Return R t
Return R t
Return Return Return
Return
Return Return

Your Company Customer’s

Suppliers’ Supplier Customer
Customer
pp
Supplier
Internal or External Internal or External

14 AMR 2009 ‐ SCC & SCOR Executive Overview
 SCOR Processes – Five Levels of Decomposition 

Level 1 Level 2 Level 3 Level 4 Level 5

Scope Configuration Activity Workflow Transactions

S1 EDI
Supply-Chain
pp y S1.2
Source XML
Source Receive Product
Stocked Product

Differentiates Differentiates Names Tasks Sequences Steps Links

B i
Business C
Complexity
l it T
Transactions
ti
Defines Scope Differentiates Links, Metrics, Job Details Details of
Capabilities Tasks and Automation
Practices

Sets Strategy First Tier Second Tier Industry or Technology

Diagnostics Diagnostics Company Specific Specific

Standard SCOR definitions Company/Industry

p y y definitions

15 AMR 2009 ‐ SCC & SCOR Executive Overview
 Supply Chain Balanced SCORcard

Standard Strategic (Level 1) Metrics
Attribute Metric (Strategic)
Reliability Perfect Order Fulfillment
Customer

Responsiveness Order Fulfillment Cycle Time
Agility Supply Chain Flexibility
Chain Adaptability†
Supply Chain Adaptability
Supply
Cost Supply Chain Management Cost
nal

Cost of Goods Sold
Intern

Assets Cash‐to‐Cash Cycle Time
Return on Supply Chain Fixed Assets
Return on Working Capital

† upside and downside adaptability metrics

16 AMR 2009 ‐ SCC & SCOR Executive Overview
 How Does SCOR Help Improve Supply Chains?  
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
It helps companies: 
•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
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)
g j g y q y p

17 AMR 2009 ‐ SCC & SCOR Executive Overview
How companies benefit from SCOR?
How companies benefit from SCOR?
How companies benefit from SCOR?
 SCOR®: CASE IN POINT

21 AMR 2009 ‐ SCC & SCOR Executive Overview
Fonterra Brands ‐ Creating a More Flexible, 
Responsive and $Marter Supply Chain
Responsive and $Marter Supply Chain

Supply-Chain Council
SEA Conference 2006
 ADVA Optical Networking 

The Challenge  The Solution
• €370.2M Revenue Enterprise p 1 g p
• Using SCOR, ADVA identified performance gaps g p
• Rapid growth in demand for storage, voice &  in key metrics between current and required to 
data transport  reach parity status
• Focus on capturing this growth while  • Also using SCOR, identified process 
maintaining profitability
maintaining profitability  disconnects, drivers of inventory and projects
disconnects, drivers of inventory and projects 
• Needed to identify inventory drivers and  required for improvement 
optimize inventory levels to enable ADVA to  • Grouped and prioritized proposed projects 
reach inventory reduction targets whilst  based on potential impact and amount of 
i
improving customer satisfaction in Order 
i t ti f ti i O d effort/risk
effort/risk 
Fulfillment Cycle Time (OFCT) and On‐time  • Agreed to project list including: 
Delivery (OTD) – New S&OP Process
• Created a transformation plan that would  – Supplier scorecards and quarterly business 
allow ADVA to proactively plan, drive and  reviews with suppliers, 
i ith li
manage the inventory levels and better  – Information transparency and others  
achieve the balance of cost and service 
Benefits Achieved
• Gross inventory reduced from €59 million to 
€38 million in 10 months 
• Inventory days of supply reduced 47% from 
1Hoovers.com
initial scorecard

23 AMR 2009 ‐ SCC & SCOR Executive Overview
 SASOL Supply Chain Optimization 

The Challenge  The Solution
• US$16B annual South African Petrochemical  pp y p
• The SASOL Supply Chain Optimization Journey  y
Concern 1 • Awareness – identified SCOR as a tool (2004) 
• Embarked on Supply Chain Optimization to  • Embarked on SCOR pilot project – tackling 
identify synergies and improvement  problem area to show benefits and understand 
opportunities across multiple business units
opportunities across multiple business units process
• Complex changing political environment and  • First in‐house project (to build internal success) 
introduction of substantial Managerial class  • Approval for permanent Center of Excellence 
without deep experience (CoE) competency
• Prioritization of supply chain projects (project 
demand exceeds supply) 
• Project 2, 3, 4…..X
• Embraced 
Embraced “The
The SCOR Way
SCOR Way” (2007) 
(2007)

Benefits Achieved
• Ongoing CoE for supply chain optimization 
• Sample project generated IRR of 139% over the 
project lifetime
1Hoovers.com
• Estimated US$1B cost improvements over 3 
year period
year period

24 AMR 2009 ‐ SCC & SCOR Executive Overview
 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)

25 AMR 2009 ‐ SCC & SCOR Executive Overview
 Even More Companies

• Comparison of Fortune‐1000 
Council  member company share 
price aggregate growth from 
2003 – present to S&P 500 and 
DOW indices.
• Growth inflected after 2 years, 
and the spread between SCOR 
index companies and other 
industrials has grown to almost 
30 points.
• Growth is increasing 
exponentially: Compound 
interest on SC performance.
interest on SC performance.
• Correlates SCC 
Membership/SCOR investments 
with Shareholder value.
• Same pattern evident in FTSE‐
S tt id t i FTSE
Realtime: www.scorlabs.org/scor/scorindex
100, DAX, NIKKEI and other 
indices.

26 AMR 2009 ‐ SCC & SCOR Executive Overview
 Thank you!

More info:
www.Supply‐Chain.org
S l Ch i

Lim Yeong Chuan
Lim Yeong Chuan
ylim@supply‐chain.org
limsla@yahoo.com