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Supply Chain Management: An International Journal
Supply Chain Management: An International Journal
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To cite this document:
Samuel H. Huan, Sunil K. Sheoran, Ge Wang, (2004),"A review and analysis of supply chain operations reference (SCOR) model",
Supply Chain Management: An International Journal, Vol. 9 Iss: 1 pp. 23 - 29
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http://dx.doi.org/10.1108/13598540410517557
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Archie Lockamy III, Kevin McCormack, (2004),"Linking SCOR planning practices to supply chain performance: An exploratory study",
International Journal of Operations & Production Management, Vol. 24 Iss: 12 pp. 1192 - 1218
http://dx.doi.org/10.1108/01443570410569010
Mark Barratt, (2004),"Understanding the meaning of collaboration in the supply chain", Supply Chain Management: An International
Journal, Vol. 9 Iss: 1 pp. 30 - 42
http://dx.doi.org/10.1108/13598540410517566
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1 Introduction
Research note
A review and analysis of The concept of supply chain management
(SCM) can be traced back to just before the
supply chain operations 1960s. Increased study of the field began in the
3 Analysis
the strategic response of a supply chain, on the management decision making in a changing
premise that the better the alignment, the better environment.
the bottom-line performance. The problem in
the past has been that different metrics were 3.1 Change management
used to measure the performance at different Just as humans change their behavior in
levels. Market researchers and corporate different situation or environments, so do
strategists use entirely different language to companies and markets. The major factor
describe the marketplace and supply chain driving the need for change management is the
activities. The strength of the SCOR model is accelerating change in technologies, mainly in
that it provides a standard format to facilitate the field of information technology. The rapid
communication. It is a useful tool for the upper growth in Internet awareness among the
management of a firm to design and reconfigure customer base requires a strong change
its supply chain to achieve desired performance. management strategy. We recommend that
Specific advantages of the SCOR model have change management be included as an element
been widely publicized by the SCC and will not in the plan supply chain (P1) process category
be repeated here. Rather, we focus on of the SCOR model, since managing change
discussing the weakness of the SCOR model deals with management of any of the nodes of a
and how it can be enhanced to facilitate supply chain.
The first issue to be addressed in change
management is market analysis. The market is
Table II SCOR model level I performance metrics
the structure, conditions and forces for change
Delivery reliability in a given industry, all of which shape a range
Delivery performance of customer buying behaviors. Developing an
Fill rate intimate relationship with customers is
Order fulfillment lead time
essential to the success of a firm. The most
Perfect order fulfillment
effective way to develop a close customer
Flexibility and responsiveness relationship is by understanding customer
Supply chain responsiveness buying behaviors and designing and sustaining
Production flexibility a supply chain tailored to deliver value to each
Cost customer segment. Customer segments may
Total logistics management cost typically include the cost conscious buyers, the
Value-added employee productivity time sensitive payers and those with specialized
Warranty costs requirements, among others. Sometimes,
circumstances move customers from one
Assets segment to another in an instant. Market
Cash-to-cash cycle time
analysis is the key input to the future strategic
Inventory days of supply
decisions of the SCOR model and should
Asset turns
receive proper attention.
25
A review and analysis of supply chain operations reference (SCOR) model Supply Chain Management: An International Journal
Samuel H. Huang, Sunil K. Sheoran and Ge Wang Volume 9 . Number 1 . 2004 . 23-29
maker needs to express his/her preference facilitate decision maker's easy understanding
between each pair of the elements. from a human factor point of view. The SCOR
. Weight calculation. Mathematical model is also a hierarchical model that consists
normalization methods are used to of different process levels. The performance
calculate the priority weights for each level. metrics it uses are also hierarchical in nature.
. Consistency check. A consistency ratio (CR) Therefore, it seems natural to apply AHP with
is calculated. If it is greater than 10 per SCOR metrics to construct an overall objective
cent, then the decision maker is not function (overall supply chain efficiency) for
consistent in making the pair-wise network optimization. Although it seems
comparison. He/she should review the unlikely that SCC should endorse a certain
comparison and make adjustment. network optimization/decision making
. Hierarchical synthesis. The calculated technique, the introduction of an overall supply
priority weights at different hierarchy levels chain efficiency measure will be beneficial to
are integrated to allow overall evaluation of industrial practitioners.
the alternatives.
. Determine priority for all alternatives. The 3.3 Decision making using analytical
alternative with the highest overall priority hierarchy process
weight is chosen. It should be pointed out that there is a debate
on the rigor of using AHP for decision making.
AHP was developed to reflect the way people While we believe the use of AHP with the
naturally behave and think. It is a decision SCOR model is valid, it is necessary to
making tool that can help describe the general examine the issues raised by AHP opponents
decision operation by decomposing a complex to justify our belief. The first issue is regarding
problem into a multi-level hierarchic structure the axiomatic foundation of AHP. Belton and
of objectives, criteria, sub-criteria and Gear (1984) argued that AHP lacked a firm
alternatives. AHP's hierarchic structure reflects theoretical basis and an axiomatic approach
the natural tendency of the human mind to sort compared to multi-attribute utility theory
elements of a system into different levels and to (MAUT), hence it was a flawed theory in
group like elements in each level, which can analyzing decisions. Saaty (1986) then
27
A review and analysis of supply chain operations reference (SCOR) model Supply Chain Management: An International Journal
Samuel H. Huang, Sunil K. Sheoran and Ge Wang Volume 9 . Number 1 . 2004 . 23-29
provided theorems to prove that AHP was axioms and outcomes of AHP and MAUT.
based on an axiomatic theory. Dyer (1990) Harker and Vargas (1990) argued that the
questioned the validity of Saaty's axioms. axioms of AHP provided by Saaty (1986) are
Saaty (1990), together with Harker and Vargas different from those of traditional utility
(1990), defended their standpoints that the theory, and they indicated the reason for rank
axioms of AHP are different from that of reversal is because the alternatives depend on
traditional utility theory, and they are valid. It what alternatives are considered, hence,
appears to us that if one agrees that AHP is a adding or deleting alternatives can lead to
different approach from MAUT, then its change in the rank.
axiomatic validity should not be questioned. Many researchers are still working on the
This is a matter of opinion and should not rank reversal problem using sensitivity
hinder the applicability of AHP in decision analysis. So far, no definite conclusion has
making. been made. In our opinion, the rank reversal
A more serious problem under debate is rank problem occurs under certain conditions,
reversal. Belton and Gear (1984) criticized that some of which are created manually that do
any addition of alternatives caused a rank not occur (or can be easily dealt with) in real
reversal in AHP. Harker and Vargas (1987) and life, e.g. adding exact copies of alternatives.
Saaty (1986) defended the attack by indicating Nonetheless this is a problem that any users of
that: AHP should recognize and pay attention to.
. . . the rank reversal was because Belton and Gear We believe the use of AHP with SCOR
applied MAUT weights on the AHP derived eigen performance metrics will not cause the rank
vectors to derive the rankings, which is an
reversal problem because of the following
incorrect method. If the AHP method of deriving
the ranked preferences were followed, then the reasons:
rank reversal would not have occurred. The . The set of criteria and sub-criteria to be
weights that are considered to be equal in MAUT compared, which are SCOR model level I
have to be transformed in AHP to preserve not performance metrics, does not change.
only the preference but also the ratio among the Therefore, there is no multiple choice to
values.
cause rank reversal.
Saaty (1990) further pointed out that: . SCOR performance metrics use absolute
. . . with the absolute measurement of the AHP, measurements, so the addition and/or
there can never be reversal in the rank of the deletion of alternatives will not cause any
alternatives by adding or deleting other reversal ranks.
alternatives.
29