Supply Chain Operations Reference Model

PDF version of this report
You must have Adobe Acrobat reader to view, save, or print PDF files. The reader
is available for free
download.

Supply Chain
Operations Reference Model

by James G. Barr

Docid: 00011526

Publication Date: 1802

Report Type: TUTORIAL

Preview

The Supply Chain Operations Reference (SCOR) model is a process reference
model developed and endorsed by the Supply Chain Council as the
cross-industry diagnostic tool for supply chain
management. SCOR is designed to enable users to address,
improve, and communicate supply chain management practices within and
between all interested parties. The process reference model integrates
the concepts of business process reengineering, benchmarking, and
measurement into a cross-functional framework. SCOR 12.0 is the latest version. Many supply chain management vendors’
products support
all or parts of the model, in spite of the fact that SCOR is not a
standard.

Executive Summary

[return to top of this report]

The Supply Chain Operations Reference (SCOR) model is a process reference
model that serves as a cross-industry standard tool for supply chain
management (SCM). SCM is an inter-enterprise discipline for controlling
the actions and interactions of multiple enterprise partners engaged in a shared
business activity, as, for example, when partner “A” supplies raw
materials to partner “B” to facilitate the manufacture of a particular product.

Related
Faulkner Reports

Supply
Chain Management Market Trends

Developed by the Supply Chain Council (SCC), an independent, not-for-profit corporation,
SCOR provides a unique framework that links business processes, metrics, best
practices, and technology features into a unified structure to support
communication among supply chain partners and to improve the effectiveness of
supply chain management and related supply chain improvement activities.

APICS SCC

SCOR is presently maintained by the APICS Supply Chain Council (APICS SCC),
which was formed through the 2014 merger of APICS and the Supply Chain Council. APICS is the leading professional association
for supply chain and operations management and the premier provider
of research, education and certification programs designed to promote supply
chain innovation and resilience.

The APICS Certified in Production
and Inventory Management (CPIM), APICS Certified Supply Chain Professional (CSCP),
and APICS SCOR-Professional (SCOR-P) credentials define the industry standard.

SCOR Model

The SCOR model covers the
supply chain from the
supplier’s supplier to the customer’s customer and can be used with simple
supply chains as well as large ones that cross multiple industries. The main purpose of SCOR is to depict
current processes and provide ways to identify and implement improvements.

SCOR
is divided into a four-level hierarchy. The first three levels address process
design and the fourth provides for implementation. The process model
assumes sufficient training, quality management, information technology
support, and adequate administration, but does not address these issues as
part of the framework.

SCOR is most effectively used as a starting point for improving supply chain
management. Organizations that seek to apply it will need to do significant work
to decompose higher-level SCOR processes into tasks that are customized to their
unique needs.

Mobile App

The APICS SCOR mobile application provides SCOR
users with anytime, anywhere access to the SCOR supply chain
framework. The mobile app is available for download
iTunes or
Google Play for 99 cents with all proceeds going toward APICS student
programs.

The SCOR Framework is only available to APICS SCC members, affiliates, and
sponsors.

Description

[return to top of this report]

The Supply Chain Operations Reference (SCOR)
model was developed through the
Supply Chain Council (SCC), which was formed in 1996 by Pittiglio Rabin Todd &
McGrath and AMR Research, and initially included 69 voluntary member companies.

The SCOR model provides a framework that links business process,
metrics, best practices, and technology features into a structure to
support communication among supply chain partners, as well as to improve
the effectiveness of supply chain management and related supply chain
improvement activities. The latest version of SCOR is 12.0.

The
elements that constitute SCOR are based largely on processes, metrics,
and best practices that are widely established and used in various
industries.
SCOR contains standard descriptions of management processes, a
framework of relationships among the standard processes, standard
metrics to measure process performance, management practices that
produce best-in-class performance, and a standard alignment to features
and functionality. In addition, SCOR was designed to cover all customer
interactions, from order entry through paid invoice; all product
transactions (involving both physical materials and services) from an
organization’s supplier’s supplier to
its customer’s customer, including equipment, supplies,
spare parts, bulk product, and software; and market
interactions, from the understanding of aggregate demand to the
fulfillment of each order.

Defining
the scope of the supply chain as stretching from the company that supplies an
organization’s supplier to a customer’s end-user customer, SCOR addresses key
supply
chain processes for physical goods, which covers raw materials, parts, and
finished products. These processes include order entry,
invoice
processing, the transportation of goods, and balancing supply with
demand. It
does not, however, cover sales and marketing processes, research,
product
development, or ongoing customer support. SCOR assumes, but does not
explicitly address, training, quality control, information technology support, or
adequate non-supply chain administration.

SCOR Processes

SCOR includes six Level 1 Processes:

Plan – Addresses the assessment, resource
supply, aggregation, and
prioritization of demand requirements, including the planning of inventory distribution requirements,
production material, and rough-cut capacity of all products and channels. It
also entails aligning financial plans to individual elements of the supply
chain.
Source – Covers the management of the sourcing infrastructure and
involves choosing and managing the receipt and transfer of products and
materials, whether pre-made or made-to-order.
Make – Concerns the production, execution, and
management of the “make” infrastructure and involves the building, testing, and
packaging of finished products.
Deliver – Consists of order management, warehouse
management, and transportation management and involves taking customer
orders, retrieving products from a warehouse, coordinating shipping, and
processing customer invoices.
Return – Involves receiving and
processing the returns of both raw materials and finished products.
Enable – Involves managing business rules, performance,
resources, assets, contracts, regulatory requirements, and risks. Enable
was introduced in SCOR 11.0.

Level 1 Metrics include:

Perfect order
fulfillment
Order fulfillment
cycle time
Upside supply
chain flexibility
Upside supply
chain adaptability
Downside supply
chain adaptability
Overall value at
risk
Total cost to
serve
Cash-to-cash cycle
time
Return on supply
chain fixed assets
Return on working capital

Versions

[return to top of this report]

Version 12.0

According to APICS, SCOR 12.0, released in October 2017, incorporates omni-channel, metadata, blockchain, and other emerging supply chain
drivers. “Maintaining a competitive advantage by prioritizing supply
chain as a core competency is essential in today’s business
environment,” said APICS CEO Abe Eshkenazi. “With the updated SCOR
model, supply chain leaders can connect the latest industry advancements
and insights with proven best practices to deliver operational
excellence and increased shareholder value.”

SCOR 12.0 offers:

Modernized best practices and processes to better align with
digital strategy.
Updated people skills/training based on APICS body of knowledge.
Sustainability standards based on The Global Reporting
Initiative (GRI).
Tighter alignment of supply chain management costs with SCORmark
benchmark.
Process workflows generated by the SCOR BPM Accelerator,
ensuring accurate data mapping.

APICS corporate affiliates can use SCORmark benchmark tools to:

Define supply chain competitive requirements.
Measure internal performance.
Compare performance to a custom data population.
Calculate performance gaps.
Set performance goals based on SCOR metrics.
Develop company-specific roadmaps for improving supply chain
performance.

The SCOR BPM Accelerator is a collaboration between APICS, Virtual
Enterprise Architecture, and Software AG, and enables organizations to
design, manage, and measure their global supply chain processes using
SCOR level one through level five metrics. It boosts the power of the
SCOR framework exponentially by making it easier to customize the tool
to your specific supply chain environment.

Version 11.0

Released in December 2012, SCOR 11.0 includes Enable Process, Best Practices,
and Cost Metrics redesign. In SCOR 11.0, “Enable” has been promoted to one of the primary management
processes joining Plan, Make, Source, Deliver, and Return. “Version
11 marks a significant evolution in the SCOR model,” said Caspar Hunsche,
Research Director for the Supply Chain Council. “The major additions enable
implementers stronger guidance for gauging, measuring, and improving the
effectiveness of their supply chains. As a result, SCOR continues to be
the standard upon which leading organizations base their critical initiatives
for substantially improving supply chain performance.”

Version 10.0

Released in December 2010, SCOR 10.0 clarifies the performance metrics, processes, and best practices found in the
previous version, but it also introduces people skills requirements with the
goal of assisting organizations to build supply chain competency and career
paths. To this end, it outlines training needs and individual performance
measures for each of the core process elements. According to SCC, the key
benefits of the supply chain skills additions include:

Ability to accurately match job responsibilities with candidates’ skills
and avoid costly hiring mistakes.
Efficient identification of
post-merger or post-acquisition skill requirements.
Enhanced ability
to make outsourcing or in-sourcing decisions.
Preservation of organizational effectiveness
and knowledge as large numbers of retirees leave the workforce over the next
decade.

Version 9.0

SCOR 9.0 was released in 2008, and it added many features that merit
explanation. As enterprises’
operations become increasingly global and complex, the potential
risks to which companies are exposed grow accordingly. Therefore,
the need for risk management capabilities within SCOR was required.
SCOR 9.0 contained a comprehensive set of risk-calculation metrics covering
all levels of the supply chain, enabling a company to more
effectively balance risk impact and
costs of risk mitigation with overall supply-chain management costs.
For example, the two higher-level risk metrics included in SCOR 9.0 were “Value at Risk” and “Risk Mitigation Cost.”
Value at Risk is the sum of the probability of risk events multiplied
by the monetary impact of the events for all the supply chain functions
(plan, source, make, deliver, and return). Risk Mitigation Cost is
now a component of Total Supply Chain Management Cost and provides the
total of these costs across all the processes.

In
addition to risk, environmental responsibility has grown steadily as a
corporate concern. Increasing governmental
regulations, coupled with a broader recognition that developing more
eco-friendly operations is “the right thing to do” promoted
sustainability to or near the top of most companies’ agendas. To
help organizations build a “greener” supply chain, SCOR 9.0
incorporated the capabilities of GreenSCOR, which SCC introduced as
a standalone reference model in 2003. These capabilities include the
following:

Industry
best practices for making the supply chain
environmentally friendly, such as working with partners on
environmental issues, reducing energy consumption, and
minimizing and reusing packaging materials.
Metrics
to measure the effects of a greener supply chain, including carbon and
environmental footprint, emissions cost per unit, energy costs as
a percent of production costs, waste produced as a percent of
product produced, and returned products disposed of versus
remanufactured.
Processes
to address waste management, such as how to collect and
manage waste produced during production and testing.

The
green capabilities within SCOR 9.0 not only made it easier for
companies to comply with governmental and other regulations, but they
also can improve overall supply-chain performance by identifying ways
to reduce consumption and waste. Other updates included:

The
metrics section of the reference model was updated and
clarified, and now includes metrics performance
attributes needed for benchmarking and a metrics coding
system.
The manual was completely reformatted for easier use and
readability. In addition to hard copy, lists of the Metrics, Best
Practices, and Inputs/Outputs are available in Excel format for easy
importing into individual and company-specific programs. These lists
include the name, definition, and process where the item occurs as well
as coding and performance attributes for metrics.

Recommendations

[return to top of this report]

SCOR is not a standard, but a model. Therefore, it is not necessary for
organizations to implement all SCOR processes or use all of its metrics and best
practices. In fact, it would be impractical to do so because of the model’s size
and complexity.

Many organizations will find that SCOR is best used as a starting point upon
which customized processes can be built. It can provide common terminology to
help supply chain partners integrate their processes and metrics, and its
best practices offer the potential for making supply chains more cost-effective,
more responsive, and more effective. Organizations should, however, expect that
significant process engineering work will be needed to customize the template
that SCOR provides. The ultimate utility of SCOR depends on how well individual
users apply it to their own needs.

Many organizations may find that attempting to develop and implement a
supply chain based on SCOR will be time consuming or beyond the
abilities of in-house personnel. While packaged supply chain management
products from firms like Oracle and SAP are available, they can also be
difficult to deploy.

Leveraging the SCOR model for non-supply chain activities

The SCOR model encourages the realignment of supply chain processes
to better achieve business objectives, combining techniques such as
business (process) reengineering, lean manufacturing analysis, and Six
Sigma analysis (of defective processes).

These industrial engineering disciplines should be applied across the
enterprise – both for supply chain and non-supply chain operations. Business reengineering, in particular, enables enterprise personnel to:

Deconstruct existing processes.
Identify inefficient, or even redundant, process elements.
Reconstruct the processes to create simpler, more
cost-effective, and more repeatable functions.

Web Links

[return to top of this report]

APICS: http://www.apics.org/
NIST: http://www.nist.gov/

About the Author

[return to top of this report]

James G. Barr is a leading business continuity analyst and

business writer with more than 30 years’ IT experience. A member of

“Who’s Who in Finance and Industry,” Mr. Barr has designed,

developed, and deployed business continuity plans for a number of Fortune

500 firms. He is the author of several books, including How to

Succeed in Business BY Really Trying, a member of Faulkner’s Advisory

Panel, and a senior editor for Faulkner’s Security Management

Practices. Mr. Barr can be reached via e-mail at jgbarr@faulkner.com.

[return to top of this report]