Supply chain operations reference model

From Supply Chain Management Encyclopedia

Russian: Референтная модель операций в цепях поставок

By far the best known and most detailed performance metrics are encompassed in the Supply Chain Operations reference – SCOR model, which was created in 1995 and has been continuously refined ever since. The SCOR model provides an industry-standard approach to analyze, design, and implement changes to improve performance throughout five integrated supply chain processes: plan, source, make, deliver, and return – spanning the full gamut from a supplier’ supplier to a customer’s customer and every point in between. The SCOR model is aligned with a company’s operational strategy, material, work flows, and information flows.^[1]

As explained by Peter Bolstorff and Robert Rosenbaum in Supply Chain Excellence, a handbook on using the SCOR model, the five SCOR processes encompass the following measurable activities^[2]:

• Plan: Assess supply resources; aggregate and prioritize demand requirements; plan inventory for distribution, production, and material requirements; and plan rough-cut capacity for all products and all channels.
• Source: Obtain, receive, inspect, hold, issue, and authorize payment for raw materials and purchased finished goods.
• Make: Request and receive material; manufacture and test product; package, hold, and/or release product.
• Deliver: Execute order management processes; generate quotations; configure product; create and maintain a customer database; maintain a product/price database; manage accounts receivable, credits, collections, and invoicing; execute warehouse processes, including pick, pack, and configure; create customer-specific packaging/labeling; consolidate orders; ship products; manage transportation processes and import/export; and verify performance.
• Return: defective, warranty, and excess return processing, including authorization, scheduling, inspection, transfer, warranty administration, receiving and verifying defective products, disposition, and replacement.

SCOR model is used like a language to communicate among supply-chain partners. It decomposes processes in the company to process elements, then to tasks, and then to activities. SCOR model includes three levels of details ^[3]:

• Top-level (to define scope of supply-chain operations);
• Configuration level (on the basis of specific configuration, supply chain operations are based);
• Process element level (companies “fine tune” their operations strategy)

SCOR is the first model which can be used to configure the supply-chain based on a business strategy. SCOR model is used to measure supply-chain processes in organizations. There are more than 150 key metrics organized hierarchically. By that model all departments can develop integrated supply chain and collaborate effectively. SCOR model is using as theoretical framework for different researches in the field of SCM (e.g. “Management of risks in Supply Chains: SCOR approach and Analytic Network Process” by Faisal, Banwet and Shankar, 2007). Also, many companies are using SCOR model for their business. There are list of them on the website of Supply Chain council. SCOR was used as reference model to document HP and Compaq Supply Chains and helped during the process of their merger. Siemens Medical using SCOR model decreased delivery time from 22 to 2 weeks and inventory by 60%. U.S. Marine Corps reduced 200 logistics systems to handful Internet-enabled systems. Volvo by using SCOR received such benefits: standard language and nomenclature, incorporated best practices and metrics, accelerated process understanding and definition and depicted relationships between supply chain partners. SCOR model is useful both for simple and complex supply chains because it represents integrated and unified approach. SCOR model is the basis for improvements in supply chain in global scale. SCOR model is developing and the number of organizations using it is rising because it provides unambiguous standard descriptions for the thousand of activities.

References

1. ↑ David Blanchard, Supply Chain Management, Best Practices, New Jersey, John Wiley & Sons, 2007, 44
2. ↑ Peter Bolstorff and Joseph Rosenbaum, Supply Chain Excellence: A Handbook for Dramatic Improvement Using the SCOR Model, New York: Amacom, 2003, 2-3
3. ↑ Faisal M.N., Banwet D.K., Shankar R. Management of Risk in Supply Chains: SCOR approach and Analytic Network Process. 2007. An international journal, Vol. 8, #2.