Joseph Francis - SCC and SCOR Overview.pdf - Supply Chain ...
Joseph Francis - SCC and SCOR Overview.pdf - Supply Chain ...
Joseph Francis - SCC and SCOR Overview.pdf - Supply Chain ...
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<strong>SCC</strong> <strong>and</strong> <strong>SCOR</strong> <strong>Overview</strong><strong>Supply</strong> <strong>Chain</strong> CouncilExecutive Presentation© 2010 <strong>Supply</strong> <strong>Chain</strong> Council. ALL RIGHTS RESERVED. | 2010 Executive | 1 | 12 Sep 2011
What Keeps You Up at Night?Stock Market Volatility, Oil Prices, Labor,Political Instability, SecurityReducing Inventory/Working Capital/ AssetManagementReducing Total <strong>Supply</strong><strong>Chain</strong> Costs<strong>Supply</strong> <strong>Chain</strong> Resiliency& Sustainability:Risk Management& GreenCompeting in aGlobal MarketProviding Superior & ConsistentCustomer Service While IncreasingRevenue & Margin© 2010 <strong>Supply</strong> <strong>Chain</strong> Council. ALL RIGHTS RESERVED. | 2010 Executive | 2 | 12 Sep 2011
<strong>Supply</strong> <strong>Chain</strong> is Dominant Company Cost Driver• In 2007, US business logistics costs rose toan all time high of $1.4 trillion (10.1% of USnominal Gross Domestic Product ) 3• <strong>Supply</strong>-chain generally accounts forbetween 60% <strong>and</strong> 90% of all companycosts 1• A 2% improvement in process efficiencyfor supply-chain processes has 3000% -5000% the impact of a 2% improvement inefficiency for… IT… HR… Finance 1 … Sales…Fortune-10 Company<strong>Supply</strong>-<strong>Chain</strong> Cost as% of Total Costs 2GM 94%Ford 93%Conoco 90%Wal-Mart 90%Chevron 88%IBM 77%Exxon 75%GE 63%Citi 1 0%AIG 1 0%1 Exclusive of Financial Services companies2 Source: Hoovers 2006 Financial Data, <strong>Supply</strong>-<strong>Chain</strong> Council 2006 SCMBenchmark data on SCM cost for discrete & process industries3 CSCMP 19 th Annual State of the Logistics Industry© 2010 <strong>Supply</strong> <strong>Chain</strong> Council. ALL RIGHTS RESERVED. | 2010 Executive | 3 | 12 Sep 2011
The Dupont ModelIncome StatementNet ProfitMargin3 %NetProfit$ 3.00GrossProfit$ 40TotalExpenses$ 34Net Sales$ 100COGS$ 60VariableExpenses$ 12Return onnet worth74.91 %FinancialLeverage11ROA6.8 %Sales$ 100Taxes$ 3Fixed Expenses$ 18InventoryExpenses$ 4Balance SheetAssetTurnover2.27Sales$ 100divided byCurrentAssets$ 26Inventory$ 16AccountsReceivable$ 44TotalAssetsFixedAssets$ 18$ 8Other CurrentsAssets$ 2Assumption: Financial Leverage is a company-wide constant= Total Assets / Shareholder Equity© 2010 <strong>Supply</strong> <strong>Chain</strong> Council. ALL RIGHTS RESERVED. | 2010 Executive | 4 | 12 Sep 2011
<strong>SCOR</strong> KPI’s Help Measure Performance…KPIs that managethe activitiesPerfect Order FulfillmentOrder Fulfillment Cycle Time<strong>Supply</strong> <strong>Chain</strong> Flexibility<strong>Supply</strong> <strong>Chain</strong> Adaptability †<strong>Supply</strong> <strong>Chain</strong> Management CostCost of Goods SoldCash-to-Cash Cycle TimeReturn on <strong>Supply</strong> <strong>Chain</strong> Fixed AssetsReturn on Working Capital<strong>Supply</strong> <strong>Chain</strong>sImpact the LeversRevenueExpenseWorkingCapitalFixed CapitalProfitCapitalEfficiency& ShareholderValueValue© 2010 <strong>Supply</strong> <strong>Chain</strong> Council. ALL RIGHTS RESERVED. | 2010 Executive | 5 | 12 Sep 2011
SUPPLY CHAIN COMPLEXITY SIMPLIFIEDUSING <strong>SCOR</strong> FRAMEWORK© 2010 <strong>Supply</strong> <strong>Chain</strong> Council. ALL RIGHTS RESERVED. | 2010 Executive | 6 | 12 Sep 2011
<strong>Supply</strong> <strong>Chain</strong>It’s aFAN!It’s aSPEAR!It’s aWALL!It’s aROPE!It’s aSNAKE!It’s aTREE!© 2010 <strong>Supply</strong> <strong>Chain</strong> Council. ALL RIGHTS RESERVED. | 2010 Executive | 7 | 12 Sep 2011
What is a <strong>Supply</strong> <strong>Chain</strong>?Product/Portfolio ManagementSupplier processesProduct DesignSales & SupportDCORCCOR<strong>Supply</strong> <strong>Chain</strong><strong>SCOR</strong> ®Customer processes© 2010 <strong>Supply</strong> <strong>Chain</strong> Council. ALL RIGHTS RESERVED. | 2010 Executive | 8 | 12 Sep 2011
<strong>Supply</strong> <strong>Chain</strong> Architecture <strong>Overview</strong>Business Strategy<strong>Supply</strong> <strong>Chain</strong>Strategy<strong>Supply</strong> <strong>Chain</strong>Configuration<strong>Supply</strong> <strong>Chain</strong>Assets<strong>Supply</strong> <strong>Chain</strong>Performance<strong>Supply</strong> <strong>Chain</strong>Processes<strong>Supply</strong> <strong>Chain</strong>SkillsSt<strong>and</strong>ard for <strong>Supply</strong> <strong>Chain</strong>: <strong>SCOR</strong> ®© 2010 <strong>Supply</strong> <strong>Chain</strong> Council. ALL RIGHTS RESERVED. | 2010 Executive | 9 | 12 Sep 2011
THE BUSINESS’ MONEY IS IN SUPPLY CHAIN!WHEN IT COMES TO SUPPLY CHAINS, HAVING TWO IS BETTER THANONE, AND THREE OR MORE MAY BE BEST OF ALL!ISLANDS OF PROFIT IN A SEA OF RED INK BYRNES, J..L..S. SR. LECTURER MIT© 2010 <strong>Supply</strong> <strong>Chain</strong> Council. ALL RIGHTS RESERVED. | 2010 Executive | 11 | 12 Sep 2011
Business Strategy• A product or Service for each Market or Segment• <strong>Supply</strong> <strong>Chain</strong> Definition Matrix is used to define the supply-chains within anenterprise• Column Generation:› The columns in the matrix are focused on dem<strong>and</strong> e.g. channels or segments or customers• Row Generation:› The rows in the matrix are focused on supply e.g. business lines or products or locations orsuppliersCostPerformanceStyleMarket Product A B C D1 ✔2 ✔ ✔QualityBr<strong>and</strong>Product 13 ✔ ✔4 ✔ ✔Innovation© 2010 <strong>Supply</strong> <strong>Chain</strong> Council. ALL RIGHTS RESERVED. | 2010 Executive | 12 | 12 Sep 2011
<strong>Supply</strong> <strong>Chain</strong> Strategy• <strong>Supply</strong> <strong>Chain</strong> Competitive AttributesCustomerInternalAttributeReliability (RL)Responsiveness(RS)Agility (AG)Cost (CO)Assets (AM)StrategyConsistently getting the orders right,product meets quality requirementsThe consistent speed of providingproducts/services to customersThe ability to respond to changes in themarket (external influences)The cost associated with managing <strong>and</strong>operating the supply chainThe effectiveness in managing the supplychain’s assets in support of fulfillment© 2010 <strong>Supply</strong> <strong>Chain</strong> Council. ALL RIGHTS RESERVED. | 2010 Executive | 13 | 12 Sep 2011
<strong>Supply</strong> <strong>Chain</strong> Strategy• <strong>Supply</strong> <strong>Chain</strong> Competitive AttributesCustomerInternalAttributeReliability (RL)Responsiveness(RS)Agility (AG)Cost (CO)Assets (AM)Required PerformanceSAAPP© 2010 <strong>Supply</strong> <strong>Chain</strong> Council. ALL RIGHTS RESERVED. | 2010 Executive | 14 | 12 Sep 2011
<strong>Supply</strong> <strong>Chain</strong> Performance <strong>and</strong> GovernanceMetric Actual P A S GapRL Perfect Order Fulfillment 82 74 81 88 6RS Order Fulfillment Cycle Time 6 10 6 3 --AG Flexibility 46 60 45 29 1CO SC Management Cost 5.1 9.5 6.7 3.9 --AM Cash-to-Cash Cycle Time 83 98 64 30 --© 2010 <strong>Supply</strong> <strong>Chain</strong> Council. ALL RIGHTS RESERVED. | 2010 Executive | 15 | 12 Sep 2011
<strong>SCOR</strong> HIERARCHY“DE-LAYERS” COMPLEXITY© 2010 <strong>Supply</strong> <strong>Chain</strong> Council. ALL RIGHTS RESERVED. | 2010 Executive | 16 | 12 Sep 2011
<strong>SCOR</strong> HierarchyLevel 1 Level 2 Level 3 Level 4 Level 5Scope Configuration Activity Workflow Transactions<strong>Supply</strong>-<strong>Chain</strong>SourceS1SourceStocked ProductS1.2Receive ProductEDIXMLDifferentiatesBusinessDifferentiatesComplexityNames TasksSequences Steps LinksTransactionsDefines ScopeDifferentiatesCapabilitiesLinks, Metrics,Tasks <strong>and</strong>PracticesJob DetailsDetails ofAutomationFrameworkLanguageFrameworkLanguageFrameworkLanguageIndustry orCompanySpecificLanguageTechnologySpecificLanguageSt<strong>and</strong>ard <strong>SCOR</strong> definitionsCompany/Industry definitions© 2010 <strong>Supply</strong> <strong>Chain</strong> Council. ALL RIGHTS RESERVED. | 2010 Executive | 17 | 12 Sep 2011
<strong>Supply</strong> <strong>Chain</strong> Performance <strong>and</strong> Diagnosis• Diagnostic metric relationships enable root causeanalysisMetricLevelPerfect Order Fulfillment 1L> On-time 2L> In-Full 2L> Correct Items 3L> Correct Quantities 3L> Perfect Documentation 2L> Initial Quality 2© 2010 <strong>Supply</strong> <strong>Chain</strong> Council. ALL RIGHTS RESERVED. | 2010 Executive | 18 | 12 Sep 2011
<strong>Supply</strong> <strong>Chain</strong> Configuration <strong>and</strong> Capabilities• High Level Material Flows <strong>and</strong> Practices • VMI• Kanban• Make-to-Order• S&OP• CPFR© 2010 <strong>Supply</strong> <strong>Chain</strong> Council. ALL RIGHTS RESERVED. | 2010 Executive | 19 | 12 Sep 2011
<strong>Supply</strong> <strong>Chain</strong> Processes• Work <strong>and</strong> Information Flowsmp3 Factory mp3 HQ Retail, inc.Customer P.O.S1.1Schedule Prod.DeliveriesD2.2Receive, Enter,Validate OrderDelivery CommitC.O.C.O. = Customer Order, Inv. = Inventory,P.O. = Purchase Order, Prod. = ProductD2.3Reserve Inv.Calculate DateC.O.Inter-Company P.O.S2.1Schedule Prod.DeliveriesD1.2Receive, Enter,Validate OrderD1.3Reserve Inv.Calculate Date© 2010 <strong>Supply</strong> <strong>Chain</strong> Council. ALL RIGHTS RESERVED. | 2010 Executive | 20 | 12 Sep 2011
<strong>SCOR</strong> ROADMAP PROVIDESRAPID TURNAROUND© 2010 <strong>Supply</strong> <strong>Chain</strong> Council. ALL RIGHTS RESERVED. | 2010 Executive | 21 | 12 Sep 2011
Copyright © <strong>Supply</strong> <strong>Chain</strong> Council. 2006. All rights reserved.AttributeReliabilityResponsivenessFlexibilityCostAssetsMetric (level 1)Perfect Order FulfillmentOrder Fulfillment Cycle TimeUps. <strong>Supply</strong> <strong>Chain</strong> Flexibility<strong>Supply</strong> <strong>Chain</strong> Mgmt CostCash-to-Cash Cycle TimeCopyright © <strong>Supply</strong> <strong>Chain</strong> Council. 2006. All rights reserved.Copyright © <strong>Supply</strong> <strong>Chain</strong> Council. 2006. All rights reserved.Operations<strong>Supply</strong> <strong>Chain</strong>PurchasingLogisticsWarehousingResponsibleAccountableSupportedResponsibleAccountableSupportedResponsibleAccountableSupportedResponsibleAccountableSupportedCopyright © <strong>Supply</strong> <strong>Chain</strong> Council. 2006. All rights reserved.S1S1S1Company98%14 days62 days10.1%22 daysParity92%8 days80 days10.8%45 daysAdv96%6 days62 days10.4%30 daysOur CompanyShared Insights <strong>SCOR</strong> Seminar |Superior98%4 days40 days10.2%20 daysParityGap-6%6 days-18 days-0.7%-23 daysReqGap8 daysShared Insights <strong>SCOR</strong> Seminar |80%Shared Insights <strong>SCOR</strong> Seminar |APJ Warehouse US Warehouse EU WarehouseD1D1D1SR2SR2DR2DR2DR2S1S1S1D1D1D1SR2SR2DR2DR2DR2DR2S1S1S1D1D1D1SR2SR2DR2DR2DR2DR2Shared Insights <strong>SCOR</strong> Seminar |20334356Copyright © <strong>Supply</strong> <strong>Chain</strong> Council. 2006. All rights reserved.OEM Supplier(D1)CommercialCustomer(S2)RefrigerantSupplier(D1)CommercialDistribution(P4, D2)Copyright © <strong>Supply</strong> <strong>Chain</strong> Council. 2006. All rights reserved.Copyright © <strong>Supply</strong> <strong>Chain</strong> Council. 2006. All rights reserved.Copyright © <strong>Supply</strong> <strong>Chain</strong> Council. 2006. All rights reserved.Controls Plant(P3, S1, M1)Basic Units(P1, P2, P3, S1,M1, M2)ElectronicsSupplier(D1)Motor Supplier(D1)RetailDistribution(P4, D1)Shared Insights <strong>SCOR</strong> Seminar |RetailCustomers(S1)Shared Insights <strong>SCOR</strong> Seminar |Shared Insights <strong>SCOR</strong> Seminar |Shared Insights <strong>SCOR</strong> Seminar |1815062D1ElectronicsSupplierD2.1Process Inquiry& Quote<strong>Supply</strong>-<strong>Chain</strong>Big AirSmallAirComm’lOverallRating120180300Copyright © <strong>Supply</strong> <strong>Chain</strong> Council. 2006. All rights reserved.D1MotorSupplierSupplierD1OEMSupplierD1RefrigerantSupplierCopyright © <strong>Supply</strong> <strong>Chain</strong> Council. 2006. All rights reserved.D2.2Receive,Configure,Enter <strong>and</strong>Validate OrderM2.1ScheduleProductionActivitiesD2.3ReserveResources &DetermineDelivery DateD2.15InvoiceCopyright © <strong>Supply</strong> <strong>Chain</strong> Council. 2006. All rights reserved.Perfect OrderFulfillmentCopyright © <strong>Supply</strong> <strong>Chain</strong> Council. 2006. All rights reserved.CriteriaWeightP2S1M2.2Revenue& Rank123IssueSourced/In-ProcessProductD2.420%Basic UnitsConsolidate OrdersD2.14Install Product0.20.40.6P1P3M1M2Order FulfillmentCycle TimeGrossMargin& Rank213S1.4Transfer ProductM2.320%P4Produce <strong>and</strong> TestD2.5Build LoadsD2.13Receive & VerifyProduct byCustomerD20.40.20.6CommercialDistributionOur Company<strong>Supply</strong> <strong>Chain</strong>FlexibilityNumber ofSKU’s &Rank123S120%0.20.40.6Controls PlantM2.4PackageD2.6RouteShipmentsD2.12Ship ProductUnitVolume &Rank12320%0.20.40.6StrategicValue& Rank0.6Shared Insights <strong>SCOR</strong> Seminar |P3M1P4D1RetailDistribution123S220%CommercialCustomer0.20.4CustomerShared Insights <strong>SCOR</strong> Seminar |M2.5Stage FinishedProductD2.7Select Carriers& RateShipmentsD2.11Load Product &GenerateShippingDocumentationM2.6ReleaseFinishedProduct toDeliverD2.9Pick ProductD2.10Pack ProductShared Insights <strong>SCOR</strong> Seminar |<strong>Supply</strong> <strong>Chain</strong>Mgmt CostCash-to-CashCycle TimeShared Insights <strong>SCOR</strong> Seminar |S119RetailCustomersD2.8ReceiveProduct fromSource orMake375168AttributeReliabilityResponsivenessFlexibilityCostAssetsMetric (level 1)Perfect Order FulfillmentOrder Fulfillment Cycle TimeUps. <strong>Supply</strong> <strong>Chain</strong> Flexibility<strong>Supply</strong> <strong>Chain</strong> Mgmt CostCash-to-Cash Cycle TimeCopyright © <strong>Supply</strong> <strong>Chain</strong> Council. 2006. All rights reserved.Copyright © <strong>Supply</strong> <strong>Chain</strong> Council. 2006. All rights reserved.Copyright © <strong>Supply</strong> <strong>Chain</strong> Council. 2006. All rights reserved.Copyright © <strong>Supply</strong> <strong>Chain</strong> Council. 2006. All rights reserved.Company Parity Adv98%14 days62 days10.1%22 daysSuperiorParityGapReqGapShared Insights <strong>SCOR</strong> Seminar |Shared Insights <strong>SCOR</strong> Seminar |Shared Insights <strong>SCOR</strong> Seminar |Shared Insights <strong>SCOR</strong> Seminar |28406070ReliabilityResponsivenessFlexibilityCostAssetManagementBigAircoCopyright © <strong>Supply</strong> <strong>Chain</strong> Council. 2006. All rights reserved.Copyright © <strong>Supply</strong> <strong>Chain</strong> Council. 2006. All rights reserved.Copyright © <strong>Supply</strong> <strong>Chain</strong> Council. 2006. All rights reserved.ScopeMigrationApproachTimingProject Risks &ComplexityCostValue• Medium Risk• Medium Complexity• $500KCopyright © <strong>Supply</strong> <strong>Chain</strong> Council. 2006. All rights reserved.SmallAircoComm’lObjectives• Reduce Cycle time by direct shipping from factory to commercial customersAnalysis Issue• Order Cycle Time, SCM Cost % RevenueProcesses supported• S1, D1Business GroupsGeography• FH9: _x__ • Sweden: _x__• FM : _x__ • Belgium: _x__• FD: ____ • France: _x__• Complete Critical Direct inbound links• Create local DC• Move new procurement to store at local DC• Drain Regional DC• Close/Sell Assets• Immediate• Eliminates a net 1.5% of SCM cost as % of revenue; 2 Days OCTShared Insights <strong>SCOR</strong> Seminar |Shared Insights <strong>SCOR</strong> Seminar |Shared Insights <strong>SCOR</strong> Seminar |Functions/GroupsIntegrated LogisticsIntegrated ProcurementShared Insights <strong>SCOR</strong> Seminar |32425571The 16-Week <strong>SCOR</strong> ProgramProject Charter OutlineExample: ComfyCo<strong>Supply</strong> <strong>Chain</strong> Priority: ComfyCoScorecardIdentify Competitive RequirementsSection SubsectionContent/ReasonIntroduction ContextUnderst<strong>and</strong>ing of Document<strong>Overview</strong> Scope<strong>Supply</strong>-<strong>Chain</strong>s ConsideredBusiness Objectives MetricsProject Objectives Five-Phase DeliverablesProject Methodology<strong>SCOR</strong> Project RoadmapApproachScheduleTimeline, MeetingsDeliverablesDetailed DeliverablesRiskLevelProgram Management Key Areas1BudgetCostOrganizationChart <strong>and</strong> ResponsibilitiesBenefitsMeasures of Success, AnalysisCommunication Who, How, Why, What, When• Continuing Information on our Example Company, what arethe distinct supply-chainsGeography – Customer or Market Channel<strong>Supply</strong>-<strong>Chain</strong>RetailCommercialDefinition MatrixBig-BoxInternetCommercialCommercialRetailerDirectBuildingMajor AcctProductBig AirCox xSmall Airco x xCustomIndustrialxSt<strong>and</strong>ardIndustrialx xRankingWeighted Result<strong>Supply</strong>-<strong>Chain</strong> Selection Decision Matrix• The ComfyCo “Commercial” <strong>Supply</strong>-<strong>Chain</strong> has beenprioritized by sponsor for improvement.CompetitivePerformance RequirementsAttribute orCategoryS A SA P AP S PP P P• Procedure• Prioritize supply chainperformance requirementsfor each relevantcustomer/market channel• Within a channel you get 1superior (S), 1 advantage(A), <strong>and</strong> two parity (P)• Each unique combination ofratings defines Your <strong>Supply</strong><strong>Chain</strong> Strategy for thechannel• Think of the rating as adesired state, NOT whereyou want to improve themostParity, Advantage, SuperiorGeo Map of ComfyCo (US)ComfyCo Thread DiagramExample IssuesFishboneminusequalsLevel 2We now link strategy,Parity Median ofperformance, <strong>and</strong> benchmarkStatistical Sampleto identify performanceAdvantage Midpoint of Parityrequired of strategy<strong>and</strong> SuperiorSuperior 90 th percentile ofpopulationBasicGeographicContextComfyCoEntitiesMajor Level 2processesMajorSuppliersBasic FlowIndicationCustomerEntitiesLevel 2ProcessesBasicProcess FlowKey EntitiesPlanningNotationBusinessContext1. Multiple Product touch factory to Warehouse2. Highly variable dem<strong>and</strong> from channels3. Channel config constantly changes4. One chance per day to ship5. Channel not ready for delivery6. Losing priority shipments7. Takes a lot of time to enter channel orders8. Duplicate effort entering channel ordersw/channel9. Factory locks schedule for 3 days, noflexibility for dem<strong>and</strong> change10. Multiple-touch on OEM material from Asia11. Logistics providers not aligned to ourpriorities12. Factory doesn’t always build to plan,sometimes to capacity13. Selling what we don’t have, <strong>and</strong> not sellingwhat we do14. Takes forever to schedule an order toinventory15. No visibility on inbound material for orderplanning16. Chasing down inventory for order planningtakes a long time – manual17. Inventory picture for order planning notalways accurate18. Configuration of Airco unit – can’t alwaysmanufacturing <strong>and</strong> must ’çlean’orders19. Only one person in order management whounderst<strong>and</strong>s configuration rules20. Errors in re-keying quotes to orders21. Time taken to re-key quote to to order22. No visibility on order load when replenishinginventory23. No dem<strong>and</strong> visibility to reflect to suppliersfor critical parts24. Not underst<strong>and</strong>ing what are priority buildorders25. Configuration errors by customer26. No visibility to channel of inventory for sales27. Inventory too high AND too low becauseforecasting errors28. Ability to expedite critical parts for keycustomers29. Long transit time from factory to warehouse30. Losing inventory in warehouse for keycustomers31. Uneven workload on warehouse staff – highin AM, idle rest of day32. Damage to material receiving at warehouseduring peak shipping33. Duplicate builds if boxes not taggedcorrectly to end-cust34. Poor scheduling of staff for shipping –sometimes too many, sometimes too few35. Factory adherence to schedule builds36. Some products run out of inventorylocations at WHSE – overbuild37. Supplier complaints about inaccurateforecasting38. Extra costs due to excess RAW indemurrage39. Too few key workers in factory for complexconfigurations40. No way to get orders dropped when factoryidleBasicProblemPartitioningParetoProcess Worksheet 1Captured <strong>SCOR</strong> Level-3 ModelPractices BenchmarkingTransaction Productivity AnalysisInterviewees:AccountableStatus<strong>SCOR</strong>Efficiency YieldPractices VolTimeElapsedInput(s) - Highlight Primary Input<strong>SCOR</strong> ElementOutput(s) - Highlight PrimaryOutputReceipt D2.1Entry D2.275% 90%75% 90%80%80%1001001.5h1.5h2h2hAllocate D2.34% 90%20%1001h24hStep123DescriptionResponsibleEvent TimeFactoryDropPackShipPODM2.1M2.2- 2.6, D2.8D2.9- 2.12D2.12- D2.132% 90%5% 90%8% 90%92% 90%70%70%70%70%1001001001001.5h6h2h44h72h120h24h48hLevelAnd Subsequent3Identification of nextstepAnalysis FocusProcess Steps (>4<strong>and</strong>
<strong>SCOR</strong> IMPROVEMENT AREAS ANDPOTENTIAL VALUE© 2010 <strong>Supply</strong> <strong>Chain</strong> Council. ALL RIGHTS RESERVED. | 2010 Executive | 23 | 12 Sep 2011
Typical Potential Improvements 1Area ImprovementRaw materials purchase cost 25%Cost of Distribution 35%Total resource deployed 50%Manufacturing space 50%Investment in Tooling 50%Order cycle time 60%New product development cycle 60%Inventory 70%Paperwork <strong>and</strong> Documentation 80%Quality Defects 100%1Hughes & Michels (1998) Transform your supply chain. Releasing value in business. London, UK© 2010 <strong>Supply</strong> <strong>Chain</strong> Council. ALL RIGHTS RESERVED. | 2010 Executive | 24 | 12 Sep 2011
Comparative Data 1Improvement Area RangeDelivery performance 16% - 28%Inventory Cost Reduction 25% - 60%Reduction in order fulfillment cycle time 30% - 50%Improvement to forecast accuracy 25% - 80%Increase in overall productivity 10% - 16%Lower supply chain costs 25% - 50%Improvement of fill rates 20% - 30%Improved capacity realization 10% - 20%1Stephens (2000) 1997 Comparative Study Pittsburg, USA© 2010 <strong>Supply</strong> <strong>Chain</strong> Council. ALL RIGHTS RESERVED. | 2010 Executive | 25 | 12 Sep 2011
Core Value 1• Improvement of operating results of an average of 3% inthe initial <strong>SCOR</strong> implementation phase by means of costreduction <strong>and</strong> improvement in customer services• Increase in profitability (between 2x <strong>and</strong> 6x) with regardsto project investments costs within first 12 months ofimplementation• Reduction in IT costs through minimizing systemcustomization <strong>and</strong> making better use of st<strong>and</strong>ard functionality• Continuous actualization of process change portfolio bycontinuous conversion of <strong>Supply</strong> <strong>Chain</strong>improvements with the objective of increasing annualprofits by 1% to 3%1Poluha (2007) Application of the <strong>SCOR</strong> Model in <strong>Supply</strong> <strong>Chain</strong> Management New York, USA© 2010 <strong>Supply</strong> <strong>Chain</strong> Council. ALL RIGHTS RESERVED. | 2010 Executive | 26 | 12 Sep 2011
ADVA Optical Networking• The Challenge• €370.2M Revenue Enterprise1• Rapid growth in dem<strong>and</strong> for storage,voice & data transport• Focus on capturing this growth whilemaintaining profitability• Needed to identify inventory drivers<strong>and</strong> optimize inventory levels toenable ADVA to reach inventoryreduction targets whilst improvingcustomer satisfaction in OrderFulfillment Cycle Time (OFCT) <strong>and</strong>On-time Delivery (OTD)• Created a transformation plan thatwould allow ADVA to proactivelyplan, drive <strong>and</strong> manage theinventory levels <strong>and</strong> better achievethe balance of cost <strong>and</strong> service1Hoovers.com• The Solution• Using <strong>SCOR</strong>, ADVA identifiedperformance gaps in key metricsbetween current <strong>and</strong> required toreach parity status• Also using <strong>SCOR</strong>, identified processdisconnects, drivers of inventory<strong>and</strong> projects required forimprovement• Grouped <strong>and</strong> prioritized proposedprojects based on potential impact<strong>and</strong> amount of effort/risk• Agreed to project list including:Benefits Achieved› New S&OP Process• Gross inventory › reduced Supplier scorecards from €59 million <strong>and</strong> quarterly to €38business reviews with suppliers,million in 10 months›• Inventory days ofInformationsupply reducedtransparency47% from<strong>and</strong> othersinitial scorecard© 2010 <strong>Supply</strong> <strong>Chain</strong> Council. ALL RIGHTS RESERVED. | 2010 Executive | 27 | 12 Sep 2011
Douglas Pharmaceuticals LimitedThe ChallengeSignificant growth from 2003 to 2007› 300% increase in new product development› 122% growth in production volume› 61% growth in employees• Created the “perfect storm” of supply chainissues• Converted to new ERP in August 2006• “Burning Platform”:› Customer DIFOT (Export) Down to 20%› Product Lead Times Up to 8 months› New Product Introduction Lead Times Up to 9months› Stock Turns Down to 2.1x› YTD Sales Down 30%• Available Spare Capacity Unknown• Customer complaints impact new licensingopportunities <strong>and</strong> future earnings growth• The Solution• “Turning point” for organization –DIY not always best• Board m<strong>and</strong>ated review at its April2007 meeting• Process established to evaluateoptions• SCE program initiated using <strong>SCOR</strong>• 17 week SCE program between May<strong>and</strong> September 2007•Impact on 2007/8 earnings <strong>and</strong> shareholder value:›EBIT (15.9%)›Enterprise Value ($25.2M)© 2010 <strong>Supply</strong> <strong>Chain</strong> Council. ALL RIGHTS RESERVED. | 2010 Executive | 28 | 12 Sep 2011
SAAB AB• Challenge• US$3.1B Aerospace TechnologyEnterprise1• Three strategic business segments:aeronautics, defense <strong>and</strong> securitysolutions, systems <strong>and</strong> products• Challenged to execute profitable<strong>and</strong> customer adapted logisticsintensive businesses› The degree of coordination oflogistics operations highly impactSaabs cost level for logistics› Coordination enables CELprocesses to ensure delivery tocustomers dem<strong>and</strong>s• Needed to build competitiveoperations, planning, logistics, <strong>and</strong>support• To do so, wanted to move to a fulllifecycle-based support concept• The Saab Common Solution• One backbone system (today basedon ERP <strong>and</strong>/or Best of Breed)• Cross-functional collaboration <strong>and</strong>common trust• Increased Interoperability• Align SCM Strategy with CorporateStrategy• Key Enablers› Common <strong>Supply</strong> <strong>Chain</strong> Frameworks<strong>and</strong> Roadmaps› St<strong>and</strong>ardization› Codification› Information Systems1Hoovers.com© 2010 <strong>Supply</strong> <strong>Chain</strong> Council. ALL RIGHTS RESERVED. | 2010 Executive | 29 | 12 Sep 2011
SAAB Coordinated Effective Logistics (CEL)• Solution• Step by step approach - no “big bang”• Multiple supply chains <strong>and</strong> methods• Lack of structured methods <strong>and</strong>processes• Knowledge tied to individuals• Lack of information sharing• Use of the <strong>SCOR</strong> model› Common definitions <strong>and</strong> processmapping› Sustainable <strong>and</strong> structuredmethodology being used as frameworkfor realization of all logistics <strong>and</strong> SCMactivities within Project CEL throughoutall of its phases; from cradle to thegrave• Project management• Change management• Engineering technique• Benefits Achieved• Creating a Saab Common Logistics<strong>and</strong> <strong>Supply</strong> <strong>Chain</strong> ManagementFramework› Delivering incremental capabilities› Using <strong>SCOR</strong> Methodology, Processes<strong>and</strong> Metrics hierarchy• Initial business cases have identifiedsavings of 73 FTEs <strong>and</strong> a total ofUS$15M© 2010 <strong>Supply</strong> <strong>Chain</strong> Council. ALL RIGHTS RESERVED. | 2010 Executive | 30 | 12 Sep 2011
Raytheon IDS• The Challenge• US$4.7B subdivision of US$23.1B DefenseServices Provider1• Rapid growth but antiquated processes <strong>and</strong>procurement focus in supply chain left IDSfacing non-competitive operating costs• No skills within existing team to background<strong>and</strong> skills for transformational change required• The Solution• <strong>SCOR</strong>/Six-Sigma program assessing all supplychain processes within IDS, with focus all<strong>SCOR</strong> process areas• 8550 people within Raytheon IDS, <strong>and</strong> 7600supplier partners went through transformationfor accomplishing five key challenges:› Improving world-class performance› Connecting every employee to the business› Creating purposeful, collaborative partnerships› Accelerating top-line, double-digit growth› Achieving predictable, best-in-class bottom-lineperformance• Benefits Achieved• 37 Percent reduction in headcount but increaseof college-educated population to 66%• 75% reduction in transactional processing formaterial acquisition• 25% improvement in SC Cost-to-Sales• $57M in bottom-line savings• 98% supplier conformance to contract1Hoovers.com© 2010 <strong>Supply</strong> <strong>Chain</strong> Council. ALL RIGHTS RESERVED. | 2010 Executive | 31 | 12 Sep 2011
SASOL <strong>Supply</strong> <strong>Chain</strong> OptimizationThe Challenge• US$16B annual South AfricanPetrochemical Concern 1• Embarked on <strong>Supply</strong> <strong>Chain</strong>Optimization to identify synergies <strong>and</strong>improvement opportunities acrossmultiple business units• Complex changing politicalenvironment <strong>and</strong> introduction ofsubstantial Managerial class withoutdeep experienceThe Solution• The SASOL <strong>Supply</strong> <strong>Chain</strong> OptimizationJourney• Awareness – identified <strong>SCOR</strong> as a tool (2004)• Embarked on <strong>SCOR</strong> pilot project – tacklingproblem area to show benefits <strong>and</strong> underst<strong>and</strong>process• First in-house project (to build internalsuccess)• Approval for permanent Center of Excellence(CoE) competency• Prioritization of supply chain projects (projectdem<strong>and</strong> exceeds supply)• Project 2, 3, 4…..X• Embraced “The <strong>SCOR</strong> Way” (2007)1Hoovers.comBenefits Achieved• Ongoing CoE for supply chain optimization• Sample project generated IRR of 139% over the projectlifetime• Estimated US$1B cost improvements over 3 year period© 2010 <strong>Supply</strong> <strong>Chain</strong> Council. ALL RIGHTS RESERVED. | 2010 Executive | 32 | 12 Sep 2011
SCM Asset Returns: Superior Valuation• Comparison of Fortune-1000 Council member companyshare price aggregate growth from 2003 – present to S&P500 <strong>and</strong> DOW indices.• Growth inflected after 2 years, <strong>and</strong> the spread between<strong>SCOR</strong> index companies <strong>and</strong> other industrials has grown toalmost 30 points.• Growth is increasing exponentially: Compound interest onSC performance.• Correlates <strong>SCC</strong> Membership/<strong>SCOR</strong> investments withShareholder value.• Same pattern evident in FTSE-100, DAX, NIKKEI <strong>and</strong> otherindices.© 2010 <strong>Supply</strong> <strong>Chain</strong> Council. ALL RIGHTS RESERVED. | 2010 Executive | 33 | 12 Sep 2011
About <strong>Supply</strong> <strong>Chain</strong> Council• <strong>SCC</strong> is an independent, not-for-profit, trade association• Membership open to all companies <strong>and</strong> organizations• Founded in 1996• Regional representation (chapters) worldwide: North America,Europe, Japan, Southern Africa, Latin America, Australia/NewZeal<strong>and</strong>, Southeast Asia, Greater China, <strong>and</strong> Middle East• Focus on research, application <strong>and</strong> advancement <strong>and</strong> advancingstate-of-the-art supply chain management systems <strong>and</strong> practices• Developer <strong>and</strong> endorser of the <strong>Supply</strong> <strong>Chain</strong> Operations Reference(<strong>SCOR</strong>®) as a cross-industry st<strong>and</strong>ard for supply chain management• Offers Training, Certification, Benchmarking, Research, TeamDevelopment, Coaching, <strong>and</strong> Cross-st<strong>and</strong>ard Integration focused onthe <strong>SCOR</strong>® framework• Approaching 1000 Association Members within global chapters© 2010 <strong>Supply</strong> <strong>Chain</strong> Council. ALL RIGHTS RESERVED. | 2010 Executive | 34 | 12 Sep 2011
Sample of Industry Membership Scope© 2010 <strong>Supply</strong> <strong>Chain</strong> Council. ALL RIGHTS RESERVED. | 2010 Executive | 35 | 12 Sep 2011
For More InformationW: WWW.SUPPLY-CHAIN.ORGE: INFO@SUPPLY-CHAIN.ORG© 2010 <strong>Supply</strong> <strong>Chain</strong> Council. ALL RIGHTS RESERVED. | 2010 Executive | 36 | 12 Sep 2011