How SCOR Model Enhance Global Sourcing Effectiveness

How SCOR Model Enhance Global Sourcing Effectiveness 1

What are the challenges in global sourcing?» Supplier selection» Supplier performance monitoring» MOQ» Complex Logistics» And many more 2

What is Supply Chain Operation Reference (SCOR) Model?» The Supply-Chain Operations Reference-model (SCOR) is a process reference model that has been developed and endorsed by the Supply-Chain Council as the cross-industry standard diagnostic tool for supply-chain management. SCOR enables users to address, improve and communicate supply-chain management practices within and between all interested parties.» SCOR has been adopted by major industries over the past 10 years and the latest version of SCOR (v. 9.0). 3

What are the benefits of SCOR model?» Provides a structured approach and practical methodology for supply chain process improvements.» Provides a common language to share operational views, and communicate changes or definitions of processes.» Provide a set of common, easy to understand terminology, process building blocks with definitions and performance metrics.» SCOR offers companies insights and suggestions on best practices to build a project portfolio for improvement. 4

Three Major Components of SCOR Performance Metrics Process Building Blocks Best Practices 5

Process Building Block 6

Level 1 Process Type Customer s Customer 7

All Process Type 8

Process Classification Plan Source Process Management Process Manufacturing Environment Make Deliver Return Make-to-Stock Make-to-Order Engineer-to-Order Process Type Planning Execution Enable 9

What Can You Tell From The Process Map? SR1 S2 M2 D2 SR3 S2 M1 D1 D1 DR1 SR1 DR1 SR1 DR1 SR1 DR3 SR3 DR3 SR3 M1 D1 10

What Can You Tell From The Process Map? SR1 S2 M2 D2 SR3 S2 M1 D1 D1 DR1 SR1 DR1 SR1 DR1 SR1 DR3 SR3 DR3 SR3 M1 D1 Raw Material Supplier s Production Site Your Production Site Your Regional Warehouses Customer s Warehouses 11

What Can You Tell From The Process Map? What is the implication of S2+->M1 SR1 S2 M2 D2 SR3 S2 M1 D1 D1 DR1 SR1 DR1 SR1 DR1 SR1 DR3 SR3 DR3 SR3 M1 D1 Raw Material Supplier s Production Site Your Production Site Your Regional Warehouses Customer s Warehouses 12

What Can You Tell From The Process Map? What is the implication of SR3->DR1 SR1 S2 M2 D2 SR3 S2 M1 D1 D1 DR1 SR1 DR1 SR1 DR1 SR1 DR3 SR3 DR3 SR3 M1 D1 Raw Material Supplier s Production Site Your Production Site Your Regional Warehouses Customer s Warehouses 13

Business Process Reengineering Change the performance of a business process by capturing the As-Is state of a process, deriving the desired To-Be future state and closing the gap between the two states. The operational states can be documented by SCOR process building blocks and measured by SCOR metrics. The gap can be closed through applying SCOR best practices. 14

As-Is P1 P1 P2 P3 P4 P4 M3 D1 M3 D2 D1 M1 D1 M3 D1 M3 D2 NORTH & SOUTH AMERICAN CUSTOMERS D2 S2 M2 D2 D1 D2 CUSTOMERS D1 M1 D2 S2 M2 D1 D2 INDIAN & BANGLADESHI CUSTOMERS ROW CUSTOMERS 15

To-Be P1 P2 P3 P4 P4 D1 D1 M1 D1 D1 NORTH & SOUTH AMERICAN CUSTOMERS D2 S2 M2 D2 D1 CUSTOMERS D1 M1 D2 S2 M2 D1 D2 INDIAN & BANGLADESHI CUSTOMERS ROW CUSTOMERS 16

Performance Metrics 17

Measuring Performance Measuring how well the supply chain performs is as essential as understanding how it operates» Measurements must link to business objectives» Measurements must be repeatable» Measurements must provide insights into how to manage the supply chain more effectively» Measurements must be appropriate for the process activity they are measuring - Same level 18

Supply-chain Performance Risks (Performance Metrics of SCOR) Customer Internal Attribute Reliability Responsiveness Agility Cost Assets Strategic metric RL.1.1 Perfect Order Fulfillment RS.1.1 Order Fulfillment Cycle Time AG.1.1 Upside Supply Chain Flexibility AG.1.2 Supply Chain Upside Adaptability AG.1.3 Supply Chain Downside Adaptability CO.1.1 Supply Chain Management Cost CO.1.2 Cost of Goods Sold AM.1.1 Cash-to-Cash Cycle Time AM.1.2 Return on Supply Chain Fixed Assets AM.1.3 Return on Working Capital 19 Copyright Supply Chain Council, 2008. All rights reserved 1 9 19

Measuring Process Performance with SCOR Performance Metrics Cycle Time Perfect Order Fulfillment Perfect Order Fulfillment SR1 S2 M2 D2 SR3 S2 M1 D1 D1 DR1 SR1 DR1 SR1 DR1 SR1 DR3 SR3 DR3 SR3 M1 D1 20

Benchmarking - Parity, Advantage, Superior Attribute Metric (level 1) P A S Reliability Responsiveness Agility Cost Assets Perfect Order Fulfillment Order Fulfillment Cycle Time Supply Chain Flexibility Supply Chain Mgmt Cost Cash-to-Cash Cycle Time Compare to:» Lines of business in your company» Businesses in your industry» Businesses across industries Parity Advantage Superior Median of Statistical Sample Midpoint of Parity and Superior 90 th percentile of population 21

Supply-Chain Strategy Matrix External Supply-Chain Strategy Matrix Supply Chain A Supply Chain B Supply Chain C Reliability P P S Responsiveness A P A Agility P P P Cost S A P» Each unique combination of ratings defines Your Supply Chain Strategy for the channel» Think of the rating as a desired state, NOT where you want to improve the most Internal Assets P S P 22 22

Benchmarking Quantify the operational performance of similar companies and establish internal targets based on the best-in-class results. A question that managers should always ask themselves is How is my company s performance compared with other similar companies? It may be easy to compare on financial performance, but how about responsiveness to customer need, flexibility in dealing with changes and reliability of the supply chain? SCOR defines a set of metrics to measure operational performance which enable direct comparison of supply chains similar to those of financial performance. 23

Supply-chain Performance Scorecard Strategic Metrics Actual Parity (50th) Advantage Superior (90 th ) Parity gap Requirement gap Reliability [Perfect order fulfillment] 60 % 74 % 81 % 88 % 14 % 14 % [P] Responsiveness [Order cycle time] 9 days 10 days 6.5 days 3 days -- 6 d [S] Agility [Upside supply chain flexibility] Cost [Supply Chain Management Cost] 110 d 60 d 45 d 29 d 50 d 81 d [P] 14.0 % 9.5 % 6.7 % 3.9 % 4.5% 7.3% [A] Asset [Cash-to-cash cycle time] 197 d 98 d 64 d 30 d 99 d 99 d [P] 24 24

Best Practice 25

Best Practice A current, structured, proven and repeatable method for making a positive impact on desired operation results.» Current: Must not be emerging & must not be antiquated.» Structured: Has clearly stated goal, scope, process & 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 and information or knowledge management.» Positive impact on desired operation results: The practice shows operational improvement related to the stated goal and could be linked to key metrics. The impacts should show either as gain (increase in speed, revenue, quality) or reduction (resource utilizations, costs, loss, returns, etc.) (Defined by SCC Best Practices Team 2003) 26

Best Practices Analysis Characterize the management practices and software solutions that result in best-in-class performance Not all best practices are suitable to all industries / companies, things to be considered include but not limited to the following items:» Geographical location» Industry» Management practices» Software solutions»..etc 27

Improving Process Performance with SCOR Best Practices VMI S2 M2 D2 EDI Automatic Identification SR1 SR3 S2 M1 D1 D1 DR1 SR1 DR1 SR1 DR1 SR1 DR3 SR3 DR3 SR3 M1 D1 28

Best Practice Analysis Practice Relevance (Y/N) Importance (H/M/L) Implemented (Y/N) ATP Carrier Agreements CPFR Co-located Procurement Cross Docking TOC-DBR Postponement S&OP VMI Wave Picking Copyright Supply Chain Council, 2006-2010. All rights reserved 2 29 9 29

CPFR is a Best Practice 30

Cross Docking 31

SCOR Model is a Business Process Reference Model 32

How to Start Supply Chain Improvements? 1 2 3 4 5 Education Feasibility Study Competitive & Strategy Analysis As-Is Operation Modeling To-Be Operation Modeling Align Internal understanding Define Areas of Improvement Define Supply Chain Performance Define Current Process Description Define Required Process Description 6 7 Gap Identification & Project Portfolio Project Justification 8 Project Implementation 9 Improvement Audit Set Improvement Target and Projects Portfolio Justify Project Based on Savings or Benefits Implement SCOR Operations Audit on Result of Project Implementation 33

Step 1 1 2 3 4 5 Education Feasibility Study Competitive & Strategy Analysis As-Is Operation Modeling To-Be Operation Modeling Align Internal understanding Define Areas of Improvement Define Supply Chain Performance Define Current Process Description Define Required Process Description 6 7 Gap Identification & Project Portfolio Project Justification 8 Project Implementation 9 Improvement Audit Set Improvement Target and Projects Portfolio Justify Project Based on Savings or Benefits Implement SCOR Operations Audit on Result of Project Implementation 34

Education SCOR Workshop» 4-days workshop» 2-days workshop on the SCOR Framework» 2-days workshop on SCOR Project.» The SCOR Framework focus on» how to map their current operations using SCOR s process building blocks (the As-is operations) and define the required SCOR process (the To-be operations) based on management requirements» define performance metrics to measure the performance of individual process» provide recommended best practices for the right direction on supply-chain process improvements» The SCOR Project workshop focus on» how to implement successful SCOR projects using the implementation roadmap that was developed based on more than 60 SCOR projects.» All students are entitled to take the SCOR-Professional Examination (awarded by Supply Chain Council) after taking the Framework and Project workshops 35

Certify as SCOR Professional» Examination Format» Computer based multiple choices» 60 questions» Passing mark is 45 out of 60 (at least 45 correct answers)» Examination Time Frame» Examination window 2010-1 2010-02-08 2010-02-19» Examination window 2010-2 2010-05-24 2010-06-04» Examination window 2010-3 2010-08-23 2010-09-03» Examination window 2010-4 2010-11-08 2010-11-19» Venue» GUANGZHOU» GUANGZHOU UNIVERSITY OF FOREIGN STUDY, BAIYUN DADAO NORTH #2 GUANGZHOU, CHN 510420» HONG KONG» RM 501 HKEA SAN PO KONG SUB-OFFICE #17 TSUEK LUK STREET, SAN PO KONG KOWLOON 36

More Information www.supply-chain.org 37

Common Sourcing KPIs (ESCAB) 38

Common Sourcing KPIs (ESCAB) KPI name Factory Certification - Technical Factory Compliance - Regulatory, KPI description Measure the ability of factory, compliant with buyer's hard and soft factors/requirements Focus on Business Behaviours (such as Operating according to government / authority laws and regulations, provides safe working environment, Code of Conduct, C-TPAT, etc.), and Environmental and Compliance to required standards to best benefit both sides. Social Focus on product, supply chain management, and process. Product introduction Vertical set up Cost Competitiveness To count supplier's own vertical set up, e.g. own washing mills, own weaving mills, own printing facilities, own embroidery facilities provided that it delivers economy of scale Estimated Landed Cost (ELC) Comparison 39

Common Sourcing KPIs (ESCAB) KPI name Manufacturing Lead Time Response time 1st Sample rejection KPI description The manufacturing lead time quoted by the supplier during the bid process which the will abide by. The time supplier needs to response, e.g. confirm orders, reply requests, sign agreements and others The sample is rejected if failure or does not meet our requirement Sample Cycle Time Measure the number of days taken to approve sample. Can apply to various kind of sample, e.g. color sample, fit sample, etc. Sample Iteration Sample on time Measures the frequency with which samples require rework, indicate efficiency and timeliness for on time production. Can apply to various kind of sample, e.g. color sample, fit sample, etc. To measure if the requested sample can be submitted before the deadline 40

Common Sourcing KPIs (ESCAB) KPI name 1st Inspection Passing Rate KPI description Measure final inspection passing rate Inspection rejection rate An order is rejected during final inspection due to quality problems or formal mistakes. Quality (Major/Minor Quality reflects the product quality of the supplier. Basis defects during QC for the calculation of that KPI are the inspection results. Inspection) Upside Deliver Flexibility The number of days required to achieve an unplanned sustainable % increase in quantity delivered with the assumption of no other constraints (= Elasticity of ETD) Cancellations rate (responsible party supplier) Claim to shipment ratio (dollar value) Claim to shipment ratio (no. of incidents) Measures the share of order cancellations caused by the supplier Measure unmet customer expectations Quality problem or formal mistakes after arrival to our customer. 41

Common Sourcing KPIs (ESCAB) KPI name Compliance Document accuracy and completeness Container Booking Timeliness Delivery Quantity Accurary Document submission cycle time Forwarder document process time On time and honoured Inspection Booking KPI description material safety data sheets, GDOT, etc are complete and correct A container booking is considered submitted to 3PL within the agreed time frame Measures the share of articles delivered correctly concerning quantities. Only short deliveries have a negative influence. Meaure the average time when the supplier submit document to the document is confirmed correct and completed To measure the time which the forwarder needs to provide the documents e.g. airway bill (AWB), BL, SWB Measure the reliability of inspection booking by vendor 42

Common Sourcing KPIs (ESCAB) KPI name On time document submission On time Shipment Booking Shipment booking cycle time Shipment reliability Shipping document accuracy and completeness Space & Equipment Availability KPI description Supplier is supposed to submit document according to predefined timeframe in order to ensure accurate documents are on time for custom clearance. A vessel booking is submitted within the agreed time frame. Measure the average time when the supplier submit first booking to the time carrier booking is confirmed. Measure timeliness of shipments. Shipping documents are complete and accurate Carriers performance on space and equipment availability 43

Common Sourcing KPIs (ESCAB) KPI name Timely Advanced Shipment Notification (ASN) submission Withhold Payment Annual Sales Growth KPI description Measure the timeliness of ASN / Dispatch Advice Measure the % of payment that ware withhold due to supplier's issues Measure the sales growth of a supplier 44

Enquiry» Please contact us for further enquires:» Mr. Rocky Yu Ms. Tina Ho» Tel: 2863 9731 Tel: 2863 9758» Email: rockyyu@gs1hk.org Email: tinaho@gs1hk.org 45

Thank You. Questions?