Scdm Monday s3

8/13/2019 Scdm Monday s3

1/42

Supply Chain

Performance Measurement

Semaine ATHENS

18 - 23 November 2013


2/42


3/42

3

What is Supply Chain?

Supply Chain is a network of facilities and distribution

options that performs the function of procurement of

materials, transformation of these materials into

intermediate and finished products and the distribution of

these finished products to customers. Supply chains exist

in both service and manufacturing organizations, although

the complexity of the chain may vary greatly from industry

to industry and firm to firm.


4/42

4

Suppliers

Transporters

Customers

Manufacturers

Distributers3PL



5/42

5

ConsumersRetailersDistributorsManufacturersSuppliers

Material Flow

Information flow

Financial flow


There is a close connection between the design and management of

supply chain flows (product, information, and funds) and the success

of a supply chain.


6/42

6

What is SC Management?

Supply Chain Management (SCM) is the network of

organizations and systems that are involved through

upstream and downstream linkages, in the different

processes and activities that produce value in the form

of products and services in the hands of the ultimate

consumer.

The objective of every supply chain should be to

maximize the overall value generated


7/427

Brief Introduction to SC/SCM

Performance Management and its importance

for SCM

Performance Drivers of SC

SCPM models

SCOR model / SCOR Metrics


8/42

8

CustomersMonoprix

Stores

DCs +Log. Hubs

Detergentsmanufacturers

SuppliersSuppliers

Example 1 : Monoprix

Textile & LeatherManufacturersSuppliers

Electronics P.Manufacturers

Suppliers

Fresh productssuppliers

Suppliers

Food & DrinkManufacturers

Suppliers need to reduce costs or inventory

need to improve customer satisfaction


9/42

9

CommunityPharmacies

+Private hospitals

Wholesalers

CPT(DC)

Foreign

Suppliers

Example 2 : Pharma SC

NationalManufacturers

Public hospitals

+Other P. Structures

Patients

Imported drugs

Locally manufactured drugs

Very regulated SC

Uncertain demand

Suppliers have long lead times

Main goal : supply availability


10/42

10

Example 3 : HP

Suppliers

Suppliers

Suppliers

European DC Retailer

US DC Retailer

Far East DC Retailer

FAT

IC Mfg

PCAT

PrintMech Mfg

IC Mfg = Integrated Circuit Manufacturing

PCAT = Printed Circuit Assembly and Testing

FAT = Final Assembly and Testing

Print Mech. Mfg. = Print Mechanism Manufacturing

DC = Distribution Center

Suppliers

Customers

Customers

Customers


11/42

11

SC Performance Management

Todayscompetition is supplychain versus supply chain

Creation of customer value.

Speedy, cost efficient and reliable supply chain.

Performance measures :

to enable improvements

to enable benchmarking

Key is to see what customers expect, how your

competition is doing and what do we need to do to bridge

and exceed that gap.


12/42

12

MEASUREMENT is the key to performance

management since:

If you cannot measuresomething, you cannot

manageit

If you cannot managesomething, you cannotimproveit

SC Performance Measurement


13/42

13

Total Supply Chain Management Costs (% of Revenue)

9,2%

12,3%

10,7%10,0%

10,7%

9,1%

6,6%7,4%

4,8%5,5%5,3%

4,2%3,5% 3,6%

5,4%

3,4%

0,0%

2,0%

4,0%

6,0%8,0%

10,0%

12,0%

14,0%

Automotive Indus tr ial Chemical &

Advanced Materials

Computer Consumer Goods Pharmaceutical Semiconductor Telecommunications

Equipment

Best-in-Class

Median

Source: PRTM/The Performance Measurement Group (http://www.pmgbenchmarking.com/ )

%o

fRe

venue

Best-in-class Companies Outperform Their Median Competitors with a50% Cost Advantage

http://www.pmgbenchmarking.com/http://www.pmgbenchmarking.com/http://www.pmgbenchmarking.com/


14/42

14

Competi tive Strategy

Supply Chain

Strategy

Efficiency Responsiveness

Faci li ti es Inventory Transpor tation

Information

Supply chain structure

Cross Functional Drivers

Sourcing Pricing

Logistical Drivers

Drivers of Supply Chain Performance

Performance drivers are those things that make performance go up or down

Source : Sunil Chopra and Peter Meindl, Supply Chain Management, 4rdedition, Prentice Hall, 2010.


15/42

15

Drivers of Supply Chain Performance

trade-off between efficiency and responsiveness


16/42

16

Top Supply Chain Challenges(source : http://supply-chain.org/)

Unable to apply the right metrics to manage supply

chains effectively

Difficulty prioritizing supply chain improvement efforts

Performance is lagging

Complexity of supply chains

Finding and holding on to supply chain talent

http://supply-chain.org/http://supply-chain.org/http://supply-chain.org/http://supply-chain.org/


17/42

17

Supply chain metrics are very different from traditional

logistics metrics in that they measure inter-company

performance rather than just internal performance.

These measures of performance must be common

across the firms in the supply chain to be meaningful.

SCP Measurement Models


18/42

18

SCP Measurement Models

SCOR

Balanced Scorecard

Activity-Based Costing (ABC)

The Logistics Scoreboard


19/42

19

Custom

erprocessesS

upplierpro

cesses

Supply Chain

Custom

erprocessesS

upplierpro

cesses

Supply Chain

Process, arrow indicates material flow direction

Process, no material flow Information flow

DeliverMakeSource

ReturnReturn

Plan

SCOR: A Process Framework


20/42

20

Process frameworks :

Standard processes: Plan, Source, Make, Deliver, Return

Standard metrics: Perfect Order Fulfillment, Cash-to-Cash

Cycle Time, Cost of Goods Sold, Order Fulfillment Cycle Time,..

Standard practices: EDI, CPFR, Sales & Operations Planning,

Pre-defined relationships between processes, metrics

and practices and inputs and outputs



21/42

21


End-to-End Supply Chain

Supplier CustomerSuppliersSupplier

Source

Internal or External Internal or External

Your Company

Return

Deliver MakeSource

Return

Plan

Deliver

Return

Source

Return

MakeSource

Return

Plan

Deliver

Return

DeliverMake

Plan

Return Return

Customers

Customer

SCOR reference model


22/42

22

Level 1 Level 2 Level 3 Level 4 Level 5

Scope Configuration Activity Workflow Transactions

Differentiates

Business

Differentiates

Complexity

Names Tasks Sequences Steps Links Transactions

Defines Scope Differentiates

Capabilities

Links, Metrics,

Tasks and

Practices

Job Details Details of

Automation

FrameworkLanguage

FrameworkLanguage

FrameworkLanguage

Industry orCompany

Language

TechnologySpecific Language

EDIXML

SCOR Hierarchy

S1 SourceStockedProduct

SSource

S1.2ReceiveProduct

Standard SCOR practices Company/Industry definitions

(source : http://supply-chain.org/)


23/42

23

Stocked Product (S1) Make-to-Order (S2) Engineer-to-Order (S3)

S2.1 Schedule ProductDeliveries

S3.1 Identify Sources of

Supply

S3.2 Select Final Supplier(s)

and Negotiate



S1.2 Receive Product S2.2 Receive Product S3.4 Receive Product

S1.3 Verify Product S2.3 Verify Product S3.5 Verify Product

S1.4 Transfer Product S2.4 Transfer Product S3.6 Transfer Product

S1.5 Authorize Supplier

Payment


Payment


Payment

Source Process Elements


24/42

24

Make-to-Stock (M1) Make-to-Order (M2) Engineer-to-Order (M3)

M1.1 Schedule Production

Activities


Activities

M3.1 Finalize Production

Engineering


Activities

M1.2 Issue Material M2.2 Issue Sourced/In-Process Product

M3.3 Issue Sourced/In-ProcessProduct

M1.3 Produce and Test M2.3 Produce and Test M3.4 Produce and Test

M1.4 Package M2.4 Package M3.5 Package

M1.5 Stage Product M2.5 Stage Finished Product M3.6 Stage Finished Product

M1.6 Release Product to

Deliver

M2.6 Release Finished

Product to Deliver

M3.7 Release Product to

Deliver

M1.7 Waste Disposal M2.7 Waste Disposal M3.8 Waste Disposal

Make Process Elements


25/42

25

Deliver Process Elements

Stocked Products (D1) Make-to-Order (D2) Engineer-to-Order (D3)

D1.8 Receive Product from

Source or Make


Source or Make


Source or Make

D1.9 Pick Product D2.9 Pick Product D3.9 Pick Product

D1.10 Pack Product D2.10 Pack Product D3.10 Pack Product

D1.11 Load Product & Create

Documentation


Documentation


Documentation

D1.12 Ship Product D2.12 Ship Product D3.12 Ship Product

D1.13 Receive & VerifyProduct by Customer

D1.13 Receive & Verify Productby Customer

D1.13 Receive & VerifyProduct by Customer

D1.14 Install Product D2.14 Install Product D3.14 Install Product

D1.15 Invoice D2.15 Invoice D3.15 Invoice


26/42

26

Different Model Types

SCOR recognizes different types of models. Each

serving a different purpose:

Business Scope diagram: Set the scope for a project or

organization

Geographic Map : Describes material flows in a geographic

context; Highlights node complexity or redundancy

Thread Diagram: Material flow diagram, focused on level 2

process connectivity; Describes high level process

complexity or redundancy

Workflow or Process Models: Information, material and work

flow diagram at level 3 (or beyond); Highlights information,

people and system interaction issues


27/42

27

SCOR Metrics

P er fo r m a n c e A t t ri b u te: a characteristic to describe astrategy. Performance attributes serve as classification for

KPIs and metrics

K ey Per fo rm an c e In d ic at or (K PI): a metric that is

representative to measure the overall performance or state-of-

affairs

Metric: a standard for measurement

M e a s u r e m e n t : an observation that reduces the amount of

uncertainty about the value of a quantity


28/42

28

Attribute Strategy

Reliability (RL) Consistently getting the orders right, product

meets quality requirements

Responsiveness (RS) The consistent speed of providing

products/services to customers

Agility (Flexibility)

(AG)

The ability to respond to changes in the

market (external influences)

Cost (CO) The cost associated with managing and

operating the supply chain

Assets (AM) The effectiveness in managing the supply

chains assets in support of fulfillment

Customer

Inte

rnal

Performance Attributes

What is/are the most important attributes to achieve your supply chainstrategy?


29/42


30/42

30

SCOR Metrics Codification

SCOR metrics have unique identifiers:

1.Two capitals are performance attributes: RL, RS, AG, CO and AM (5)

2.Two capitals, a period the number one (1) and a number are strategic

(a.k.a. level 1) metrics:

RL.1.1, RS.1.1, AG.1.1, CO.1.1, CO.1.2, AM.1.3 (10 in total)

3.Two capitals, a period the number two (2) and a number are diagnostic

(a.k.a. level 2) metrics:RL.2.1, RS.2.1, AG.2.1, CO.2.1, CO.2.2, AM.2.7 (36 in total)

4.Two capitals, a period the number three (3) and a number are

diagnostic (or level 3) metrics:

RL.3.1, RS.3.1, AG.3.1, CO.3.149, CO.3.151, AM.3.44 (>500)

XX = performance attribute,

XX.1.n = level 1, XX.2.n = level 2, and so on



31/42

31

Attribute Strategic metricReliability RL.1.1 Perfect Order Fulfillment

Responsiveness RS.1.1 Order Fulfillment Cycle Time

Agility AG.1.1 Upside Supply Chain Flexibility

AG.1.2 Supply Chain Upside Adaptability

AG.1.3 Supply Chain Downside Adaptability

Cost CO.1.1 Supply Chain Management Cost

CO.1.2 Cost of Goods Sold

Assets AM.1.1 Cash-to-Cash Cycle Time

AM.1.2 Return on Supply Chain Fixed Assets

AM.1.3 Return on Working Capital

C

ustomer

Internal

KPIs: Strategic Metrics


32/42

32

Metric: RL.1.1 Perfect Order Fulfillment

Definition: The percentage of orders delivered on-time, in full.

Components of perfect include all items and quantities on-

time, using the customers definition of on-time, complete

documentation and in the right condition

Calculation: [Total Perfect Orders] / [Total Number of Orders]

Diagnostic

Metrics:

(examples)

RL.2.1 % Orders Delivered in Full

RL.2.4 Perfect Condition

RL.3.19 % Orders Received Defect Free

RL.3.24 % Orders Received Damage Free

Notes: An order is perfect : An order must be: on-time AND in-full

AND right condition AND right documentation

Strategic Reliability Metric



33/42

33

Metric: RS.1.1 Order Fulfillment Cycle Time

Definition: The average actual cycle time consistently achieved to fulfill

customer orders. The actual cycle time starts with the receipt

of the order and ends with the customer acceptance of the

delivery. The unit of measure is days.

Calculation: [Sum Actual Cycle Times For All Orders Delivered] / [Total

Number Of Orders Delivered]

Diagnostic

Metrics:

(examples)

RS.2.2 Make Cycle Time

RS.2.3 Deliver Cycle Time

RS.3.96 Pick Product Cycle Time

Notes: Order Fulfillment Cycle Time includes dwell time. Dwell time is

the time no value add activities are performed on the order or

product, imposed by customer requirements.

Strategic Responsiveness Metric



34/42


35/42

35

Strategic Cost Metrics

Metric: CO.1.1 Total Supply Chain Management Cost (TSCMC)

Definition: All direct and indirect expenses associated with the operation

of supply chain business processes across the supply chain.

Traditionally Total Supply Chain Management Cost is measured

as a percentage of revenue.

Calculation: [Cost to Plan] + [Cost to Source] + [Cost to Deliver] + [Costto Return]

Diagnostic

(Level 2)

Metrics:

CO.2.1 Cost to Plan

CO.2.2 Cost to Source

CO.2.4 Cost to Deliver

CO.3.5 Cost to Return

Notes: The Cost to Make is captured in Cost of Goods Sold (COGS),

however there is some overlap between COGS and Supply

Chain Management Cost.



36/42

36

Strategic Cost Metrics

Metric: CO.1.2 Cost of Goods Sold (COGS)

Definition: The cost associated with buying raw materials and producing

finished goods. This cost includes direct costs (labor, materials)

and overhead.

Overhead is interpreted between companies.

Calculation: Direct Material + Direct Labor + Overhead

Diagnostic

(Level 2) etrics:

CO.2.3 Cost to Make

Notes: Overhead may contain elements of TSCMC that have been

allocated to the COGS related processes. Do not double count!

Cost toPlan

Cost toSource

Cost toMake

Cost toDeliver

Cost toReturn

Total Supply Chain Management Cost (TCSMC) ComponentCost of Goods Sold component



37/42

37

Metric: AM.1.1 Cash-to-Cash Cycle TimeDefinition: The time it takes for cash invested in materials to flow back

into the company after finished goods have been delivered to

customers. The unit of measure for Cash-to-Cash Cycle Time

is calendar days

Calculation: [Inventory Days of Supply] + [Days Sales Outstanding]

[Days Payable Outstanding]

Diagnostic

Metrics:

AM.2.1 Days Sales Outstanding (DSO)

AM.2.2 Inventory Days of Supply (IDOS)

AM.2.3 Days Payable Outstanding (DPO)

Notes: For services, the time between paying the resources assigned

to a service and receiving payment for the service delivery.

Strategic Asset Metrics



38/42

38

Metric: AM.1.2 Return on Supply Chain Fixed Assets

Definition: The return an organization receives on its invested capital in

supply chain fixed assets. This includes the fixed assets used

to Plan, Source, Make, Deliver and Return. Examples of fixed

assets include land, buildings, machinery, trucks

Calculation: ([Supply Chain Revenue] [COGS] [Supply Chain

Management Costs]) / [Supply Chain Fixed Assets]

Diagnostic

Metrics:

AM.3.11 Deliver Fixed Assets Value

AM.3.18 Make Fixed Assets Value

AM.3.20 Plan Fixed Asset Value AM.3.27 Source Fixed Assets Value

Notes: Supply-Chain Revenue is the operating revenue generated

from a supply chain. This does not include non-operating

revenue, such as investments, etc..

Strategic Asset Metrics



39/42

39

Typical SCOR Model Results

SCORMeasures

Unit of

Measurement

Median

Class

Best in

Class

Delivery

performance

Percentage 81% 96%

Upsideperformanceflexibility

Number ofdays

42.0 8.3

Cash to cashcycle

Number ofdays

66.6 24.7



40/42

40

Supply ChainCost/Industry

Unit ofmeasurement

MedianClass

Best inClass

Consumerpackaged goods

SCM cost % toRevenue

11.2 5.3

Chemical andPharmaceuticals SCM cost % toRevenue 9.8 4.0TelecomEquipment


8.5 3.3

Defense and

industrial

SCM cost % to

Revenue

10.2 4.5

Computers and

Electronics


9.1 4.0

Typical SCOR Model Results



41/42

41

Metrics Data

Each company will need to develop a tool or instructions

where to source the data for the SCOR metrics

There are two types of data:

Recorded data; obtain from ERP (Enterprise ResourcePlanning), WMS (Warehouse Management System), financial

systems, etc.

Observed data; obtain through interviews, error logs, audits

and/or time-studies. For example the observed percentage of

orders requiring additional customer setup in a system,percentage of manual repackaging events on the shipping dock.


42/42

Documents

Scdm Monday s3