How Do I Use SCOR?Supply Chain World - April, 2000Supply Chain World - April, 2000

Peter Bolstorff peter.bolstorff@pragmatek.comPRAGMATEK Consulting Group, Ltd.www.pragmatek.com

2

Supplier

Plan

Customer Customer’sCustomer

Suppliers’Supplier

Make DeliverSource Make DeliverMakeSourceDeliver SourceDeliver

Internal or External Internal or External

Your Company

Source

What is Supply Chain?

Supply Chain Operations Reference Model

The integrated processes of Plan, Source, Make and Deliver, spanning your suppliers’ supplier to your customers’ customer, aligned with Operational Strategy, Material, Work & Information Flows.

3

Material Flow

Operations StrategyAnalyze

Basis of Competition

ConfigureSupply Chain

AlignPerformance

Levels, Practices,

and Systems

AlignPerformance

Levels, Practices,

and Systems

ImplementSupply-Chain

Changes

ImplementSupply-Chain

Changes

SCOR Project Roadmap•Supply Chain Scope•Performance Metrics•Supply Chain SCORcard•Competitive Performance Requirements•SCORcard Gap Analysis•Business Case

•AS IS Geographic Map•Disconnects & ROI•Design Specifications•TO BE Geographic Map •AS IS Process Flow •TO BE Process Flow

Informationand Work Flow

•AS IS Work/Information Map•Disconnects•Design Specifications•TO BE Work/Information Map•Prioritized List of Changes

Implementation •Master Schedule of Projects•Detail Design•Technology Selection•Pilot•Roll Out

4

Project Approach

Analyze Basis of Competition

Configure Supply Chain

Implement Supply Chain Changes

3-4 Months 6+ Months1-2 Weeks

Discover Analyze Design Develop Implement

OpportunityOpportunity StrategyStrategy SolutionSolution PrototypePrototype InstallInstall

Align Performance Levels, Practices &

Systems

SCOR Project Roadmap

Educate

SupportSupport

1 Week

• Workshops• Executive

Briefings• Customized

Training

5

Educate for Support

WHO

– The Evangelist– Core Team Buy IN– Active Executive

Sponsorship

WHAT

– General SCOR Workshops

– Customized SCOR Workshops

– Executive Briefing

6

Discover Opportunity

Business Team

Value PropositionProfit & Loss StatementBalance SheetCritical Success FactorsCritical Business Issues Internal ProfileExternal Profile

7

Discover Opportunity

Performance Issues

Deficiency ImprovementCore Competency

Investment

Goals, Design, & Management

OrganizationProcessTechnology Jobs/People

8

Discover DeliverableProject Charter

I. IntroductionMaintenance of the Project

Charter

II. Project OverviewScopeBusiness ObjectivesProject Objectives

III. Project ApproachMethodologyProject ScheduleProject Milestones &

DeliverablesDependencies

IV. Project Budget

V. Project OrganizationOrganization ChartProject ResourcesRoles and Responsibilities

VI. Measures of SuccessStakeholder ExpectationsBenchmarksBenefit Analysis 8

VII. Project CommunicationCommunication PlanControl Procedures

9

PRAGMATEK SMEPRAGMATEK SME

CLIENT Advisory/Steering CommitteeCLIENT Advisory/Steering Committee

PRAGMATEK Project ManagerPRAGMATEK Project ManagerCLIENT Project ManagerCLIENT Project Manager

PRAGMATEK Extended TeamPRAGMATEK Extended Team CLIENT Extended TeamCLIENT Extended TeamCLIENT Design TeamCLIENT Design Team

CLIENT Project SponsorCLIENT Project Sponsor

Discover DeliverableProject Organization

10

Discover DeliverableProject Plan

3/20 5/1 6/1 7/1 8/1 9/1 +

Supply Chain Design/PilotRoll OutQuick Hit Changes

Roll Out Non-Technical Changes

Bus

ines

s

Technology Assessment/ Optimization

FunctionalRequirements

ConferenceRoom Pilot

Roll Out Integrated Solution

Tech

nica

l

Analyze Design Develop Implement

11

Analyze

Drive a Tight Supply Chain Scope Benchmark Defines Business Opportunity Supply Chain SCORcard “Hot Links” to the

P&L Business Management Team Ownership

12

Analyze DeliverableSCORcard

Cu

sto

mer

Facin

gIn

tern

al

Facin

g

Actual SCORcard

SCOR Level 1 Metric Actual Parity Advantage Superior Value from Improvements

Order Fillrate98% 76% 87% 97%

Need To Maintain Superior Performance

Delivery Reliability

Line Fillrate N/A 90% 96% 98+% N/A

Flexibility & Responsiveness

Fulfillment Leadtime, (Order Receipt to Customer Receipt)

5 - 12 days 3 days 2 days 1 day Opportunity for Competitive Advantage

COGS, (Cost of Sales % to Net Sales)

34.7% 60.0% TBD TBD Need To Maintain Superior Performance

Warranty/Returns, (Returns as % of Net Sales)

16.0% TBD TBD TBD Opportunity for Performance Improvement

CostTotal Supply Chain Cost, (As a % of Net Sales)

----- 8.0% 7.0% 5.0%Opportunity for SG&A

Reduction

Order Management, (Customer Service Allocation + Freight + Fulf illment)

8.5% 4.0% 3.0% 1.5% $2.5M estimated Home Delivery opportunity

Material Acquisition Very Low 3.0% 2.0% 0.5% Need To Maintain Superior Performance

AssetsCash to-Cash, (Inventory days of supply + days sales outstanding - average payment period)

7 days 65 days 40 days 20 daysNeed To Maintain Superior

Performance

Net Asset Turns, (Total gross product revenue/Total net assets)

TBD 2.5 5 7 TBD

Actual Performance Versus Consumer Packaged Goods Benchmarks

13

Analyze DeliverableCompetitive Performance Requirements

Superior

Legend

Advantage Parity

Delivery Reliability

Flexibility/ Responsiveness

Cost

Asset

Performance Attribute

MATURE NEW

Performance vs.

Competition

14

DesignMaterial Flow

Geographic Map– Physical Locations– Product ID, SKU, and/or Family

Disconnects– Drive the ROI– Prioritize the Work

SCOR Level 2 defines types of processes used by physical location– “Lean Manufacturing” concepts

15

DesignMaterial Flow Deliverable

M anufacturing

D istributor

O E M S up p lier

W arehouse

C ustom erD istributor

D istributor

D istributor

W arehouse

W arehouse

W arehouse

C ustom er

C ustom er

C ustom er

Texas Supplier

(S2, M2, D2)

(S1, D1) (S1, D1)

(S2, M1, D1)

(D2)

(S1)

(S1, M1, D1)

16

DesignMaterial Flow Deliverable

1 = Forecasting 2 = Competitive Part Material Flow 3 = Non-working Inventory 4 = Inbound Freight 5 = Reorder Point 6 = Schedule Agreements 7 = Current/Non-current (TBD)

17

DesignMaterial Flow Deliverable

4. Inbound Transportation between Suppliers is not optimized which includesboth Parcel and LTL, normal and expedite shipping, and cross dockoperations. This is further complicated by the conflict between physicalspace for staging shipments to support truck utilization AND leadtime todealer order needs.

Metric P&L Line ImpactLine Fillrate Net Sales No impact on Line Fillrate.BackorderDuration

Net SalesCVA/EVA

Minimum of 2 days of backorderduration due to transportation time.

COGS Gross Profit Inbound transportation as a ruleshows up in STANDARD COST,MFG Variance and PurchaseVariance. 60% of the shipmentsare parcel. Actual spend in 1999was $2.5M.

Supply ChainCost

Direct ProfitContribution

The inbound cost of supply chaincost shows up in Warehouse linevia allocation. Actual spend in1999 was $.5M.

Assets CVA/EVA The FOB destination as currentlypracticed, is the Supplier’s dockwhich impacts the Inventory by anestimated $.1M (25 days)

18

DesignMaterial Flow Deliverable

Ease of Implementation

Easy Tough

Bu

sin

ess

Imp

act Small

Pay-Off

Big Pay-Off

Quick Hits Caution

Gems Extra Effort4

7

6 5

32

1

$ 1M Annual Savings$ 1M Annual Savings

19

DesignWork & Information Flow

Defines the work and information which moves the material

Incorporates the major system applications and transactions

“Swim Diagram” approach Illustrates the impact of “e” to your business Additive to the ROI derived in Material Flow

20

As-Is Level 3 OperationsW ork and Inform ation Flow

Pac

k/S

tock

Ord

er F

ill/

Sh

ipIn

ven

tory

Co

ntr

ol

Ord

er F

ill/

Sh

ipP

urc

has

ing

Pac

k/S

tock

Rec

eivi

ng

Rec

eivi

ng

DC

2D

C1

HQ

S2.1 & S1.1Schedule Material

Deliveries

P2.4 EstablishDetailed Sourcing

P lans

S2.2 & S1.2Receive and Verify

Material

S2.3 & S1.3Transfer Material

S2.2 & S1.2Receive and Verify

Material

S2.3 & S1.3Transfer Material

Pkg S lipfrom

Supplier

S tockxportfromDC2

Receip tTo AP

Pick T icket

Release to stockM ove ticket

Release toInspect

Pkg S lipfrom

Supplier

S tockxportfrom

Plants

Receip tTo AP

ToSupplier

JITSchedule

PO toSupplier

To M FG(all p lants)

S tockxport

F irmReq

???

P2.3 BalanceMaterial

Resources withMat'l Reqm ts

P2.2 Identify,Assess, &

Aggregate Mat'lResources

?? ??

D1.1 Process Inqu iry &Q uote

D1.2 Receive, Enter &Validate O rder

D1.3 Reserve Inventoryand Determine Delivery

Date

D1.4 ConsolidateOrders

D1.5 P lan & BuildLoads

CustomerDefined Route

DeliveryDue L ist

F romPlantsStockxports

StockO rdersFrom

Customer

D irectO rdersFrom

Customer

Backorders

P2.1 Identify,Prioritize, &

Aggregate MaterialResources

CustomerBackorders

ConsumptionRe-order

poin ttripped

M arketingP lan

NewPart

Setup

ProductionSchedule

(seasonal)

???

D1.4 ConsolidateOrders

D1.5 P lan & BuildLoads

CustomerDefined Route

DeliveryDue L ist

D irectO rdersFrom

Customer

D1.6 RouteShipm ents

CustomerDefined Route

DeliveryDue L ist

D1.6 RouteShipm ents

CustomerDefined Route

DeliveryDue L ist

S1.1 & S1.3SUBCONTRACT

PROCESS(per child)

PO toSupplier

541542

Parent S1.1

D1.7 Select Carriers andRate Shipments

CustomerDefinedRoute

P icking T ickets

P icking T ickets1/line

D1.8, S2.2, & S1.2Receive & Verify

Material (P roduct)

D1.8, S2.2, S2.3,S1.2 & S1.3

Receive, Verify,and Transfer

Material (P roduct)

D1.9 P ick Product

Availab le

Inventory

D1.9 P ick Product

Availab le

Inventory

FromSubcontract

Process541

PostG oodsIssue

D1.10 LoadVehicle, GenerateShip Docs, & Ship

ToDC2

Stockxport

D1.10 LoadVehicle, GenerateShip Docs, & Ship

HandwrittenP ick T icket

HandwrittenP ick T icket

XferPosting

Post G oodsIssue

ToVendorR -ticket

BO L

To P lantM ovement

TypeBO L

To CustomerPacking S lip

BO L

M1.1 ScheduleManufacturing

Activities

Re-orderPoin t

SafetyStock

D1.11 Receive & VerifyM ateria l a t Customer

S ite

M1.3 Manufacture& Test (K itting)

D1.13 Invo ice & ReceivePayment

Post G oodsIssue

M1.2 IssueMaterial

ProductionW orkorder

P3 P lan Make(K itting)

SAP ProductionP icklist

M1.4 Package

M1.5 S tageProduct

Physica lM ove

M1.6 ReleaseProduct to

Deliver

ProductionO rder

Backflush

Release to S tockM ateria l M oveTo D1.8, S1.1

P4.4 EstablishDetailed

Delivery P lans

P4.3 BalanceDelivery

Resources withDelivery Reqm ts

To D1.3D1.5

P4.2 Identify,Assess, &Aggregate

DeliveryResources

P4.1 Identify,Prioritize, &Aggregate

Delivery Reqm ts

Same asP2.1

P1.4 EstablishSupply Chain

P lans

???

P1.3 BalanceSupply-Chain

Resources withSupply-Chain

Reqm ts

??

P1.2 Identify,Assess, &Aggregate

Supply-ChainResources

BudgetRqmts

ServiceLevelRqmts

TurnG oals

Sales $

ToD ist

SalesG oals $

P1.1 Identify,Prioritize, and

AggregateSupply-Chain

Rqm ts

F in ishedG oodsUnits in

O peration

Ave PartsUseage

$/O peration

SalesH istory

$

ToCustomer

Packing S lipBO L

DesignWork & Information Flow Deliverable

21

Inve

nto

ryC

on

tro

lP

urc

has

ing

AS IS

DesignWork & Information Flow Deliverable

P1.4 Establish Supply Chain

Plans

P1.4 Establish Supply Chain

Plans

P1.3 Balance Supply Chain

Resources with Supply Chain Requirements

P1.3 Balance Supply Chain

Resources with Supply Chain Requirements

P1.2 Identify, Assess, &

Aggregate Supply Chain Resources

P1.2 Identify, Assess, &

Aggregate Supply Chain Resources

P1.1 Identify, Prioritize, and

Aggregate Supply Chain

Requirements

P1.1 Identify, Prioritize, and

Aggregate Supply Chain

Requirements

??

??

BudgetRqmts

Sales$

Service Level

Rqmts

Turn Goals

Sales Goals $

Finished Goods Units in

Operation

Sales History

$

Avg Product Usage

22

Inv

ento

ryC

on

tro

lP

urc

has

ing

Mar

keti

ng

Man

ufa

ctu

rin

g

TO BE

DesignWork & Information Flow Deliverable

P1.3 Balance Supply Chain

Resources With Supply

Chain Reqmts

P1.3 Balance Supply Chain

Resources With Supply

Chain Reqmts

P1.2 Identify,

Assess, & Aggregate

Supply Chain

Resources

P1.2 Identify,

Assess, & Aggregate

Supply Chain

Resources

P1.1 Identify,

Prioritize, and

Aggregate Supply Chain

Reqmts

P1.1 Identify,

Prioritize, and

Aggregate Supply Chain

Reqmts

P1.4 Establish Supply

Chain Plans

P1.4 Establish Supply

Chain Plans

Unit Forecast

Existing Inventory

Net Unit Supply

Plan ProfitContribut

ion $$

Consensus Unit Plan

Rolling 12 mo Aggregate

Unit Plan (to P2)

23

Develop Solution

Balance Quick Hits and Non-Technology Changes with Longer payback projects

Leverage a Conference Room Pilot Scenario Link a formal Technology Selection Process to

the Design Process Transition Team from “Design” to

“Implementation” Detail “TO BE” Design at Level 4

24

Challenges/Dependencies:

- Define Requirements

- Explore tool options

- Test/prove design

- Enlist support from MRP controllers

- Data integrity

.

Recommendation: Design, test and implement an integrated supply chain demand planning/forecasting solution for Business Unit

Project Manager:Elaine Reichardt

Change Required:

- Organizational metrics

- Process changes/additions

- Separate demand and supply planning

- Technology changes

Opportunity/Benefit:$2MInventory reduction

Develop Solution DeliverableRecommendation Summary

25

Develop Solution

Pace of Change

Fast Measured

Sc

op

e o

f C

ha

ng

e

Tactical

Strategic

Focused Improvement

Continuous Improvement

Focused Restructuring

Business Process Innovation

Balanced Project Mix

26

TYPE PROJECT NAME START SCOR PROJECT MANAGER RESULTS PLAN END JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DECSUPPLY CHAIN SCOPE

Strategic Available to Promise Service Flexibility 02/08/00

Deliver Jo Ellsw orth Cost Assets 12/31/00

Strategic Make-to-Order Service Flexibility 10/01/99

Make David Hendrickson Assets 06/30/00

Strategic Outsource Reconfiguration Service Flexibility 12/03/99

Source Deb Lynch Cost Assets 12/31/00

Deficiency Non Working Inventory Reduction 07/19/99

Deliver Jay Gaustad Assets 04/30/00

Deficiency Integrated Supply Chain Planning Service Flexibility 08/16/99

Plan Peter Bolstorff Cost Assets TBD

Deficiency Texas Consignment Service Flexibility Determine Schedule

Source Joe Comerford Cost Assets

Strategic Efficient Material Acquisition Determine Schedule

Source Elaine Reichardt Cost

Strategic Direct to Consumer Transportation Service Flexibility 03/01/00 2001 plan

Deliver Rick Hardcopf Assets 12/31/00

CompleteCapital Plan

Complete Test

BrainstormingSession

QuarterlyActionPlan

Complete 2ndQuarter Plan

Complete 3rdQuarter Plan

Complete 4thQuarter Plan

CompleteImplementation

Process DesignValidation

Process Cutover

PlanningReview

NWIData Integration

DisconnectsReviewed

Action Plan

Monthly Action Plan Reviews - Plants

BrainstormProject Objectives;

Set Strategy

Develop Solution DeliverableMaster Project Schedule

27

Develop Solution DeliverableLevel 4 Work & Information Flow

SalesManageme

nt

FieldSales

Inside

Sales

Customer

Business

Analysis

P1.1

Planning

Marketing

BDU

Determ ine SignificantNet Custom er Change

@ SKU @ W eek

M aintain Item M asterL ist

Update New ProductIntroduction Plan @SKU w / appropriate

Forecast

ApproveRecom m ended SKU

Retirem ents

new SKU w/forecast

inactive SKUrecommended

SKU retirements

Run M onth EndForecast Update w /

Forecast M ethod A, 1,and 2

activeSKU list w/

consolidatedhistory

Run Exception ReportUsing DT @ Product

Code @ 60-90Foreccast

updatedJBA &

DTsystems

Analyze SKUExceptions and

Consolidate Input

SKU>± 25%

from 80%case volume

list

Determ ine SignificantM ix im pact @ SKU @

Custom er @ W eek

Analyze Prom otionalPerform ance @ SKU

@ W eek

M aintain Prom otionalPerform ance H istory

@ SKU @ W eek

M aintain Prom otionalCalendar @ SKU @

W eek

Rem odel Forecast

SKUExceptionChange

Summary

PromotionalH istoryInput

PromotionalImpact

M ix H istoryInput

Net CustomerChange Input

PromotionChanges

PromotionalH istoryInput

Achieve Consensuson 30-60 and 60-90

day Forecast

RecommendedSKU Forecast

Adjustments forExceptions

Achieve Consensuson 30-60 and 60-90

day Forecast

Achieve Consensuson 30-60 and 60-90

day Forecast

Achieve Consensuson 30-60 and 60-90

day Forecast

SKU>± 25%

from 80%case volume

list

SKU>± 25%

from 80%case volume

list

SKU>± 25%

from 80%case volume

list

28

Implement

Implementation of supply changes can be described in 3 phases– Transition– Installation– Institutionalization

Installation is an iterative process– Develop– Prepare– Cut-Over– Evaluate

29

Implementation DeliverableDashboard, Self Funding Project

P & L

Results

As Is To Be

Rev Rev(COGS) (COGS)

Gross Gross(SG&A) (SG&A)

NOI NOI (Inv + AR (Inv + AR -AP/I%) -AP/I%)

EVA EVA

Define

PlanPlan

SourceSource

MakeMake

DeliverDeliver

Processes

Design & Improve

Flows

INFORMATION

WORK FLOW

MATERIALS

OPS Strategy

Measure

Performance

Inventory Days

DSO/AR

Order Lead-time

Fill Rate

Rework

Asset Turns

METRICS

Logistics Cost

Cash Cycle Time