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Key Decision Making Alignment = Supply Chain Alignment
How SCOR helps your company to align your supply chains.
2011 Supply Chain Council. ALL RIGHTS RESERVED. | SCOR Framework | Slide 1
Copyright Supply Chain Council. 2011. All rights reserved. The marks SCOR, CCOR, DCOR and SCOR Roadmap are the exclusive property of the Supply Chain Council.
Instructor Introduction
Herman Estrada
CEO at Calafia BMT S de RL de CV, Supply Chain Management Consultant herman.estrada@grupocalafia.com
Summary Herman Estrada is a founding member and CEO of Calafia BMT, also participates as consultant in the areas of Supply Chain Management, Six Sigma, and Lean Production, for Global accounts such as Pfizer and DHL, as well as national account such as Grupo Modelo, Frmacos Nacionales and Fabrica de Papel San Francisco. Prior to the founding of the Calafia BMT, Herman was responsible for leading projects of new Business and Operations Development, Inventory Management, Product Data Management and consulting in Industrial Engineering, Six Sigma, Lean Production and Supply Chain Management. Herman publishes articles at CNN Expansion Manufactura, and has been interviewed for opinions in multiple business journals. Specialties Supply Chain Management, Lean, Six Sigma, Process Re-Engineering, Change Management, S&OP (SOP), Planning, Procurement, Production, Distribution, Return Process, Operational Governance Experience CEO at Calafia BMT. May 2005 - Present Executive Director, The AIT Group Mexico at The AIT Group, Inc.. 2001 - 2005 Engineering Change Manager at Kenworth Mexicana SA de CV. 1995 - 1998 Education Supply Chain Council SCOR Certified Professional, Supply Chain Management, 2004 Supply Chain Council SCOR Certified Instructor, Supply Chain Management, 2010 The AIT Group, Inc.. Black Belt, Lean Six Sigma, 2001 - 2002 Purdue University. MSIE, Operations Research, Supply Chain Management, 1998 - 2001 CETYS Universidad. IE, Industrial Engineering in Production, 1990 - 1994
About Supply Chain Council
Formed in 1996 to create and evolve a standard industry process reference model of the supply chain for the benefit of helping companies rapidly and dramatically improve supply chain operations SCC has established the supply chain worlds most widely accepted framework the SCOR process reference model for evaluating and comparing supply chain activities and their performance
It can be used to describe supply chains that are very simple or very complex using a common set of definitions and enabling a common understanding
It lets companies quickly determine and compare the performance of supply chain and related operations within their company or against other companies
SCC continually advances its tools and educates members about how companies are capitalizing on those tools

With membership open to all interested organizations Global presence, volunteer driven
Global Scope With Over 800 Member Organizations

Member Distribution Geographic
China
Australia/New Zealand
South Africa Latin America Southeast Asia Japan
North America
Member Affiliation
Government
Europe
SME
End User
Also developing chapters in India and the Middle East
Enabling Technology Consultant Non-Profit/Academic

0% 10% 20% 30% 40% 50%
Supply Chain
SCOR defines supply chain as:
Whether from Cow to Cone, Crude to Car or from Rock to Ring, SCOR is not limited by organizational boundaries
The processes that plan and execute the acquisition of materials, transformation of materials in sellable products, delivery and return of products and services in support of customer orders
Plan
Plan Deliver Source Make Deliver Return Return Return
Source Return
Make
Delive r Return
SCOR can be applied to supply chains in any industry and to any organization in the chain
Source Return
Plan Make Deliver Source Return Return
Suppliers Supplier
Supplier
Your Organization
Customer
Internal or External
Customers Customer
Working And Industry Groups
Working Groups
Comprised of volunteers from global open industry
call under the guidance of Caspar Hunsche, CTO Membership not required open to all SCOR 11.0 DCOR 3.0 CCOR 2.0 Best Practices Sustainability GreenSCOR Risk Management Reverse Logistics SCOR Convergence SCM Skills Now, Supply Chain Talent Academic Initiative
Industry Groups
Comprised and managed by volunteers from global
open industry call under the guidance of Carolyn Lawrence, Special Programs Administrator Membership not required open to all Aerospace & Defense Industry SCW-NA 5/24 Automotive (OEM/Tiered Supplier Segment) Industry Automotive Aftermarket Industry Association Energy, Oil & Gas Industry Hi Tech & Electronics Industry Software Industry Specialty Equipment Market Association
Industry Association Member Affiliations

APICS Institute for Supply Management (ISM) Council of Supply Chain Management Professionals (CSCMP) Automotive Aftermarket Industry Association (AAIA) GS1 globally Specialty Equipment Market Association (SEMA) Material Handling Industry of America (MHIA) Reverse Logistics Association (RLA) Diverse Manufacturing Supply Chain Alliance (DMSCA) Women's Business Enterprise National Council (WBENC) Industry Partners with most industry conference producers & publications
The Supply Chain Council Continues to be recognized as the global industry standard for supply chain process definition, reference, and resources.
The Business Landscape
The Song Remains the Same Across Industry: Change and Challenge are Constants
Stock Market Volatility, Oil Prices, Labor, Political Instability, Access to Capital
Reducing Inventory/ Working Capital/ Asset Management

Supply Chain Resiliency & Sustainability: Risk Management (Security/Counterfeiting) & Green (Product/Supply Chain)
Reducing Total Supply Chain Costs: Leveraging Technology Competing in a Global Market, New Entrants: Foreign & Internet Providing Superior & Consistent Customer Service While Increasing Revenue & Margin
Business as Usual Has Been Cancelled: Change is Inevitable, Growth is Optional!

The New Normal?

Managing, Retaining, and Recruiting Talent Is Increasingly More Challenging Lack of Management Process Standards and Cross Training Inhibits Succession and Consistency Lack of Visibility to Cross-Functional Process Requirements and Integration an Inhibitor to Collaboration and Orchestration of Supply Chain Activities Poor Daily Forecast Accuracy Results in Extensive fire fighting to Resolve Variation from Plan Planners and Schedulers Rely More on Custom Spreadsheets than Enterprise Planning Systems Lack of Visibility to Changes Upstream and Downstream Result in Frequent Inventory Imbalances Inability to Share Information with other Functions and Planners Lack of Performance Information and Daily Decision Support Tools Inability to Optimize Resources, Inventory and Operations to Maximize Profitability Effective Supply Chain Management and Operations Excellence
are Central Pillars for a Competitive Strategy!
Superior Supply Chain Management (SCM) has Long Been a Source of Competitive Advantage
Supply chain management costs per $1,000 revenue
$180 $160 $168.11
$140
$120 $100 $81.32 $80 $60 $40 $20 $0
Consumer Products/Packaged Goods Electronics Industrial Products
$91.49 $80.52 $70.12 $56.36 $29.48
$22.86
$23.98
$24.60
$24.58
$9.75
Petroleum/Chemical Retail and Wholesale Services
Best-in-class Companies Outperform Their Median Competitors with more than a 50% Cost Advantage 14 of AMR s Top 25 are SCC members! Parity (50th Percentile) Superior (90th Percentile)
Source: APQC, SCORmark benchmarking database (www.apqc.org/scc)
The Ultimate Goal of the Transformation to Operations Excellence is to Increase Shareholder Value
The Supply Chain Impacts . . .
Improve customer service and response Optimize inventory flow, utilization & productivity
All Financial Metrics . . .

Liberate Working Capital Reduce Fixed Capital Increase Revenue and Margin
& Shareholder Value
Improve Capital Efficiency Increase Shareholder Value (ROIC) Increase Profit
Best-in-class customer relationships Differentiated service capabilities
Best-in-class strategic supplier partnerships Leverage outsourcing of business processes Unique supply chain models & Asset Utilization
Optimize
Cost Model
Effective Supply Chain Management can increase Return on Invested Capital (ROIC) by 30% and More!
SCOR Index of Publicly Traded Company Members
Companies with a Focus on Supply Chain Improvement Outperform the Market, Even in Tough Times!
Best Practices Leadership is the Foundation for Profitable Growth to Attain Market Leadership
LEADERSHIP in OPERATIONS EXCELLENCE
HIGHER MARKET SHARE SUPERIOR FINANCIAL RETURNS
GREATER VALUE TO CUSTOMERS NEW PRODUCTS, SERVICES, COST IMPROVEMENTS

REINVEST AT A HIGHER RATE THAN COMPETITORS
Competing in the 21st Century Requires New Thinking and Operations Excellence; no, Operations Innovation!
Traditional Supply Chain Thinking

Sourcing
Manufacturing Distribution Point of Sale
Supplier
Manufacturer
Distributor
Wholesaler
Sales
Retailer
Consumer
Sales
Sales
Sales
Time
Time
Time
Time
Bullwhipped
Demand Signals
Little
Collaboration
Inventory Execution Costs
Excess High
Stockouts
The Supply Chain is Evolving to a Collaborative Supply Network

Suppliers Manufacturers Wholesale Distributors Retailers
Internet/ Portals Internet/ Portals Internet/ Portals
Customer Demand
Virtual Manufacturers
Logistics Providers
Info Goods
Contract Manufacturers
Companies Must Transform Their Operating Processes To Become Customer Focused, Demand Responsive, Collaborative, & Profitable
Technology Drivers of Change
Cloud Computing

Supply Chain Visibility Software as a Service (SaaS)/On Demand Location Based Technology/Mobility/Telematics Business Intelligence/Decision Support Beyond RFID Voice Recognition/Response Intelligent Sensors, Monitors, Devices Picking, Packing, Putaway Load, Unload LinkedIn, Twitter, Blogging, Search Offers, Location, Orders, Navigation, Behavior
Auto Id/Information

Robotics Extending from Manufacturing to Logistics

Internet Transparency & Social Media for Business

The Convergence of Emerging Technologies will lead to New Applications for Integrating Planning & Execution!
A New Paradigm is Emerging: The Smart Supply Network

Optimization for Visibility & Global Flow Control Smart Transactions (Telematics/RFID) Convey Information in
Real Time Across the Supply Network Paperless!

Convergence of Planning & Execution - Basis for Demand
Planning/Crossdocking/Outbound Consolidation
Optimum Supply Network Material Flow through
Collaborative, Synchronized Activity Planning & Scheduling

Smart Information
Smart Information
Vendor Companies
Crossdockbest & Customer must define their supply chain processes, metrics, practices and Custom Pack & Distribution Outbound Label talent requirements to leverage a newCenter paradigm in supply chain management to Consolidation gain competitive advantage!
HOW COMPANIES USE SCOR TO OPTIMIZE SUPPLY CHAIN PERFORMANCE
What is SCOR?
Supplier processes
SCOR is a supply chain process reference model containing over 200 process elements, 550 metrics, and 500 best practices including risk and environmental management and HR SEAT
Supply Chain
Customer processes
Plan
Organized around the five primary management processes of Plan, Source, Make, Deliver and Return
Developed by the industry for use as an industry open standard - Any interested organization can participate in its continual development
Source
Make
Deliver
Return
Return
Process, arrow indicates material flow direction Process, no material flow Information flow
22
About SCOR: A Process Framework

Process frameworks deliver the known concepts of
23
business process reengineering, benchmarking, best practices and organizational design in a cross-functional framework
Standard processes; Plan, Source, Make, Deliver, Return Standard metrics: Perfect Order Fulfillment, Cash-to-
Cash Cycle Time, Cost of Goods Sold,.. Standard practices: EDI, CPFR, S&OP, Cross-Training, .. Standard job skills: Lean, Accounting, Solicitation, ..
Pre-defined relationships between metrics,
processes, practices and skills
A Process Framework
Combining 4 techniques into a single integrated
24
approach
Business Process Re-engineering Capture the as-is business activity and design the future to-be state Performance Benchmarking Quantify relative performance of similar supply chains and establish internal targets Best Practices Analysis Identify the practices and software solutions that result in significantly better performance Organizational Design Assess skills and performance needs and align staff and staffing needs to internal targets
Process Reference Framework Processes Performance (metrics) Practices People (skills)
About SCOR: Supply Chain

Viewing a company as processes (domains)
Product/Portfolio Product/Portfolio Management Management Supplier processes
25
Customer processes
Product & Product Design Process Design DCOR DCOR
Sales & Sales & Support Support CCOR CCOR
Supply Chain SCOR
Supply Chain visualization
The What and Why of Visualization/Modeling
'Modeling' has two major components: Gathering process knowledge and Presenting process knowledge Using SCOR, Supply Chains can be rapidly defined, processes identified, and metrics set in a common and consistent method across functions.
SCOR Supported Model Types
Business activity Identify Supply Chains Managing supply chains
Diagram Type Definition Matrix Geographic map
Description Identify and Prioritize Supply Chains Standard view for supply chain owners/managers (what is sourced, stored and/or goes where)
Managing supply chain configurations

Managing processes
Thread diagram
Level 2 process decisions. Replace, reposition and/or eliminate processes

Level 3 and 4 process decisions. Outline process disconnects, missing information
Workflow
Supply chain definition
Supply-Chain Definition
Supply Chains are the Totality of processes spanning
operations from supplier to end-customer, focused on material, work, human, cash and information flow We use a tool called the Supply Chain Definition Matrix to define the supply-chains within an enterprise The Supply Chain Definition (i/o Matrix) Matrix helps determine the number and size of supply chains Columns: Customers (Output) Rows: Products (Input) The intersection of each column and row if the goods or services flow to the customer is a supply chain
The Matrix

We now place the customer list as column headings repeating until finished And then the products list as row headings repeating until finished For each product that flows to a customer, we put an X in the cell Its that simple.
Group 1 Customer A Business 1 Product 1 Product 2 Product 3 Product 4 Customer B Group 2 Customer C Customer D
X X X X
X X X
Business 2
SCOR Defines the First 3 Levels of Details

Level 1
Scope
Supply-Chain Source
Level 2
Configuration
S1 Source Stocked Product
Level 3
Activity
S1.2 Receive Product
Level 4
Workflow
Level 5
Transactions
EDI XML
Differentiates Business
Differentiates Complexity
Names Tasks
Sequences Steps Links Transactions
Defines Scope:
The Basis for Competitive Performance Targets are set
Differentiates Capabilities: Companies implement their operations strategy based on unique SC configuration
Framework Language
Links, Metrics, Tasks and Practices:

Companies fine tune their operations strategy Framework Language
Job Details: Defines practices to achieve competitive advantage and to adapt to changing business conditions
Industry or Company Specific Language
Details of Automation:
Defines process gates and integration points/ requirements
Framework Language
Technology Specific Language
Standard SCOR definitions
Company/Industry definitions
Best Practices
Best practice: "A current, structured, proven and repeatable method for making a positive impact on desired operational results." Current Must not be emerging and can not be antiquated Structured Has clearly stated Goal, Scope, Process, and Procedure Proven Success has been demonstrated in a working environment and can be linked to key metrics Repeatable The practice has been proven in multiple environments.
P1 Plan Supply Chain

Metrics Cash-to-Cash Cycle Time Cost to Plan SC Order Fulfillment Cycle Time Plan Cycle Time Return on SC Fixed Assets Return on Working Capital Best Practices Capability to run What-if simulations Change in Demand signal instantaneously reconfigures Production and Supply Plans CPFR On-line visibility of demand Re-balancing on full-stream supply and demand Supply/Demand Processes are fully integrated
S&OP
Tools support balanced decision making VMI
Best Practices What does it take to improve?

SCOR contains over 200 best practices today Do you need to implement all 200+ in your company?
Low Risk High Risk
High Return
quick wins
sponsor issue
How to determine fit? For each best practice Determine risk Determine return Pin in the quadrant
Low Return
nice to have
consider carefully
Implement a best practice IF it makes sense for your specific processes, business, or industry.
Supply chain performance
Supply Chain Prioritization
We use a tool called the Supply Chain Prioritization Matrix to order the supply-chains according to relevance Each supply chain can be ranked by a number of features We suggest:
size (revenue, volume, and margin), complexity (# SKUs) strategic importance
You can also look at them by

Cash Consumption Risk Volume variability Etc.
Supply Chain Priority
Each supply chain is given a rank in each
category The total of the values gives the final overall ranking Weightings and other criteria may apply
Revenue Gross Margin % # of SKUs Unit Volume Strategic Value Rank
Business 1 Business 2 Business 3
3 2 1
2 1 3
2 3 1
2 3 1
2 1 3
11 10 9
1=low 3=high
Supply Chain Strategy
We use a tool called the Supply Chain
Strategy Matrix to Identify priority strategic features or attributes of supply-chains. Each supply chain strategy is indicated by a collection of ranked features:
Reliability On time? Complete? Undamaged? Responsiveness From Customer Request to final acceptance Flexibility How long to scale up? How expensive to scale down? Cost Cost of Processes? Cost of Goods Sold? Assets Working Capital? Return on Investments?
Comparative Ranking
We advocate using a simple ranking system for
industry comparison Each rank corresponds to a specific percentile in industry performance We do not use averages or other statistical tests Our key ranks:
Performance Superior Advantage Parity Percentile 90th 75th 50th Choices 1 2 2 Interpretation Top 10 performer Top Half performer Half better/Half worse
Supply-Chain Strategy Matrix

Supply-Chain Strategy Matrix
Business Business Business 1 2 3
Each unique
Reliability
P P
S A
A P P
Responsiveness
Flexibility
A
A S
Cost
Internal
combination of ratings defines Your Supply Chain Strategy for the channel Think of the rating as a desired state, NOT where you want to improve the most
External
Assets
The SCORcard
We use a tool called the Supply Chain SCORcard to Identify performance characteristics of supplychains. Each SCORcard is built from a subset of hundreds of SCOR metrics. For supply-chain benchmarking we generally use only Level 1, 2 and 3 metrics The SCOR Manual provides all necessary definitions
Supply Chain Balanced SCORcard Standard Strategic (Level 1) Metrics

Attribute
Customer
Metric (Strategic)
Reliability
Responsiveness Agility Cost
Perfect Order Fulfillment

Order Fulfillment Cycle Time Supply Chain Flexibility Supply Chain Adaptability Supply Chain Management Cost Cost of Goods Sold Cash-to-Cash Cycle Time Return on Supply Chain Fixed Assets Return on Working Capital
Internal
Assets
upside and downside adaptability metrics
SCORmark Benchmarking Diagnoses the Areas Most
in Need of Improvement
Benchmark to Identify Process Parity, Advantage, or Superiority

Attribute Reliability Responsiveness Flexibility Cost Assets Metric (level 1)
Perfect Order Fulfillment Order Fulfillment Cycle Time Ups. Supply Chain Flexibility Supply Chain Mgmt Cost Cash-to-Cash Cycle Time
Company 98% 14 days 62 days 10.1% 22 days
Parity 92% 8 days 80 days 10.8% 45 days
Adv 96% 6 days 62 days 10.4% 30 days
Superior 98% 4 days 40 days 10.2% 20 days
Parity Gap -6% 6 days -18 days -0.7% -23 days
Req Gap
8 days
Scoping Identifies one or more targeted metrics for improvement
Parity
Advantage Superior
Median of Statistical Sample

Midpoint of Parity and Superior 90th percentile of population
Potential Improvement Opportunity

The SCOR framework a cross-industry open standard

The five integrated processes provide a boundary-free view of the true end-to-end Extended Supply Chain Achieve Operations Excellence, Supply Chain Transformation, and Continuous Innovation using Supply Chain Council frameworks & resources
Plan
Deliver
Return
Source Return
Make
Deliver Return
Source Return
Make
Deliver
Return
Source Return
Make
Deliver Return
Source Return
Suppliers Supplier
Supplier
Your Company
Customer
Customer s Customer
WRAP UP: WHY & HOW DO WE CHANGE?
A Game Plan for Transformation

Why Should We Change? Assess Current Operations Set Objectives Determine Market Benchmarks, Environment & Challenges How Do We Change? Create Strategy and Vision for the Future Map As Is & To Be Business Processes & Systems What is the Value of Changing? Determine Critical Success Factors & Windows of Opportunity Calculate Return on Investment Getting Management Buy In & Investment Present Solution Plan to Management Getting Operations Buy In & Commitment Pilot Implementation Proof of Concept Rapid Results Everyone Jumps on the Band Wagon Deploy Transformation Plan Across the Enterprise
The World is Flat: Companies that leverage technology and the SCCs Resources to connect & collaborate will lead the 21st Century!
September 2012
Supply Chain Council Mexico & CENAM Chapter

Additional Benefits by Mexico & CENAM Chapter
Establish & Professionalize the Practice of Supply Chain Management in the Region, locally adapted to situations and language

Models Implementation Strategies Training & Events
Participate in Best Practices Development Project and other SCC Programs so regional input is included. Host regional meetings for local networking and support. Establish the Basis for competition in the Region.

KPIs Benchmarking
Establish the Best Practices in Business Management for the Supply Chain area. Membership and training fees will be adjusted for regional economy. Anticipated reduction of 25-40%
50

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Key Decision Making Alignment = Supply Chain Alignment

How SCOR helps your company to align your supply chains.

About Supply Chain Council

Global Scope With Over 800 Member Organizations

South Africa Latin America Southeast Asia Japan

Also developing chapters in India and the Middle East

Enabling Technology Consultant Non-Profit/Academic

Plan Deliver Source Make Deliver Return Return Return

Plan Make Deliver Source Return Return

Working And Industry Groups

Industry Association Member Affiliations

The Business Landscape

Reducing Inventory/ Working Capital/ Asset Management

Business as Usual Has Been Cancelled: Change is Inevitable, Growth is Optional!

The New Normal?

are Central Pillars for a Competitive Strategy!

$91.49 $80.52 $70.12 $56.36 $29.48

All Financial Metrics . . .

& Shareholder Value

Improve Capital Efficiency Increase Shareholder Value (ROIC) Increase Profit

Best-in-class customer relationships Differentiated service capabilities

SCOR Index of Publicly Traded Company Members

GREATER VALUE TO CUSTOMERS NEW PRODUCTS, SERVICES, COST IMPROVEMENTS

REINVEST AT A HIGHER RATE THAN COMPETITORS

Traditional Supply Chain Thinking

The Supply Chain is Evolving to a Collaborative Supply Network

Internet/ Portals Internet/ Portals Internet/ Portals

Technology Drivers of Change

Robotics Extending from Manufacturing to Logistics

Internet Transparency & Social Media for Business

A New Paradigm is Emerging: The Smart Supply Network

Real Time Across the Supply Network Paperless!

Collaborative, Synchronized Activity Planning & Scheduling

HOW COMPANIES USE SCOR TO OPTIMIZE SUPPLY CHAIN PERFORMANCE

About SCOR: A Process Framework

Pre-defined relationships between metrics,

processes, practices and skills

Process Reference Framework Processes Performance (metrics) Practices People (skills)

About SCOR: Supply Chain

Product & Product Design Process Design DCOR DCOR

Sales & Sales & Support Support CCOR CCOR

Supply Chain SCOR

Supply Chain visualization

The What and Why of Visualization/Modeling

SCOR Supported Model Types

Business activity Identify Supply Chains Managing supply chains

Diagram Type Definition Matrix Geographic map

Managing supply chain configurations

Level 2 process decisions. Replace, reposition and/or eliminate processes

Supply chain definition

Supply Chains are the Totality of processes spanning

SCOR Defines the First 3 Levels of Details

Sequences Steps Links Transactions

Links, Metrics, Tasks and Practices:

Technology Specific Language

Standard SCOR definitions

P1 Plan Supply Chain

Best Practices What does it take to improve?

Supply chain performance

Supply Chain Prioritization

size (revenue, volume, and margin), complexity (# SKUs) strategic importance

You can also look at them by

Cash Consumption Risk Volume variability Etc.

Supply Chain Priority