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Int. J. Production Economics 115 (2008) 411– 423

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Int. J. Production Economics

journal homepage: www.elsevier.com/locate/ijpe

The performance evaluation of SCOR sourcing process—The case

study of Taiwan’s TFT-LCD industry
Yeong-Dong Hwang a,, Yi-Ching Lin b, Jung Lyu Jr.b
a
Department of Industrial Management, Leader University, No. 188 Sec. 5 An-chung Rd., Tainan City 709, Taiwan
b
Department of Industrial and Information Management, National Cheng Kung University, Taiwan

a r t i c l e in fo abstract

Article history: The supply chain operations reference (SCOR) model, proposed by the supply chain
Received 24 September 2006 council (SCC), is a standard for supply chain performance evaluation model, which has
Accepted 28 September 2007 been widely embraced by many modern organizations. The SCOR model enables
Available online 22 June 2008
enterprises to analyse their supply chain performance in a systematic way, to enhance
Keywords: communication among the members in the supply chain, and to design a better supply
Performance evaluation chain network. To further improve the performance of the sourcing process, which is
Supply chain operations reference (SCOR) critical to many industries, this research investigates the sourcing processes and their
model accompanied performance metrics in the SCOR model version 7.0. The supply chain of
TFT-LCD industry
thin film transistor-liquid crystal display (TFT-LCD) industry in Taiwan is the subject.
Regression analysis
Using the questionnaire survey to collect empirical information, the regression model
was applied to examine the sourcing process of SCOR at level 2 and its performance
metrics. The results obtained were further extended for discussion on the sourcing
process of level 3. In addition, this article also elaborates the institutionalization of the
SCOR model and justifies the project planning system based on the SCOR model. It is
illustrated that the proposed approach is feasible and valuable to supply chain managers
in decision-making on various industries.
Crown Copyright & 2008 Published by Elsevier B.V. All rights reserved.

1. Introduction requires the coordination of members in the supply chain,

Enterprises must compete against one another in order
to survive. As the global economy continues to grow,
enterprises are no longer competing independently but to
rely on their supply chain systems. As a result, they may
face the following two issues.
Firstly, following the globalization of certain products
and the emergence of China market, many manufacturers
have set up manufacturing facilities in China and world-
wide warehouses in order to closely accommodate
customer needs. To satisfy customer requirements, the
supply chain also needs to customize its service. This
 Corresponding author. Tel.: +886 5 213 0561; fax: +886 5 213 0153;
Mobile: 0921 952 830.
E-mail address: hyd1020@ms11.hinet.net (Y.-D. Hwang).
including processes such as marketing, design, manufac-
turing, logistics, etc. The integration of these processes
complicates the design and management of the supply
chain.
Secondly, although enterprises have largely recognized
the necessity of the supply chain model and the impact of
its performance, it is difficult for them to design a new
supply chain without a systematic methodology. The
barriers to supply chain analysis include ambiguous
definition of supply chain operation model, incomplete
and inappropriate metrics in the existing operation model,
and the inability to locate problems affecting supply chain
performance.
Various performance metrics have been developed to
measure, evaluate, and monitor the operation of the entire
supply chain. The appropriate performance metrics can be
used to evaluate the probability of success in achieving

0925-5273/$ - see front matter Crown Copyright & 2008 Published by Elsevier B.V. All rights reserved.
doi:10.1016/j.ijpe.2007.09.014
 ARTICLE IN PRESS
412 Y.-D. Hwang et al. / Int. J. Production Economics 115 (2008) 411–423
the target, to provide advice or corrective suggestions to
the organization, to provide a feedback system to the
manager and to evaluate the internal input and output
(Tesoro and Tootson, 2000). However, if the metrics within
a supply chain lack consistency, it is difficult for managers
to take the appropriate actions based on the performance
evaluation.
Pittiglio Rabin Todd & McGrath and Advanced Manu-
facturing Research jointly formed the supply chain council
(SCC) with over 65 other enterprises in 1996. It launched
the supply chain operations reference (SCOR) model to
help enterprises conduct systematic analysis and pro-
moted communication among its members. The aim
was to establish basic business rules for setting up
supply chains. The SCOR is a cross-industry, standard
supply chain model that forms analytical tools for the
supply chain on the basis of process, performance evalua-
tion and best practice. There has been very little compre-
hensive research on the SCOR application in Taiwan.
As the nature of supply chains becomes increasingly
complex, making the right decisions also involves the
consideration of many different factors. Currently, the
sourcing decisions in the high-tech industry, such as
the TFT-LCD, heavily rely on the subjective judgment of
the decision-makers. The SCOR model provides references
for enterprises under various sourcing processes. For a
specific industry, important performance metrics under
different sourcing processes within the SCOR model can
be produced using the regression analysis method once
the data are collected via questionnaires. The objective of
this study is to establish critical metrics of the sourcing
processes within a supply chain by using the SCOR model
version 7.0. The regression analysis method enables
objective judgement for the decision-makers and has the
following advantages: (1) it shows the correlation be-
tween input and output variables; (2) it detects the
significance of the input variables; (3) it establishes the
predictive model; and (4) the statistical inference is
simple, common and scientific. Therefore, the stepwise
regression analysis is applied to identify the most
important metrics in the model.
2. Overview of the SCOR model
2.1. Definition
The SCOR model is a supply chain performance
evaluation model. It provides a consistent supply chain
management framework, including business process,
performance evaluation and the best practice. It can help
all participants of a supply chain, including manufac-
turers, first-tier and second-tier suppliers, downstream
retailers/distributors/logistics service providers and cus-
tomers, to improve the efficiency of supply chain manage-
ment thereafter by communicating effectively via the
reference model.
There are six levels within the SCOR model, for which
the outlines and comments are detailed in Table 1 (SCC,
2006; Xelocity, 2005). Level 1 is the top level that deals
with process types and defines the six key management
processes the supply chain is based on, which are
planning, sourcing, making, delivering, returning and
enabling. The objectives of the business organization
should be established carefully at this level. Level 2 is
the categorization of core processes. Level 3 contains
process elements that describe every activity clearly and
provide an insight into the operation of a supply chain.
Although levels 4, 5 and 6 are not defined here, they
should be defined and described according to the actual
situation. Level 4 defines specific supply chain manage-
ment practice that is aimed to achieve competitive edge,
which is also called task. Level 5 involves the planning of
activities within each task, while level 6 describes the
rules for each activity.
2.2. Related research of the SCOR model
The SCOR addresses supply chain management by
allowing companies to examine and measure their supply
chain processes, to determine where weak links exist and
to identify possible improvements (Harelstad et al., 2004).
Huan et al. (2004) analysed the strengths and weaknesses
of the SCOR model and discussed how it could be used to
assist managers for strategic decision-making. The SCOR
provides companies with a picture of how the processes
from start to finish will be improved (Kevan, 2005) and
supports cross-industry diagnostics since its standardized
process definitions and metrics fit all types of business
operations and environments (Bolstorff, 2002, 2003b).
Companies use the SCOR model to drive supply chain
improvements and are spending less time putting out fire
fighting and more time in planning (Bolstorff, 2003a). The
SCOR can also be applied in developing action-oriented
metrics that effectively measure the progress of supply
chain projects (Bolstorff, 2004). While the scope of ISO
9000 does not typically look at accounting and finance
functions, the SCOR enables manufacturers to manage
operational and financial performance (Reichardt and
Nichols, 2003). Bolstorff (2005) described the concept of
models of customer SCOR and design SCOR in detail. The
processes for promoting the enterprise value chain of the
two models were also introduced. Bolstorff (2003c)
described integrating the SCOR model with six sigma
quality objectives. The SCOR model provides a strategic
toolset for the black belt’s toolbox (Malin and Reichardt,
2005). The computed SCOR model keeps current with
industries’ dynamic changes (Schultz, 2003).
Ellram et al. (2004) evaluated the applicability of a
services supply chain based on three product-based
manufacturing models: global supply chain forum frame-
work, the SCOR model and Hewlett Packard’s supply chain
management model. Lambert et al. (2005) compared the
SCOR model with the global supply chain forum frame-
work in four criteria—scope, intra-company connected-
ness, inter-company connectedness and drivers of value
generation—and identified their relative strengths and
weaknesses. To design and implement e-business pro-
cesses efficiently and effectively, many firms use available
industry standards in the form of reference models, e.g.
the SCOR model, the RosettaNet standards and software
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Table 1
The outline and comment of SCOR model

Level Description Outline Comments

1 Top level (process types) Level 1 defines the scope and content for the SCOR model
Plan
Here basis of competition performance targets are set
Source Make Deliver
Return Return

Enable

2 Configuration level (process
categories)
3 Process element level
(decompose processes)
4 Implementation level
(decompose process elements)
5 Undefined (decompose tasks)
6 Undefined (analyze rule
detailed for activities)
Plan: P1–P5 A company’s supply chain can be configured-to-order at level 2
from core process categories
Source: S1–S3 Companies implement their operations strategy through the
Make: M1–M3 configuration they choose for their supply chain
Deliver: D1–D4
Return: SR1–SR3; DR1–DR3
Enable: EP, ES, EM, ED, ER
Plan: P1.1–P1.4; P2.1–P2.4; P3.1–P3.4; P4.1–P4.4; Level 3 defines a company’s ability to compete successfully in its
P5.1–P5.4 chosen markets
Source: S1.1–S1.5; S2.1–S2.5; S3.1–S3.7 Companies fine tune their operations strategy at level 3
Make: M1.1–M1.6; M2.1–M2.6; M3.1–M3.7
Deliver: D1.1–D1.15; D2.1–D2.15; D3.1–D3.15;
D4.1–D4.7
Return: SR1.1–SR1.5; SR2.1–SR2.5; SR3.1–SR3.5;
DR1.1–DR1.4; DR2.1–DR2.4; DR3.1–DR3.4
Enable: EP1–EP9; ES1–ES9; EM1–EM8; ED1–ED8;
ER1–ER8
Plan: tasks (undefined) Companies implement specific supply-chain management
practices at this level
Source: tasks (undefined) Level 4 defines practices to achieve competitive advantage and to
Make: tasks (undefined) adapt to changing business conditions
Deliver: tasks (undefined)
Return: tasks (undefined)
Enable: tasks (undefined)
Plan: activities (undefined) The activities can be defined according to the companies’ actual
Source: activities (undefined) conditions
Make: activities (undefined)
Deliver: activities (undefined)
Return: activities (undefined)
Enable: activities (undefined)
Plan: rules (undefined) The rules can be analyzed according to the companies’ actual
Source: rules (undefined) conditions
Make: rules (undefined)
Deliver: rules (undefined)
Return: rules (undefined)
Enable: rules (undefined)

reference models (Kirchmer, 2004). Huang et al. (2005)
described the benefits of using the SCOR model in AVON,
LEGO and Siemens Medicals. The authors also provided
the threaded diagram of each SCOR specification produced
by a computer-assisted tool. An integrated analytic
hierarchy process and pre-emptive goal programming-
based multi-criteria decision-making methodology for the
SCOR model performance metric was developed to take
into account both qualitative and quantitative factors in
supplier selection (Wang et al., 2004). Lockamy and
McCormack (2004) investigated the relationship between
supply chain management planning practices and its
performance based on the plan, the source, the make
and the deliver decision processes provided in the SCOR
model. The concept based on the SCOR model evaluated
different configurations of process chains with different
sets of parameters describing realistic production and
inventory processes (Roder and Tibken, 2006). In general,
the previous literature on the SCOR model neither
discussed the detailed application in any specific indus-
tries nor on any specific processes. In order to enhance the
model’s applicability, further research is required.
3. Overview of Taiwan’s TFT-LCD industry
3.1. The TFT-LCD industry
The TFT-LCD industry mainly consists of upstream
material manufacturing, midstream panel manufacturing
and downstream LCD module assembly. In upstream
material manufacturing, the key parts include glass
substrates, colour filters, polarizers, driver ICs and back-
light modules. The main Taiwanese midstream panel
manufacturers include AU Optronics, Chi-Mei Optoelectro-
nics, Chunghwa PictureTubes, HannStar Display, Quanta
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Display, Toppoly Optoelectronics, etc. Downstream LCD
module assembly assembles LCD panels, control panels and
backlight source modules into LCD modules to be used in
the computer industry, communication products and
consumer electronics products.
3.2. Parts and components
The supply of TFT-LCD parts and components is a major
factor affecting the efficiency and effectiveness of the
overall supply chain. The midstream LCD panel manufac-
turers can increase the overall competitiveness of a supply
chain by managing parts and components and providing
supply information on glass substrates, colour filters,
polarizers, driver ICs and backlight modules. Table 2
shows the supply relationship between upstream material
manufacturers and Taiwanese midstream LCD panel
manufacturers, where & indicates main suppliers, J
denotes secondary suppliers and W means small suppli-
ers (PIDA, 2005).
3.2.1. Glass substrate
The main global glass substrate suppliers for LCD
include Corning Display Technologies, Asahi Glass, NH
Techno Glass and Nippon Electric Glass, with a total
market share of 90%. In Taiwan, the main glass substrate
suppliers are Corning Display Technologies and Asahi
Glass.
3.2.2. Colour filter
As the demand for TFT-LCD panels increases, some
midstream LCD panel manufacturers have started to
produce their own colour filters. These are called in-house
manufacturers. The printing and chemical factories that
produce colour filters are called professional manufac-
turers.
3.2.3. Polarizer
Prior to 1997, all polarizers were imported in Taiwan
until Optimax Technology of Taiwan received the techni-
cal support from Sanritz Corp and became one of the top
three polarizer manufacturers in the world.
3.2.4. Driver IC
The domestic production of driver ICs continues to
increase in Taiwan. Supply from domestic manufacturers
has exceeded 55% since 2002 due to the high demand
from TFT-LCD panel manufacturers.

Table 2
Supply relationship of the upstream materials manufactures to Taiwanese midstream LCD panel manufactures

Upstream material Midstream LCD panel manufactures

manufactures
AU Chi-Mei Chunghwa picture Hannstar Quanta Toppoly
optronics optoelectronics tubes display display optoelectronics

Glass substrate Corning & J W & &

Asahi W & & J &
NHT W W J
NEG J W

Color filters Toppan & J J W J &

DNP J J & W W W
Sintek W J &
AMTC W J W J & W
Cando W W
Chi-Mei &

Polarizers Optimax & & & & & W

Nitto J J J J W &
Denko
Sumitomo W W W

Driver ICs Novatek & J & J J

Himax & J &
Winbond J J &
Sunplus W W
Myson W W W

Backlight Radiant J & & & J

modules Forhouse J J
Coretronic & J J &
K-Bridge J J
Kenmos J J
Helix W W
Forward W

& indicates main supplier, J denotes secondary supplier and W means small supplier.
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3.2.5. Backlight module Table 3

Since the technology and capital requirements for The definition of the SCOR sourcing process at levels 2 and 3
manufacturing backlight modules are less than those for
Level 2 Level 3 process element Definition
colour filters, driver ICs, polarizers and glass substrates, process (code)
there are a higher number of manufacturers producing (code)
backlight modules.
The LCD monitors for TVs and desktop computers are Source Schedule product The procurement,
stocked deliveries (S1.1) delivery, receipt and
the biggest market for midstream LCD manufacturers. It is product (S1) Receive product (S1.2) transfer of raw material
important for enterprises to position themselves within Verify product (S1.3) items, subassemblies,
the supply chain, to secure the sources of key parts and Transfer product (S1.4) product and/or services
components, and to actively invest in developing next Authorize supplier
payment (S1.5)
generation technology in order to enhance their techno-
Source Schedule product The procurement and
logical independence and competitive edge. make-to- deliveries (S2.1) delivery of product that is
order Receive product (S2.2) built to a specific design
product (S2) Verify product (S2.3) or configured based on
4. Research methodology Transfer product (S2.4) the requirements of a
Authorize supplier particular customer order
4.1. SCOR sourcing process payment (S2.5)
Source Identify sources of supply The negotiation,
engineer-to- (S3.1) procurement and
For high-tech industries such as the TFT-LCD, it is order Select final supplier(s) delivery of engineer-to-
necessary to have the standard SCOR model, which is product (S3) and negotiate (S3.2) order assemblies or
commonly adopted by the SCC members as the compre- Schedule product specialized product or
hensive decision-making model. The sourcing processes deliveries (S3.3) services that are designed
Receive product (S3.4) and built based on the
are critical to many enterprises in this industry. The Verify product (S3.5) requirements or
detailed definitions and codes of the SCOR sourcing Transfer product (S3.6) specifications of a
processes at level 2, together with the process elements Authorize supplier particular customer order
and their codes at level 3, are shown in Table 3 (Xelocity, payment (S3.7) or contract
2005; Stephens, 2001). The sourcing processes at level 2
include source stocked product (S1), source make-to-order
product (S2) and source engineer-to-order product (S3).
There are 17 process elements at level 3, including S1.1, S1.2, 1 denotes 10% and 10 denotes 100%. Similarly in the
S1.3, S1.4, S1.5, S2.2, S2.3, S2.4, S2.5, S3.1, S3.2, S3.3, S3.4, S3.5, S3.6 second section, respondents tick the respective correlation
and S3.7. There are nine common performance metrics between performance metrics and the sourcing processes,
at level 1, while level 2 and level 3 process elements in which 0 means no correlation, 1 means 10% correlation,
each have their own corresponding performance metrics. 2 means 20% correlation, etc.
Table 4 shows the performance metric codes of the SCOR
sourcing processes at levels 1, 2 and 3 and lists the
4.3. Return of questionnaire
definitions of the performance metrics at level 1. These
performance metrics are shown in Table 5 (Xelocity,
The participants of this study are the purchasing staff
2005). In the SCOR sourcing process, there are 11 and 39
of the upstream material manufacturers and the mid-
performance metrics, respectively, for level 2 processes
stream LCD panel manufacturers of the TFT-LCD industry
and level 3 process elements. This research selects level 2
in Taiwan. To determine the appropriate return sample
of the SCOR sourcing process to construct the regression
number, 45 manufacturers were contacted initially by
model, where S1, S2 and S3 are dependent variables and R1,
telephone to inquire their willingness of participation,
RP1.1, F1, F2, F3, C1, C2.1, C2.2, C2.3, A1 and A2 are independent
among which 17 upstream and 6 midstream manufac-
variables. The results obtained from this are then
turers agreed to participate. Questionnaires were posted
extended for further discussion on the sourcing process
to respondents and follow-up telephone calls were made
elements at level 3.
to ensure the completion and return of the questionnaires.

4.2. Design of questionnaire

4.4. Regression model
In order to build the regression model, the question-
naire is divided into 14 items, including S1, S2, S3, R1, RP1.1, The regression models are shown in Eqs. (1)–(3) in the
F1, F2, F3, C1, C2.1, C2.2, C2.3, A1 and A2, to measure sourcing study. They are established based on the data collected in
correlations. The questionnaire, as shown in the appendix, the questionnaires:
uses the 11-point Likert scale and is divided into two S1 ¼ b1 R1 þ b2 RP 1:1 þ b3 F 1 þ b4 F 2 þ b5 F 3 þ b6 C 1
sections—the ratio of the sourcing processes to the total
þ b7 C 2:1 þ b8 A1 þ b9 A2 þ e1 (1)
sourcing, and the correlation between performance
metrics and the sourcing processes. In the first section,
S2 ¼ b1 R1 þ b2 RP 1:1 þ b3 F 1 þ b4 F 2 þ b5 F 3 þ b6 C 1
respondents tick the respective rations of the S1, S2 and S3
processes to the total sourcing, in which 0 denotes 0%, þ b7 C 2:2 þ b8 A1 þ b9 A2 þ e2 (2)
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Table 4
The performance metric definition of SCOR sourcing process at level 1, 2 and 3

Attribute Metric code Definition

Level 1 Level 2 Level 3

Reliability R1 R1 R1.1R1.15 (15 metrics) The percentage of orders meeting delivery performance with complete and
accurate documentation and no delivery damage
Components include all items and quantities on-time using customer’s
definition of on-time, and documentation-packing slips, bills of lading,
invoices, etc.

Responsiveness RP1 RP1.1 RP1.1RP1.7 (7 metrics) The average actual cycle time consistently achieved to fulfill customer
orders
For each individual order, this cycle time starts from the order receipt and
ends with customer acceptance of the order

Flexibility F1 F1 The number of days required to achieve an unplanned sustainable 20%

increase in quantities delivered
F2 F2 The maximum sustainable percentage increase in quantity delivered that
can be achieved in 30 days
F3 F3 The reduction in quantities ordered sustainable at 30 days prior to delivery
with no inventory or cost penalties

Cost C1 C1 All direct and indirect expenses associated with operating SCOR business
across the supply chain
C2 C2.1 C2.1.1C2.1.5 (5 metrics) The cost associated with buying raw materials and producing finished
goods This cost includes direct costs (labor, materials) and indirect costs
(overhead)
C2.2 C2.2.1C2.2.5 (5 metrics)
C2.3 C2.3.1C2.3.7 (7 metrics)

Asset A1 A1 A1.1 The time it takes for an investment made to flow back into a company after
it has spent for raw materials
A2 A2 A2.1 Measures the return an organization receives on its invested capital in
supply chain fixed assets
This includes the fixed assets used in plan, source, make, deliver, and
return

S3 ¼ b1 R1 þ b2 RP 1:1 þ b3 F 1 þ b4 F 2 þ b5 F 3 þ b6 C 1 metric should not be deleted. It is calculated that

þ b7 C 2:3 þ b8 A1 þ b9 A2 þ e3
where R1, RP1.1, F1, F2, F3, C1, C2.1, C2.2, C2.3, A1 and A2 are the
performance metrics for level 2 of the SCOR sourcing
process. S1, S2 and S3 are the sourcing processes of level 2.
b1b9 are the standardized regression coefficients.
5. Case analysis
5.1. Data reliability
The most commonly used test for reliability is
Cronbach’s alpha (Sekaran, 2003). In general, Cronbach’s
alpha that is smaller than 0.60 is considered to be poor in
reliability, acceptable in the 0.70 range and good when it
is over 0.80. That is, the closer the Cronbach’s alpha to 1,
the higher the consistency. It is used to test the
consistency of answers from the respondents to the
performance metrics in the S1, S2 and S3 processes in
the questionnaire. Table 6 lists the Cronbach’s alphas of
the S1, S2 and S3 processes with respect to nine
performance metrics (independent variables). Generally,
if the Cronbach’s alpha, with any one of the performance
metrics deleted, is smaller than that of the 9-performance
metrics (overall performance metrics), the performance
(3) Cronbach’s alphas of the 9-performance metrics for the
S1, S2 and S3 processes are 0.9585, 0.7225 and 0.8528,
respectively, which indicate these performance metrics
have high reliability and are acceptable as input variables.
5.2. Validity analysis
It is important to determine whether there is a strong
correlation between independent variables by using
Pearson correlation analysis. In general, if the Pearson’s
correlation coefficients are all below 0.6, the performance
metrics are mutually independent (Sekaran, 2003; Cooper
and Schindler, 2006). The Pearson’s correlation coeffi-
cients in this study are all below 0.6, which suggests there
are no strong correlations between the 11 performance
metrics at level 2. The three regression models can then be
constructed, where S1, S2 and S3 processes are dependent
variables, and level 2 metrics of R1, RP1.1, F1, F2, F3, C1, C2.1
(or C2.2 or C2.3), A1 and A2 are independent variables. C2.1,
C2.2 and C2.3 represent independent variables of S1, S2 and
S3, respectively. Table 7 shows the results of stepwise
regression analysis. The assumptions of the regression
models include (1) the expected value of the disturbances
is zero; (2) the independent variables are not highly
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Table 5 Table 6
The performance metric of SCOR sourcing process at levels 1, 2 and 3 Data reliability for SCOR sourcing process

Attribute Metric (code) Deleted Cronbach’s alpha

performance metric
Reliability Perfect order fulfillment (R1), % schedules generated code
with supplier’s lead time (R1.1), % schedules changed S1 process S2 process S3 process
within suppliers’ lead time (R1.2), % orders/lines
received complete (R1.3), % orders/lines received on- R1 0.9543 0.6615 0.8275
time to demand requirement (R1.4), % orders/line RP1.1 0.9561 0.7218 0.8331
received damage free (R1.5), % orders/lines received F1 0.9526 0.7098 0.8456
with correct shipping documents (R1.6), % orders/lines F2 0.9577 0.6984 0.8375
received defect free (R1.7), % product transferred on- F3 0.9527 0.6871 0.8259
time to demand requirement (R1.8), % product C1 0.9535 0.6248 0.8351
transferred without transaction errors (R1.9), % product C2.1 0.9503 None None
transferred complete (R1.10), % product transferred C2.2 None 0.6903 None
damage free (R1.11), % of faultless invoices (R1.12), % C2.3 None None 0.8361
potential suppliers selected which become qualified A1 0.9551 0.7154 0.8456
(R1.13), % of qualified suppliers which meet defined A2 0.9584 0.7224 0.8486
requirements (R1.14), % of supplier contracts negotiated Cronbach’s alpha of 0.9585 0.7225 0.8528
meeting target terms and conditions for quality, overall
delivery, flexibility and cost (R1.15) performance
Responsiveness Order fulfillment cycle time (RP1), source cycle time metrics
(RP1.1), schedule product deliveries cycle time (RP1.1.1),
receive product cycle time (RP1.1.2), very product cycle
time (RP1.1.3), transfer product cycle time (RP1.1.4),
authorize supplier payment cycle time (RP1.1.5),
identify sources of supply cycle time (RP1.1.6), select interrelated; (3) the disturbances are independent; (4) the
supplier and negotiate cycle time (RP1.1.7) disturbances are normally distributed; (5) the distur-
Flexibility Upside supply chain flexibility (F1), upside supply
bances have constant variance. As the model constructed
chain adaptability (F2), downside supply chain
adaptability (F3) by using stepwise regression analysis satisfies the above
Cost Supply chain management cost (C1), cost of goods sold five assumptions, the independent variables screened are
(C2), product acquisition costs as % of source stocked validated.
product costs (C2.1), product acquisition costs as % of
In the first assumption, the models are linear in the
source make-to-order product costs (C2.2), product
acquisition costs as % of source engineer-to-order independent metrics and the sum of the residues is zero.
product costs (S2.3), schedule deliveries costs as a % of This means the expected value of the disturbances is zero.
product acquisition costs in source stocked product In the second assumption, any individual variance infla-
costs (C2.1.1), receiving cost as a % of product tion factor (VIF) larger than 10 indicates that multi-
acquisition costs in source stocked product costs
(C2.1.2), verification costs as a % of product acquisition
collinearity exists. That is, the independent variables are
costs in source stocked product costs (C2.1.3), transfer & highly correlated and may influence the least-squares
product storage costs as a % of product acquisition estimates of the regression models (Dielman, 2001). The
costs in source stocked product costs (C2.1.4), costs per VIF in Table 7 varied between 1.057 and 7.442, which
invoice as a % of product acquisition costs in source
means the independent variables are not highly corre-
stocked product costs (C2.1.5), schedule deliveries costs
as a % of product acquisition costs in source make-to- lated. In the third assumption, when the Durbin–Watson
order product costs (C2.2.1), receiving costs as a % of (DW) is close to 2, the disturbances are independent
product acquisition costs in source make-to-order (Dielman, 2001). That is, the residues do not change by
costs (C2.2.2), verification costs as a % of product
time. The DW statistics for S1, S2 and S3 are 2.051, 1.885
acquisition costs in source make-to-order costs (C2.2.3),
transfer & product storage costs as a % of product and 1.915, respectively, which indicates the disturbances
acquisition cost in source make-to-order product costs are independent. In the fourth assumption, the normality
(C2.2.4), costs per invoice as a % of product acquisition can be measured by computing the Ryan–Joiner test
costs in source make-to-order product costs (C2.2.5), statistic, denoted as R (Dielman, 2001). In this study, R’s
schedule deliveries costs as a % of product acquisition
costs in source engineer-to-order product costs (C2.3.1),
vary between 0.977 and 0.997 and their p-values are
receiving costs as a % of product acquisitions costs in smaller than 0.01, thus the disturbances are normally
source engineer-to-order product costs (C2.3.2), distributed. In the fifth assumption, the Szroeter’s test
verification costs as a % of product acquisitions costs in statistic (Q) is available for testing constant variance
source engineer-to-order product costs (C2.3.3), transfer
(Dielman, 2001). If Q is smaller than Za, the variance is
and product storage costs as a % of product acquisition
costs in source engineer-to-order product costs (C2.3.4), constant. a is the level of significance for the test and Za is
costs per invoice as of a % of product acquisition costs chosen from the standard normal table with upper-tail
in source engineer-to-order product costs (C2.3.5), area. Q’s are all smaller than 2.325 (Z0.01), thus the
source identification costs as a % product acquisition
disturbances have constant variance as shown in Table 7.
costs in source engineer-to-order product costs (C2.3.6),
supplier selection costs as a % of product acquisitions
In short, the three stepwise regression models obtained
costs in source engineer-to-order product costs (C2.3.7) correspond with the five assumptions and the metrics
Asset Cash-to-cash cycle time (A1), return on supply chain screened are validated. When R2 is close to 1, the
fixed assets (A2), inventory days of supply (A1.1), value regression models fit well with the data. That is,
of assets provided by service provider (cost avoidance,
A2.1)
the performance metrics are significant. Based on
Table 7, the regression models obtained for S1, S2 and S3
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Table 7
The results by using stepwise regression analysis

Code of level 2 Code of Standardized p Multicollinearity Coefficient of Disturbance Normality Constant variance
process screened metric coefficient Value statistic determination R2 statistic DW statistic R statistic Q

Beta Tolerance VIF

S1 R1 0.362 0.000 0.684 1.461 0.999 2.051 0.980 2.251

F1 0.210 0.012 0.210 4.771
C1 0.377 0.002 0.134 7.442
C2.1 0.285 0.001 0.323 3.092

S2 R1 0.207 0.006 0.946 1.057 0.977 1.885 0.988 0.519

C1 0.547 0.000 0.630 1.587
C2.2 0.402 0.000 0.647 1.547
A2 0.233 0.003 0.880 1.137

S3 R1 0.326 0.000 0.909 1.100 0.990 1.915 0.978 1.442

F2 0.302 0.000 0.819 1.221
F3 0.655 0.000 0.695 1.439
C2.3 0.115 0.033 0.633 1.581

fit well because the value of R2 varies between 0.977 and
0.999, which indicates the performance metrics screened
are significant and validated.
5.2.1. Level 2 processes
The results of the stepwise regression analysis, shown
in Table 7, can be explained as follows. Using the source
stocked products (S1) process as the dependent variables,
there are four significant performance metrics (indepen-
dent variables) in the regression models, which are perfect
order fulfilment (R1), upside supply chain flexibility (F1),
supply chain management cost (C1) and product acquisi-
tion costs as % of source stocked product costs (C2.1). If
perfect order fulfilment (R1), upside supply chain flex-
ibility (F1), supply chain management cost (C1) and
product acquisition costs as % of source stocked product
costs (C2.1) can be improved, they will significantly
enhance the sourcing strategy that is based on the S1
process. C2.1 is product acquisition costs divided by source
stocked products (S1) costs. Product acquisition costs are
costs incurred for the production of the products, includ-
ing the sum of product management and planning,
supplier quality engineering, inbound freight and duties,
receiving and product storage, incoming inspection,
product process engineering and tooling costs. Similarly,
perfect order fulfilment (R1), supply chain management
cost (C1), product acquisition cost as % source engineer-to-
order product cost (C2.2) and return on supply chain fixed
assets (A2) are critical in the source make-to-order
product (S2) process. In the source engineer-to-order
product (S3) process, the supply chain managers should
focus on perfect order fulfilment (R1), upside supply chain
adaptability (F2), downside supply chain adaptability (F3)
and product acquisition cost as % source engineer-to-order
product cost (C2.3). Therefore, these arguments obtained
from the regression model stand as the basis for improv-
ing sourcing strategy.
5.2.2. Level 3 process elements
Table 8 shows the performance metrics of the SCOR
process at level 3, which extended from the results of the
regression analysis at level 2. Those with | represent
performance metrics defined by the SCOR model and
marked areas denote significant metrics screened. The S1
process is divided into five process elements, including
S1.1, S1.2, S1.3, S1.4 and S1.5. In the S1.1 process element,
the significant metrics include % schedules generated
with supplier’s lead time (R1.1), % schedules changed with
supplier’s lead time (R1.2) and schedule deliveries costs
as a % of product acquisition costs in S1 costs (S2.1.1).
The attribute of R1.1 and R1.2 is reliability, while that of
C2.1.1 is cost. The definition of R1.1 is the number of
schedules that are changed within the suppliers’ lead
time divided by the total number of schedules generated
within the measurement period (Xelocity, 2005). R1.2
is 100% subtracted by R1.1. C2.1.1 is schedule delivery
costs divided by product acquisition cost within the S1
costs. In the S1.2 process element, the metrics obtained
include % order/lines received complete (R1.3), % orders/
lines received on time to demand requirement (R1.4), %
orders/lines received damage free (R1.5), % orders/lines
received with correct shipping documents (R1.6) and
receiving costs as a % of product acquisition costs in S1
process costs (C2.1.2). R1.3 is the number of orders/lines
that are received completely divided by the total orders/
lines received in the measurement period. R1.4 is the
number of orders/lines that are received on time to the
demand requirements divided by the total orders/lines
for the demand requirements. R1.5 and R1.6 represent the
ratios of orders/lines received damage free and those
with correct shipping documents to the total orders/lines
processed, respectively. C2.1.2 represents receiving costs
divided by product acquisition costs within the S1 process
costs. In the S1.3 process element, the % orders/lines
received defect free (R1.7) and verification costs as a %
product acquisition costs in S1 process costs (C2.1.3) are
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Table 8
The performance metric of SCOR sourcing process at level 3 through extending results of regression analysis at level 2
important metrics. R1.7 is the numbers of orders/lines
that are received defect free divided by the total orders/
lines processed. C2.1.3 is the percentage of verification
costs divided by product acquisition costs within the S1
process costs.
The key performance metrics for the S1.4 process
element are % product transferred to demand requirement
(R1.8), % product transferred without transaction errors
(R1.9), % product transferred complete (R1.10), % product
transferred damage free (R1.11) and transfer and product
storage costs as a % of product acquisition costs in S1
process (C2.1.4). R1.8, R1.10 and R1.11 are similar to R1.4, R1.3
and R1.5, respectively, where the former three metrics are
used for transferring products and the latter three are
used for receiving orders/lines. R1.9 is the number of
transactions processed without error divided by the total
transactions processed. The S1.5 process element includes
the % of faultless invoices (R1.12) and costs per type of
419
invoice in the S1 process (C2.1.5). C2.1.4 and C2.1.5 are similar
and used for storage costs for transferred products and
costs per invoice type, respectively. R1.12 is the number of
invoices issued without error divided by the total invoices
processed. In general, the causes of invoice defects include
change of customer purchase orders without customer
approval, incorrect customer information, incorrect pro-
duct information, incorrect prices, incorrect quantities/
terms, incorrect dates, etc. RP1.1.1, RP1.1.2, RP1.1.3, RP1.1.4
and RP1.1.5 can be ignored because of insignificant RP1.1 at
level 2.
The S2 process at level 3 has five process elements,
including S2.1, S2.2, S2.3, S2.4 and S2.5. The performance
metrics of the reliability attribute obtained from this
process are the same as those from the S1 process. At this
level the performance metrics of the cost attributes,
including C2.2.1, C2.2.2, C2.2.3, C2.2.4 and C2.2.5, are similar to
C2.1.1, C2.1.2, C2.1.3, C2.1.4 and C2.1.5, except that the former five
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metrics belong to the S2 process and the latter five to the
S1 process. Because the RP1.1 metric of the responsiveness
attribute at level 2 is insignificant, the metrics at level 3,
including RP1.1.1, RP1.1.2, RP1.1.3, RP1.1.4 and RP1.1.5, can be
ignored. The performance metrics of the flexibility and
asset attributes at level 3 can also be ignored. This result is
the same as that for the S1 process.
The S3 process is divided into S3.1, S3.2, S3.3, S3.4, S3.5, S3.6
and S3.7. The metrics of the reliability attribute for the latter
five process elements are similar to those for the S1 and S2
processes. S3.1 has two significant metrics, R1.13 and R1.14.
R1.13 is the number of qualified suppliers upgraded from
potential suppliers divided by the total number of qualified
suppliers. R1.14 is qualified suppliers that meet defined
requirements divided by the total number of qualified
suppliers. R1.15 is a critical metric in the S3.2 process element
and represents the number of negotiated contracts meeting
all business requirements divided by the total number of
contracts processed. In cost attributes, C2.3.1, C2.3.2, C2.3.3,
C2.3.4, C2.3.5, C2.3.6 and C2.3.7 are significant and the first five
metrics in S3.3, S3.4, S3.5, S3.6 and S3.7 process elements are
similar to those for the S1 and S2 processes. S3.1 and S3.2
process elements must focus on source identification costs
(C2.3.6) and supplier selection costs (C2.3.7), respectively.
Because the metrics for responsiveness and asset attributes
are not significant, RP1.1.1, RP1.1.2, RP1.1.3, RP1.1.4, RP1.1.5, RP1.1.6,
RP1.1.7, A1.1 and A1.2 can be ignored. Because the performance
metrics of the flexibility attributes at level 3 are not defined,
they also can be ignored.
S1, S2 and S3 processes at level 3 have 22, 22 and 31
defined performance metrics, respectively. They also have
17, 17 and 22 significant metrics from the results of the
regression analysis at level 2. That is, 56 significant
metrics are screened out of the 75 defined metrics for
level 3 by extending the results of level 2. In general, the
metrics at level 2 are general performance issues, whereas
the metrics at level 3 are more specific. The advantage of
moving metrics from level 2 to level 3 is the gradual
narrowing of the focus on more specific issues.
5.3. Institutionalization
The SCOR model benchmarks operational measure-
ment to create a prioritized improvement portfolio tied
directly to a company’s balance sheet for increasing
profitability. It provides a methodology for managing
supply chain projects, which includes four steps and six
levels (Harelstad et al., 2004; Bolstorff, 2003c).
The first step, level 1 of the SCOR model, is used as the
basis to analyse competitive situation, which includes
competitive performance requirements, performance
metrics, scorecard and gap analysis. This step builds project
charter that includes business objectives, project objec-
tives, project scope, milestones, schedule, resources, roles
and responsibilities, and benefits. The scope of the supply
chain costs to be placed under examination is considered
the most critical factor. If the SCOR project does not have
the right beginning based on this step, the company is at a
disadvantage and all of the effort applied to the other
elements of the institutionalization may be wasted. This
step also includes extending the process beyond the
boundaries of the company into customers and suppliers.
The SCOR project ensures company process improvement
in relation to manufacturing, transaction flow, customer-
facing processes and new product development. In this
study, the step should focus on the source process planning
in the SCOR model (P2). P2 is the development and the
establishment of the courses of action over specified time
periods, which ensures appropriate sourcing material in
order to meet supply chain requirements.
The second step, level 2 of the SCOR model, is to
configure the supply chain. This step maps the high-level
material flow in both as-is and to-be states. The material
flow may rationalize forecasted items and organize the
supply chain stocking strategy. In this research, the
performance metrics R1, F1, C1 and C2.1 are significant in
the S1 process, and thus these metrics can be used for
improving supply chain forecasting and planning. On the
other hand, both S2 and S3 processes have four important
performance metrics as references to improve planning
and forecasting.
The third step, level 3 of the SCOR model, aligns
performance levels, best practices and systems and maps
the work and information flow in terms of productivity,
quality and time in both as-is and to-be states. Work and
information flow focuses on aligning current underuti-
lized functionality with the best practices in inter-
company supply chain planning. In this study, S1, S2 and
S3 processes at level 3 are divided into 5, 5, and 7 process
elements and have 17, 17 and 22 significant performance
metrics, respectively. Taking the S1.1 process element as an
example, it has the significant performance metrics of R1.1,
R1.2 and C2.1.1 to align work and information flow with the
best practice. Other process elements can be improved in
the same way. Therefore, the significant performance
metrics can be used to improve the efficiency and the
effectiveness of the sourcing process.
Finally, the fourth step, levels 4–6 of the SCOR model, is
to implement design. This step organizes the list of
projects to improve performance through business prac-
tice changes and technology solutions. Levels 4–6 of the
SCOR model are undefined, and therefore enterprises can
establish appropriate tasks, activities and rules based on
the important process elements. It is critical to establish
and publicize project success as early as possible and to
reward those who concerned. If the SCOR project is
executed well, it will earn confidence from the rest of
the organization. The SCOR project must become em-
bedded in every aspect within the company. The change
management is also an important task in institutionaliza-
tion. Managers need to clearly explain the need for change
and the potential benefits and risks to those constitu-
encies that will be affected in the process of transition.
The SCOR change management should address the issues
of market analysis, integration to synchronization and
the use of network modelling tool (Huan et al., 2004).
A company should enforce a common language, and make
terms such as SCOR performance metrics and best
practices, net present value, lean, variation, and cycle
time part of the everyday language when discussing as-is
and to-be operations.
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Y.-D. Hwang et al. / Int. J. Production Economics 115 (2008) 411–423 421

6. Conclusion metrics are screened out of the 75 defined metrics for

This research is carried out to find out important
SCOR sourcing performance metrics by using the
stepwise regression method. The SCOR sourcing process
at level 2 has three processes, including source stocked
product (S1), source make-to-order product (S2) and
source engineer-to-order product (S3). S1, S2 and S3
processes each has four key performance metrics obtained
from the stepwise regression analysis. S1 includes
perfect order fulfilment (R1), upside supply chain flex-
ibility (F1), supply chain management cost (C1) and
product acquisition costs as % of source stocked product
costs (C2.1). S2 includes perfect order fulfilment (R1),
supply chain management cost (C1), product acquisition
cost as % source engineer-to-order product cost (C2.2)
and return on supply chain fixed assets (A2). S3 includes
perfect order fulfilment (R1), upside supply chain adapt-
ability (F2), downside supply chain adaptability (F3)
and product acquisition cost as % source engineer-to-
order product cost (C2.3). The SCOR sourcing process at
level 3 has 17 process elements and 75 performance
metrics. By extending the results of level 2, 56 critical
level 3.
The institutionalization of the SCOR model consists of
four steps, which are analysing the basis of competition,
configuration of the supply chain, alignment of perfor-
mance levels, best practices and systems and implemen-
tation of supply chain changes. The first step is to
establish the project charter through planning the source
process of the SCOR model. The next step uses the
significant performance metrics to improve the material
flow and enhance supply chain forecasting and planning.
The third step utilizes the performance metrics obtained
to improve process elements in order to reach the best
practices, and the final step uses change management to
turn jargons such as process improvement into part of the
everyday language.
As shown in the case analysis, the method is only
appropriate for the TFT-LCD industry in Taiwan and
provides an insight into the supply relationship for further
improvement in the supply chain performance on various
industries. In addition, this study is based on the SCOR
version 7.0, and the newly developed version 8.0 can be
further considered for the revision of our work.

Appendix A. Questionnaire

1. Explanation of the sourcing processes

(1) S1: the process includes the procurement, delivery, receipt and transfer of raw material items, subassemblies,
products and services.
(2) S2: the process is the procurement and delivery of products that are built to a specific design or configuration based
on the requirements of a particular customer order.
(3) S3: the process is the negotiation, procurement and delivery of engineer-to-order assemblies or specialized products
or services that are designed and built based on the requirements or specifications of a particular customer order or
contract.
2. Explanation of the performance metrics
(1) R1: the product is delivered according to specification, location, and delivery time with no damage, and is accepted
by customers.
(2) RP1.1: cumulative lead time required for sourcing products from internal and external suppliers; for example,
inside-plant planning, supplier lead time, receiving, handling, etc.
(3) F1: the company can achieve an unplanned sustainable 20% increase in delivery quantity.
(4) F2: the maximum sustainable percentage increase in delivery quantity can be achieved within 30 days.
(5) F3: sustainable reduction in order quantity within 30 days prior to delivery can be accepted with no inventory or
cost penalties and with prioritization of delivery.
(6) C1: all direct and indirect expenses associated with operating business processes across the supply chain.
(7) C2.1: product acquisition costs of the S1 process; for example, product management and planning, supplier quality
engineering, inbound freight and duties, receiving and product storage, incoming inspection, product process
engineering, tooling costs, etc.
(8) C2.2: product acquisition costs of the S2 process; for example, product management and planning, supplier quality
engineering, inbound freight and duties, receiving and product storage, incoming inspection, product process
engineering, tooling costs, etc.
(9) C2.3: product acquisition costs of the S3 process; for example, product management and planning, supplier quality
engineering, inbound freight and duties, receiving and product storage, incoming inspection, product process
engineering, tooling costs, etc.
(10) A1: the time it takes for an investment to flow back into the company after it has been spent for raw
materials.
(11) A2: the return an organization receives on its invested capital in supply chain fixed assets.
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3. Percentage of the sourcing processes in the overall sourcing (scale)

Sourcing Percentage in overall sourcing

process 0 1 2 3 4 5 6 7 8 9 10
S1
S2
S3
Note: 0 as 0% of the overall sourcing; 1 as 10% of the overall sourcing; 2 as 20% of the overall sourcing, etc.

4. Correlation of performance metrics against the sourcing process (scale)

Sourcing process
Performance
S1 S2 S3
metric
0 1 2 3 4 5 6 7 8 9 10 0 1 2 3 4 5 6 7 8 9 10 0 1 2 3 4 5 6 7 8 9 10
R1
RP1.1
F1
F2
F3
C1
C2.1
C2.2
C2.3
A1
A2
Note: 0 as no correlation, 1 as 10% correlation between the performance metric and the sourcing process, 2 as 20% correlation between the
performance metric and the sourcing process, etc.

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