The supply chain operations reference model (SCOR) is a management tool used to address, improve, and communicate supply chain management decisions within a company and with suppliers and customers of a company. The model describes the business processes required to satisfy a customer’s demands. It also helps to explain the processes along the entire supply chain and provides a basis for how to improve those processes.
The SCOR model was developed by the supply chain council (http://www.supply-chain.org) with the assistance of 70 of the world’s leading manufacturing companies. It has been described as the “most promising model for supply chain strategic decision making.” The model integrates business concepts of process re-engineering, benchmarking, and measurement into its framework. This framework focuses on five areas of the supply chain: plan, source, make, deliver, and return. These areas repeat again and again along the supply chain. The supply chain council says this process spans from “the supplier’s supplier to the customer’s customer.”
Supply-chain operations reference (SCOR) model is a process reference model developed and endorsed by the Supply Chain Council as the cross-industry, standard diagnostic tool for supply chain management. The SCOR model describes the business activities associated with satisfying a customer’s demand, which include plan, source, make, deliver, and return. Use of the model includes analyzing the current state of a company’s processes and goals, quantifying operational performance, and comparing company performance to benchmark data. SCOR has developed a set of metrics for supply chain performance, and Supply Chain Council members have formed industry groups to collect best practices information that companies can use to elevate their supply chain models.
This reference model enables users to address, improve, and communicate supply chain management practices within and between all interested parties in the extended enterprise.
SCOR was developed in 1996 by the management consulting firm PRTM, now part of PricewaterhouseCoopers LLP (PwC) and AMR Research, now part of Gartner, and endorsed by the Supply-Chain Council (SCC), now part of APICS, as the cross-industry de facto standard strategy, performance management, and process improvement diagnostic tool for supply chain management.
Areas under SCOR
- Plan – Demand and supply planning and management are included in this first step. Elements include balancing resources with requirements and determining communication along the entire chain. The plan also includes determining business rules to improve and measure supply chain efficiency. These business rules span inventory, transportation, assets, and regulatory compliance, among others. The plan also aligns the supply chain plan with the financial plan of the company.
- Source – This step describes sourcing infrastructure and material acquisition. It describes how to manage inventory, the supplier network, supplier agreements, and supplier performance. It discusses how to handle supplier payments and when to receive, verify, and transfer product.
- Make – Manufacturing and production are the emphasis of this step. Is the manufacturing process make-to-order, make-to-stock, or engineer-to-order? The make step includes, production activities, packaging, staging product, and releasing. It also includes managing the production network, equipment and facilities, and transportation.
- Deliver – Delivery includes order management, warehousing, and transportation. It also includes receiving orders from customers and invoicing them once product has been received. This step involves management of finished inventories, assets, transportation, product life cycles, and importing and exporting requirements.
- Return – Companies must be prepared to handle the return of containers, packaging, or defective product. The return involves the management of business rules, return inventory, assets, transportation, and regulatory requirements.
SCOR Model Benefits
The SCOR process can go into many levels of process detail to help a company analyze its supply chain. It gives companies an idea of how advanced its supply chain is. The process helps companies understand how the 5 steps repeat over and over again between suppliers, the company, and customers. Each step is a link in the supply chain that is critical in getting a product successfully along each level. The SCOR model has proven to benefit companies that use it to identify supply chain problems. The model enables full leverage of capital investment, creation of a supply chain road map, alignment of business functions, and an average of two to six times return on investment.
Pillars of SCOR model
The model is based on 4 major “pillars”:
- Process modeling and re-engineering
- Performance measurements
- Best practices
- Skills
The process modeling pillar – By describing supply chains using process modeling building blocks, the model can be used to describe supply chains that are very simple or very complex using a common set of definitions. As a result, disparate industries can be linked to describe the depth and breadth of virtually any supply chain.
SCORE is based on six distinct management processes: Plan, Source, Make, Deliver, Return, and Enable.
- Plan – Processes that balance aggregate demand and supply to develop a course of action which best meets sourcing, production, and delivery requirements.
- Source – Processes that procure goods and services to meet planned or actual demand.
- Make – Processes that transform product to a finished state to meet planned or actual demand.
- Deliver – Processes that provide finished goods and services to meet planned or actual demand, typically including order management, transportation management, and distribution management.
- Return – Processes associated with returning or receiving returned products for any reason. These processes extend into post-delivery customer support.
- Enable – New process since Version 11 (Dec 2012).
With all reference models, there is a specific scope that the model addresses. SCOR is no different and the model focuses on the following:
- All customer interactions, from order entry through paid invoice.
- All product (physical material and service) transactions, from your supplier’s supplier to your customer’s customer, including equipment, supplies, spare parts, bulk product, software, etc.
- All market interactions, from the understanding of aggregate demand to the fulfillment of each order.
SCOR does not attempt to describe every business process or activity. Relationships between these processes can be made to the SCOR and some have been noted within the model. Other key assumptions addressed by SCOR include: training, quality, information technology, and administration (not supply chain management). These areas are not explicitly addressed in the model but rather assumed to be a fundamental supporting process throughout the model.
SCOR provides three-levels of process detail. Each level of detail assists a company in defining scope (Level 1), configuration or type of supply chain (Level 2), process element details, including performance attributes (Level 3). Below level 3, companies decompose process elements and start implementing specific supply chain management practices. It is at this stage that companies define practices to achieve a competitive advantage, and adapt to changing business conditions.
SCOR is a process reference model designed for effective communication among supply chain partners. As an industry standard it also facilitates inter and intra supply chain collaboration, horizontal process integration, by explaining the relationships between processes (i.e., Plan-Source, Plan-Make, etc.). It also can be used as a data input to completing an analysis of configuration alternatives (e.g., Level 2) such as: Make-to-Stock or Make-To-Order. SCOR is used to describe, measure, and evaluate supply chains in support of strategic planning and continuous improvement.
In the example provided by the picture the Level 1 relates to the Make process. This means that the focus of the analysis will be concentrated on those processes that relate to the added-value activities that the model categorizes as Make processes.
Level 2 includes 3 sub-processes that are “children” of the Make “parent”. These children have a special tag – a letter (M) and a number (1, 2, or 3). This is the syntax of the SCOR model. The letter represents the initial of the process. The numbers identify the “scenario”, or “configuration”.
M1 equals a “Make build to stock” scenario. Products or services are produced against a forecast. M2 equals a “Make build to order” configuration. Products or services are produced against a real customer order in a just-in-time fashion. M3 stands for “Make engineer to order” configuration. In this case a blueprint of the final product is needed before any make activity can be performed.
Level 3 processes, also referred to as the business activities within a configuration, represent the best practice detailed processes that belong to each of the Level 2 “parents”.
The example shows the breakdown of the Level 2 process “Make build to order” into its Level 3 components identified from M2.01 to M2.06. Once again this is the SCOR syntax: letter-number-dot-serial number.
The model suggests that to perform a “Make build to order” process, there are 6 more detailed tasks that are usually performed. The model is not prescriptive, in the sense that it is not mandatory that all 6 processes are to be executed. It only represents what usually happens in the majority of organizations that compose the membership base of the Supply Chain Council.
The Level 3 processes reach a level of detail that cannot exceed the boundaries determined by the industry – agnostic and industry-standard nature of the SCOR model. Therefore, all the set of activities and processes that build – for instance – the M2.03 “Produce & test” process will be company-specific, and therefore fall outside the model’s scope.
The performance measurements pillar – The SCOR model contains more than 150 key indicators that measure the performance of supply chain operations. These performance metrics derive from the experience and contribution of the Council members. As with the process modeling system, SCOR metrics are organized in a hierarchical structure.
- Level 1 metrics are at the most aggregated level, and are typically used by top decision makers to measure the performance of the company’s overall supply chain.
- Level 2 Metrics are primary, high level measures that may cross multiple SCOR processes.
- Level 3 Metrics do not necessarily relate to a SCOR Level 1 process (PLAN, SOURCE, MAKE, DELIVER, RETURN).
The metrics are used in conjunction with performance attributes. The Performance Attributes are characteristics of the supply chain that permit it to be analyzed and evaluated against other supply chains with competing strategies. Just as you would describe a physical object like a piece of lumber using standard characteristics (e.g., height, width, depth), a supply chain requires standard characteristics to be described. Without these characteristics it is extremely difficult to compare an organization that chooses to be the low-cost provider against an organization that chooses to compete on reliability and performance.
One of the key aspects that need to be considered is that the performance measurement and thus bench-marking is done at supply chain level and not at the organizational level. Supply chains are identified with an organization based on customers and products. An organization which is offering multiple products will have multiple supply chains. In fact the supply chain to deliver the material and then returns of the material from customer will also be different.
Then the supply chain which needs to be improved is identified, this could be based on multiple parameters highest profitable, loss making. Once the supply chain is identified then only the performance measurement and bench-marking are done. Please note SCOR might not have the bench-marking data for all kind of supply chain so one needs to check with them i.e. SCOR currently doesn’t have data for “catering supply chain” in Airline industry. The point here is that SCOR is for improving supply chains in an organization and the premise is that if a single supply chain is improved it has ripple effect on the complete organization.
Associated with the Performance Attributes are the Level 1 Metrics. These Level 1 Metrics are the calculations by which an implementing organization can measure how successful they are in achieving their desired positioning within the competitive market space.
The metrics in the Model are hierarchical, just as the process elements are hierarchical. Level 1 Metrics are created from lower level calculations. (Level 1 Metrics are primary, high level measures that may cross multiple SCOR processes. Level 1 Metrics do not necessarily relate to a SCOR Level 1 process (PLAN, SOURCE, MAKE, DELIVER, RETURN). Lower level calculations (Level 2 metrics) are generally associated with a narrower subset of processes. For example, Delivery Performance is calculated as the total number of products delivered on time and in full based on a commit date.
The best-practices pillar – Once the performance of the supply chain operations has been measured and performance gaps identified, it becomes important to identify what activities should be performed to close those gaps. Over 430 executable practices derived from the experience of SCC members are available.
The SCOR model defines a best practice as a current, structured, proven and repeatable method for making a positive impact on desired operational results.
- Current – Must not be emerging (bleeding edge) and must not be antiquated
- Structured – Has clearly stated Goal, Scope, Process, and Procedure
- Proven – Success has been demonstrated in a working environment.
- Repeatable – The practice has been proven in multiple environments.
Method – Used in a very broad sense to indicate: business process, practice, organizational strategy, enabling technology, business relationship, business model, as well as information or knowledge management.
