LectureThree

SCOR® model
And strategic thinking
Case study
Royal Philips Electronics, Philips Semiconductor
 SCOR® model
• SCOR represents a global standard in supply chain
management by providing a unique framework that
determines
• and links performance metrics,
• processes, best practices and
• people’s skills into a unified structure
• SCOR® model can be used to describe the value
chains from the supplier’s supplier to the customer’s
customer
• and is organised around the six primary
management processes – Plan, Source, Make, Deliver,
Return and Enable
 The Plan process
• The Plan process links demand and supply
activities and coordinates all other processes
within one value-added level or across
companies.
• For example, the Plan instance coordinates
scheduling activities of procurement (Source),
manufacturing (Make) or sales order fulfillment
(Deliver) and thus ensures smooth collaboration
within a company or along the entire supply
chain.
 The Source process
• The Source process combines all activi-
ties related to the procurement of
materials required to meet planned or
actual demand. It also includes operational
activities regarding suppliers and material
inspection
 Make process
• Make refers to the actual manufacturing
process, i. e.
• all processes required to manufacture a finished
end product from the materials provided by
Source.
• This also includes repairs or services Transport
management and storage of the finished
products are assigned to the Deliver process,
which also covers the receipt of orders and
receivables management
 Return process
• Return process is the interface to the
supplier and refers to the returning of
goods or information
• In addition to the material flow from the
supplier to the customer, the SCOR®
model includes an order and the value
flow running in the opposite direction, as
well as non-directional information flows
 Enable processes
• Enable processes are not directly assigned to
an instance, but provide the basis (i. e. enable)
the processes
• Source, Make, Deliver, Plan and Return.
• This includes the necessary regulatory body,
guidelines and conditions such as performance
measurement, risk management, master data
management, human resource decisions or
network planning
 Skilled workforce along the
supply chain
• Supply chain experts and managers
should be capable of understanding and
managing sys-tem and methods
knowledge, actual production processes
as well as material and information flows
 Skilled workforce along the
supply chain
This capability requires :-
• emotional and social moderating
• as well as communication skills,
• in addition to problem solving skills, such as analytic abilities.
• In other words, supply chain experts and supply chain managers
must be generalists in their field of knowledge
• Supply Chain generalists need to be familiar with the * actual
situation and processes along the supply chain and understand the
methods,
• organisational forms and tools to be used.
• A basic understanding of controlling,
• business economics and IT systems, e. g. in
• ERP (Enter-prise Resource Planning),
• APS (Advanced Planning System),
• EDI (Electronic Data Inter-change) and
• MES (Manufacturing Execution System) is required.
 Overview of supply chain
management standards
• This section lists sample approaches intended to
provide an initial overview of the different
• strategies,
• levels of supply chain design,
• key performance indicators (KPIs), interfaces,
• cost factors
• and future requirements for communication
processes in supply chain management.
 Selection of different strategies
• Efficient Consumer Response (ECR)
with logistics components:
• from vendor/supplier managed inventory
(VMI/SMI) and
• cross-docking (demand-driven goods
distribution) to synchronized production
and urban production
 Selection of different strategies
• Customer Relationship Management
(CRM) and relationship marketing:
continuously improving customer
satisfaction, customer loyalty and
customer acquisition
 Selection of different strategies
• postponement strategies: reducing
semi-finished and finished goods
inventories through delayed differentiation
 Selection of different strategies
• sourcing strategies: single sourcing and
multiple sourcing procuring
modules/systems from system suppliers
(modular/system sourcing) and developing
the market by systematically expanding
the procurement policy to international
sources (global sourcing),
 Selection of different strategies
• production and procurement strategies:
Kanban with just-in-time production
systems (JIT) / just-in-sequence (JIS)
production systems,
• consignment, indicators of progress to
provide transparency by closely linking the
supplier and customer and man-aging the
collaboration via call-off orders and JIT
delivery schedules, etc.,
 Selection of different strategies
• supplier management: qualification,
purchasing, logistics, quality
• electronic marketplaces: as platforms for
the commercial exchange of goods and
services and the option of selling products
at a certain time and place,
 Selection of different strategies
• inter-organisational collaboration: including the
creation of between legally independent partners
within the network of a supply chain via the
Internet,
• virtual freight exchanges: to improve shipping
capacity utilization and reduce shipping costs,
tracking and tracing (external/ internal) to
monitor shipments, e-auctions, etc.,
• disposal and recycling strategies: which should
also be mentioned for the sake of completeness.
 Strategic thinking
• At a lower scale, supply chain is also a key component of
small and medium companies, not necessarily a priority
for most, but a cause of failure in case it’s not evaluated
properly and not kept monitored.
• Without overcomplicating small businesses with
dedicated supply teams, risk scenarios and business
continuity monitoring systems, the objective is just to
understand what are the core supply needs.
• Also it’s important to understand from where we get the
supplies and keep an eye on its sourcing activity,
thinking from time to time of what could happen if
something goes wrong.
 Strategic thinking
This could be applied as follows
• Evaluate the supply process:
• Identify the key materials/services required to
develop the company value proposition
• and understand in detail it’s process flow,
sourcing origins, key suppliers and the logistics
behind.
• Monitor the supply performance: Identify key
measures to monitor the sourcing activity,
looking for potential issues and ways to improve
the supply overall:
 Strategic thinking
• Monitor the supply performance:
• Identify key measures to monitor the
sourcing activity,
• looking for potential issues and ways to
improve the supply overall:
Are materials arriving on time?
Is the quality of the product maintained?
How about it’s packaging?
how is the relation with the supplier?
Any incident happening that could impact the supply?
How is the supplier activity going?
Is he reliable?
What if….?:
 Strategic thinking

• Without becoming paranoiac, we need just to maintain a constant

understanding of the consequences that the disruption of core
supply elements could bring on the company’s activity and its
customers.
• The objective is to be able to anticipate preventive actions that
could be quickly implemented in case early signals emerge in the
monitoring of the supply activity.
• What would happen if a material is delayed, a logistical route is
closed, or a supplier goes bankrupt?....
• Alternative supply options: It’s paramount to identify alternative
suppliers, materials or services to ensure not having any activity
disruption, even if its implemented for a limited timeframe or at a
costly solution. The focus remains to provide the product or service
when the customer needs, avoid impacting customer experience or
losing them for not fulfilling their expectations.
 Case study
Royal Philips Electronics, Philips
Semiconductor
• Once upon a time a former division of Royal
Philips Electronics, Philips Semiconductor was
one of the leaders of the market selling 80% of
chips used by mobile phones.
• Early 2000, the mobile phone market was led by
Nokia with 30% of market share followed by
Motorola and Ericsson.
• Based on a Northwestern University, Kellogg
School Management Business Case, 40% of
Nokia’s and Ericsson ‘s production was relying
on a Philips semiconductor plant in Mexico
 Case study
Royal Philips Electronics, Philips
Semiconductor
• In Q1 2000, a fire impacted the Mexican plant damaging part of the
chips stock.
• Both the North European telecommunication companies had a
different reaction when the incident, after being quickly managed,
was reported.
• The fire incident was communicated to the customers few days
after with an estimated limited impact in the chips production. Things
got complicated when around a week after, the full impact in chips
production was assessed, communicating to both the customers a
delay of weeks in terms of delivery.
• One of the customers took a step ahead, based on the first signs,
implementing a series of measures to track in detail the chips
production and evaluate its risk exposure in terms of mobile phones
production impact.
• By the time the supplier communicated the increased delay in
delivery, the customer was ready with a response team to identify
solutions to source the product from other suppliers, besides
implementing design modifications, signing new supplier contracts
and supply rerouting.
 Case study
Royal Philips Electronics, Philips
Semiconductor
• On other hand, the second customer assessed
the situation as normal in the first incident report
and didn’t scale up the information until they
received the formal confirmation weeks later that
the delivery impact was higher-than expected.
The second customer could not anticipate the
supply chain impact, failing to secure the
required chips, impacting its own mobile phone
production, which ended delaying the launch of
a new model and impacting negatively its sales.
 Case study
Royal Philips Electronics, Philips
Semiconductor
• In this example, we could see the
importance of anticipating the business
impact of unexpected incidents and
monitoring properly early signals