Supply Chain Excellence: A Handbook for Dramatic Improvement Using the SCOR Model

Supply Chain Excellence: A Handbook for Dramatic Improvement Using the SCOR Model

by Peter Bolstorff, Robert ROSENBAUM

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Overview

The gold standard guide to adopting the superior, cross-industry methodologies developed by the Supply Chain Council for achieving operational superiority-the SCOR, DCOR, and CCOR Models-Supply Chain Excellence, now updated in a third edition, is a concise, practical instruction manual to doing supply chain correctly.

Now adapted for use in an SAP environment, in global enterprises, and by small businesses, the third edition features a highly compressed timeline for using the SCOR (Supply Chain Operations Reference) framework to plan and execute supply chain improvement. You'll learn how to:

• Implement changes to achieve sustainable competitive advantage
• Define business opportunities along the supply chain by conducting the proper competitive analysis
• Gain buy-in by educating your organization about supply chain improvement
• Achieve a significant return on investment

Featuring new examples from roughly 30 additional projects, the book identifies the most common contributors to supply chain misalignment, refines the use of the scorecard for better process analysis, extends the approach to encompass implementation and strategy, and quantifies the financial value of supply chain improvement to demonstrate its importance in achieving lasting competitive advantage.

If you want to keep your sales, manufacturing, distribution, and inventory moving in perfect synchronization, you need a flawless, repeatable supply chain improvement approach that maximizes process efficiency and eliminates dysfunction. Thoroughly revised to reflect the latest thinking and most up-to-date strategies, the third edition of Supply Chain Excellence is an unparalleled guide for implementing best practices in supply chain management.

Product Details

ISBN-13: 9780814437537
Publisher: AMACOM
Publication date: 12/11/2011
Edition description: Third Edition
Pages: 304
Product dimensions: 6.10(w) x 9.10(h) x 0.90(d)
Age Range: 18 Years

About the Author

PETER BOLSTORFF is President and CEO of SCE Limited, which supports supply chain performance through education, coaching, and process expertise.

ROBERT ROSENBAUM, an award-winning journalist, is founder and President of The MarketFarm, which specializes in leveraging technical content. He was the founding editor of the former Supply Chain Technology News.

Read an Excerpt

Supply Chain Excellence

A Handbook for Dramatic Improvement Using the SCOR Model
By Peter Bolstorff Robert Rosenbaum

AMACOM

Copyright © 2012 Peter Bolstorff and Robert Rosenbaum
All right reserved.

ISBN: 978-0-8144-1771-3


Chapter One

The Supply Chain Operations Reference Model

* The Cross-Industry Standard for Supply Chain

Peter Bolstorff was introduced to the Supply Chain Operations Reference (SCOR) model in the fall of 1996 when he became part of a newly formed corporate "internal consulting" team for Imation, which had just been spun off from 3M. He's been using the SCOR model in supply chain improvement project work ever since. He was a delegate at the first conference of the Supply Chain Council, and has remained active in the Council, involved in the process of improving SCOR and teaching others how to use it. In fact, the Supply Chain Council adopted Supply Chain Excellence as the core text for its SCOR Project implementation workshops globally.

So he's heard all the questions. Among those most frequently asked are these: What is the Supply Chain Council? What is SCOR? How do I use SCOR? What is the value to my organization? How do I learn more about SCOR?

The Supply Chain Council

The Supply Chain Council (www.supply-chain.org) is an independent not-for-profit corporation formed in 1996 as a grassroots initiative to develop a supply chain process model. Among those involved at the start were individuals from such organizations as Bayer; Compaq; Procter & Gamble; Lockheed Martin; Nortel; Rockwell Semiconductor; Texas Instruments; 3M; Cargill; Pittiglio, Rabin, Todd & McGrath (PRTM); and AMR Research, Inc. In all, 69 of the world's leading companies participated in the council's founding. Its mission today is to perpetuate use of the SCOR model through technical development, research, education, and conference events. By the end of 2010, the council's technical community had released nine subsequent versions of SCOR, providing updates to process elements, metrics, practices, and tools. SCOR 10.0 also incorporates a "People" standard for describing skills required to perform tasks and manage processes.

The council has about 1,000 corporate members worldwide, with chapters in Australia/New Zealand, Latin America, Greater China, Europe, Japan, Southeast Asia, and South Africa. Membership is open to any organization interested in applying and advancing principles of supply chain management. In 2010 there were four tiers of membership: global, standard, small business, and nonprofit.

The SCOR Framework

SCOR combines elements of business process engineering, metrics, benchmarking, leading practices, and people skills into a single framework. Under SCOR, supply chain management is defined as the integrated processes of PLAN, SOURCE, MAKE, DELIVER, and RETURN—from the supplier's supplier to the customer's customer (Figure 1-1). The Supply Chain Council Web site, www .supply-chain.org, has an online overview of the model that can be viewed both by members and nonmembers.

Here's what's included in each of the SCOR process elements:

PLAN: Assess supply resources; aggregate and prioritize demand requirements; plan inventory for distribution, production, and material requirements; and plan rough-cut capacity for all products and all channels.

SOURCE: Obtain, receive, inspect, hold, issue, and authorize payment for raw materials and purchased finished goods.

MAKE: Request and receive material; manufacture and test product; package, hold, and/or release product.

DELIVER: Execute order management processes; generate quotations; configure product; create and maintain customer database; maintain product/price database; manage accounts receivable, credits, collections, and invoicing; execute warehouse processes including pick, pack, and configure; create customer-specific packaging/labeling; consolidate orders; ship products; manage transportation processes and import/export; and verify performance.

RETURN: Defective, warranty, and excess return processing, including authorization, scheduling, inspection, transfer, warranty administration, receiving and verifying defective products, disposition, and replacement.

In addition, SCOR includes a series of ENABLE elements for each of the processes. These processes focus on management around performance, information, policy, inventory strategy, capital assets, transportation, physical logistic network, regulatory, and other management processes to enable the planning and execution of supply chain activities.

SCOR spans all customer, product, and market interactions surrounding sales orders, purchase orders, work orders, return authorizations, forecasts, and replenishment orders. It also encompasses material movements of raw material, work-in-process, finished goods, and return goods.

The SCOR model includes three levels of process detail. In practice, Level 1 defines the number of supply chains, how their performance is measured, and necessary competitive requirements. Level 2 defines the configuration of planning and execution strategies in material flow, using standard categories such as make-to-stock, make-to-order, and engineer-to-order. Level 3 defines the business processes and system functionality used to transact sales orders, purchase orders, work orders, return authorizations, replenishment orders, and forecasts. Level 4 process detail is not contained in SCOR but must be defined to implement improvements and manage processes. Advanced users of the framework have defined process detail as far as Level 5, software configuration detail.

Value Chain Processes

In 2004, the Supply Chain Council introduced two new frameworks that help piece together more of the detailed mosaic of enterprise value chains (Figure 1-2). The Customer Chain Operations Reference (CCOR 1.0) model defines the customer part of the value chain as the integration of PLAN, RELATE, SELL, CONTRACT, SERVICE, and ENABLE processes.

The Design Chain Operations Reference (DCOR 2.0) model defines the design part of the Value Chain as the integration of PLAN, RESEARCH, DESIGN, INTEGRATE, AMEND, and ENABLE processes.

Chapter 19 will discuss how these process models can be used with SCOR to drive overall value chain performance improvement.

Using SCOR to Drive Supply Chain Improvement

For all its power and flexibility, the SCOR model is still essentially a series of definitions for processes, metrics, and leading practices. Simply having the "dictionary" doesn't do any good for a business. To use SCOR, it is necessary to add effective change management, problem-solving techniques, project management discipline, and business-process engineering techniques. Supply Chain Excellence is a handbook on how to use SCOR with a refined five-step formula that has been tested and proven in the course of more than 100 projects on six continents, in ten languages and with six enterprise software systems, incorporating Lean and Six Sigma, growing sales and profits, improving inventory turns, increasing productivity, and making customers happier.

The phases of the Supply Chain Excellence approach, as detailed in this third edition of the book, have been refined to support global projects in which units operate more like small business. The refinements have helped reduce the resource and time requirements to develop a project list by 50 percent and have eliminated non-value-added analysis by shifting material, work, and information flow analysis to implementation. We use the same analytical tools but focus only on the scope of each project. The refined steps are as follows:

1. Build organizational support

2. Define project scope

3. Analyze performance

4. Develop project portfolio

5. Implement projects

Build Organizational Support

Chapter 2 examines how to build organizational support for a SCOR project. The chapter explores four important roles: the "evangelist," the person in the company who has the passion, experience, and talent to lead a supply chain project; the "active executive," the individual who is accountable as sponsor of a supply chain project through modeling, influence, and leadership; the "core steering team," which has the champion role to review and approve recommendations and ultimately lead the implementation efforts; and the "design team," which analyzes the supply chain from end to end and assembles recommendations for change.

Define Project Scope

Chapter 3 helps to define and prioritize the organization's supply chains using a combination of data and strategic assessment. One of the primary outcomes from the discovery step is a Project Charter, which helps define a project's scope, approach, objectives, schedule, milestones, deliverables, budget, organization, measures of successes, and communication plan.

Analyze Performance

The analysis stage (Chapters 4 through 7) is where the metrics are defined, data are collected, defects are analyzed, benchmarks are tallied, and performance gaps are calculated. Frequently used SCOR metrics include cash-to-cash cycle time, inventory days of supply, perfect order fulfillment, order fulfillment cycle time, total supply chain management cost, and upside supply chain flexibility. This phase also helps the team to prioritize and balance customer metrics with internal-facing metrics: delivery, reliability, flexibility/responsiveness, cost, and assets.

Develop Project Portfolio

Chapters 8 through 10 describe the analytical steps required to identify a company's preliminary project list. Tasks in this phase include further analysis of metric defects; conducting a brainstorming session; using problem-solving tools such as fishbone diagrams, run charts, and affinity grouping; and working with finance to validate both financial and customer-service improvement commitments.

Implement Projects

Chapters 11 through 18 describe the thirteen steps necessary to implement a project identified in the portfolio. Analytic techniques for this phase include process and geographic mapping, transactional data analysis, leading practice assessment, "staple yourself to an order" interviews, storyboarding, design and test solutions, and the final rollout to the enterprise. This section also discusses effective supply chain strategy as a means to sustain gains and build momentum for future years.

Extend to the Greater Value Chain

Chapter 19 introduces a Value Chain Excellence project roadmap that can be used with any combination of DCOR, CCOR, and/or SCOR process frameworks. Although every project follows the same five steps, the deliverables have been tweaked to accommodate the broader scope of value chain issues, such as product development, sales, postsale service, or engineering changes and product life cycle management.

The Value of a SCOR Initiative

The Supply Chain Excellence approach is reliable and predictable with respect to project duration, cost, and benefits. Implementation results across the 100-plus projects for which this approach has been used are consistent:

* Operating income improvement, from cost reduction and service improvements in the initial SCOR project portfolio, averaging 3 percent of total sales; depending on how your company compares with benchmark data, it could be as high as 4.5 percent or as low as 1.5 percent. Return on investment of two to six times within twelve months—often with cost-neutral quick-hit projects under way on a six-month timeframe.

* Full leverage of capital investment in systems, improving return on assets for fixed-asset technology investments.

* Reduced information technology operating expenses through reduced need for customization and improved use of standard system functions.

* Ongoing profit improvement of 0.5 percent to 1 percent per year, using continuous supply chain improvement.

Chapter Two

Phase 0: Build Organizational Support for Supply Chain Improvement

* Finding the Tipping Point for Change

Brian Dowell called out of the blue after getting my name from a Google search; his keywords included SCOR, Supply Chain, Metrics, Operational Excellence, and Value Chain. He was looking for some direction for his company, Fowlers Inc., and had enough motivation within the company to justify a visit.

We showed up a week later, and Brian, the company's chief operating officer, gave us a warm greeting. His introductory overview demonstrated Fowlers to be a well-run worldwide manufacturing conglomerate with the seeds of supply chain improvement already in place. "In fact," he said proudly, "we are six months past our SAP® go-live and have closed the books on time each month." But more on that later.

The supply chain action plan had been developed at the division level by David Able, vice president of operations in the technology products group—one of the four operating units. He had pieced it together with just a little background in supply chain management and a whole lot of operating pain at the global level. His efforts had been encouraged by his boss, the division president, who had brought the concept of more integrated global supply chain improvement to the attention of other executives in the company. His last comment in most conversations on the subject went something like, "Not all of the company is on an SAP platform and most of the regions outside North America are not figuring out how to improve."

They had become a self-selected "gang" whose common feeling was that although David's ideas would solve some short-term issues, there had to be a way to solve the company's global supply chain problems to move as one at a more strategic level. Figure 2-1 is Fowlers' current organizational chart.

We began the formal meeting in the company's boardroom, with several executives present and a few others in teleconference from around the world. It didn't take much prodding to get this gang to start sharing their thoughts.

"Our products are good for a week, maybe ten days, in the store," said Doris Early, president of the food products group. "We've got to move a lot of product around with a lot of speed. And if regulators were to bring in the label from something we processed six months ago, we need to be able to identify the plant, the line, the day, and the names of everyone on the shift who produced it."

"Our shelf life is short, but not that short," added Jovan Kojcic, David's boss and the president of the technology products group, from an office in Warsaw. "We also have some other things in common with the food group; we buy a lot of commodities. The prices we pay change daily, but our customers won't let us be so flexible. There's seasonality in our sales, and many new products that are harder to forecast—all of which makes it difficult to maintain consistent margins." He added, "We've been challenged to be more flexible in shorter time with less cost and minimal inventory. The experts are telling us that we need to think about how to respond to consumer demand—that is to say, point of sale—more effectively."

Arvid Westergaard, president of the durable products group, spoke up from Sweden: "Our issues are about the rate of improvement. We have tried to address the performance issues in our group through our continuous improvement program. Four years ago, we invested in a Lean Six Sigma program that has trained hundreds of black, green, and yellow belts. We have been disciplined as an executive team managing the project list. We started out quickly with most of the work directed at our manufacturing plants. In the past year, it seems we started to run out of steam; most of our projects now seem to be smaller and smaller in scope. They are smaller in payback too. But we still believe there are big issues to address. So how do we identify a more strategic list? How do we integrate supply chain improvement with Lean Six Sigma?"

(Continues...)



Excerpted from Supply Chain Excellence by Peter Bolstorff Robert Rosenbaum Copyright © 2012 by Peter Bolstorff and Robert Rosenbaum . Excerpted by permission of AMACOM. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

Table of Contents

CONTENTS

Preface

Acknowledgments

Introduction

Chapter 1

The Supply Chain Operations Reference Model

> The Cross-Industry Standard for Supply Chain

The Supply Chain Council

The SCOR Framework

Value Chain Processes

Using SCOR to Drive Supply Chain Improvement

The Value of a SCOR Initiative

Chapter 2

Phase 0: Build Organizational Support for Supply Chain Improvement

> Finding the Tipping Point for Change

The Evangelist

The Active Executive Sponsor

Establishing Core Team Buy-In

Picking the Project Design Team

Chapter 3

Phase 1: Define Project Scope

> Planning and Organizing a Supply Chain Excellence Initiative

The Business Context Summary

The Project Charter

Chapter 4

Phase 2: Analyze Performance

> April 18 and 25: Project Kickoff and SCOR Metrics

The Project Kickoff

Picking a Balanced Set of Supply Chain Metrics

Data Collection and Benchmarks

Chapter 5

Phase 2: Data, Benchmarks, and Competitive Requirements

> May 2 and 9: Putting Performance in Perspective

Initial Data Review

The SCORmark Survey

Competitive Requirements Analysis

Metric Defect Analysis

Sponsor Update Considerations

Chapter 6

Phase 2: Scorecards and Gap Analysis

> May 16 and 23: Estimating the Size of the Opportunity

The Scorecard Review

Chapter 7

Phase 2: Defect Analysis

> May 30 and June 6: Answering the Questions of Who, What, Where, When, and How Much and Then Telling the Steering Team

Defect Analysis

Planning for the First Team On-Site

The Steering Team Review

Chapter 8

Phase 3: Develop the Project Portfolio

> June 16 and July 11–15: Building Shared Vision and the Project List

Planning the Brainstorm Event

Conducting the Brainstorm Session

Chapter 9

Phase 3: Refine the Project Portfolio

> July 11–15: Validating the Project Benefits and SCOR Processes

Consolidating Problems to Projects Using SCOR

Validating the Problem Weight

Chapter 10

Phase 3: Opportunity Analysis

> July 11–15: Due Diligence for the Project List

Summarizing the Opportunity

Conducting Steering Team Review Number Three

Chapter 11

Phase 4: Lay Groundwork to Implement Projects

> Mapping Out the Details and Portfolio Implementation Plans

Implementation Project Charters

Chapter 12

Phase 4: From Portfolio Development to Implementation

> Organizing Supply Chain Improvement as Part of Daily Life: Faster, Better, and Cheaper

Initiating Implementation

Chapter 13

Phase 4: Initiate Implementation

> Getting Organized, Getting People, Getting Data

Identify and Approve Project Resource Plan

Establish the Project Schedule and Kickoff Date

Review Project Background and Develop the Performance Baseline

Chapter 14

Phases 2–4: The Staple Yourself Interview and SCOR Level 3 Process Diagram

> June 13–17: How the Work Really Gets Done; a Tool for All Phases

Preparing for the Staple Yourself Interview

Assembling the AS IS Process and RACI Diagrams

Chapter 15

Phase 4: Solution Design

> Defining How the Process Should Work at SCOR Level 3

The SCOR Level 3 Blueprint

Configuring the Level 3 Blueprint for Project 7

Chapter 16

Phase 4: Level 4 Process Development and the Storyboard

> How Business Process Improvement Is Like a Good Cartoon

Constructing a SCOR Level 4 Process

Plan Supply Chain (P1) Level 4 Samples

Fowlers P3 Level 4 Processes and Storyboard

Chapter 17

Phase 4: Configure, Solution Test, Pilot, Refine, and Roll Out

> Moving the Needle on Performance

Configuration (or Build)

Solution Test

Pilot One, Refine, and Pilot Two

Rollout

Chapter 18

Phase 4: Supply Chain Strategy

> Supply Chain Excellence as a Way of Life

What Is Supply Chain Strategy?

Trading Partner

Organization

Processes

Technology

Performers

Chapter 19

Extend to the Greater Value Chain

> Analyzing Barriers to Profitable Growth

Value Chain Excellence

Build Organizational Support

Define Value Chain Project Scope

Analyze Value Chain Performance and Project Portfolio Development

Implementation Considerations

Conclusion

Appendix

Fowlers Inc. Supply Chain Excellence Project Charter

I. Introduction

Purpose of the Project Charter

Project Charter Contents

Maintenance of the Project Charter

II. Project Overview

Scope

Business Objectives

Project Objectives

III. Project Approach

Methodology

Project Schedule

Steering Team Meetings

Risks and Dependencies

Project Organization

Roles and Responsibilities

Benefits and Measures of Success

Benchmark Sources

Benefit Analysis

Project Communication

Index 273

Customer Reviews