SCOR Model: the Comprehensive Implementation Guide

What is SCOR Model and how to use it properly? In this article, we will explain about SCOR Model, standard implementation roadmap and implementation issues.

1. Understand Basic of SCOR Model
SCOR Model or Supply Chain Operation Reference Model was created by Supply Chain Council Inc. It is a non-profit organization founded by two Boston-based consulting firms: Pittiglio Rabin Todd and McGrath (PRTM) and AMR Research (AMR) and many of their Fortune 100 clients.

SCOR Model has many robust characteristics which are highly qualified as a methodology for supply chain improvement such as,

1.1 Standard language: in the past, supply chain management is full of terminologies which are very hard to comprehend. Plan, Source, Make, Delivery and Return are the standard language that almost all the people can understand. With its simplicity, it can gather more attention and help people from various disciplines to work on an implementation.

1.2 Standard roadmap: SCOR Model provides a framework for supply chain improvement, from the development of operational strategy to the implementation of new management practices. 

1.3 Standard process: every supply chain improvement many involve the redesign of business process. It takes a longer time to learn other process redesign methodologies. SCOR process mapping usually takes less than half a day to construct.

SCOR has 3 levels of process. The highest level of process is Level 1 or the core process. SCOR has 6 easy-to-remember core processes

- PLAN (P)
- MAKE (M)

The lower level process is called Level 2 or sub-process. Level 2 process is classified by each type of products as follows, 

1 = Make-to-stock 
2 = Make-to-order
3 = Engineering-to-order 
4 = Retail product

Sourcing of make-to-stock product is S1
Manufacturing of engineering-to-order product is M3

Level 3 or the process decomposition is provided for reference. This is where you find it very easy because you don’t have to map the process by yourself. You just pick any level 2 process and you can get associated level 3 process.

Level 4 may be drilled down from a level 3 process. Since each industry may have their specific processes which cannot be standardized, the implementation of these processes is optional, not provided.

An example of the visual presentation of each level of the process is as follows,

scor model process

1.4 Standard metrics: a good performance measurement should be realistic and understandable. Moreover, a measurement should be collected easily and represents the concern of the entire organization. Standard supply chain metrics can ensure that every function and every player in the supply chain can interpret the result in the same way.

scor model metrics

Performance attributes are usually linked to a corporate strategy. Each of them consists of one or more measurements, also known as Level 1 metrics. Level 1 metrics may be branched out into the  lower level or level 2 metrics for more control of particular processes.

1.5 Best practices provided: after the current performance is measured and processes are redesigned, the biggest thing we should contemplate is how to find the way to create an improvement. On many occasions, an improvement plan becomes unsuccessful. Cause of failure is mainly from the lack of understanding of root causes and best practices itself. Fortunately, SCOR Model is equipped with plenty of best practices that associate with each process. Once poor process can be identified, best practices will be on hands and ready to help fix problems.

1.6 Cross industry standard: many supply chain initiatives rely on SCOR Model. Then, the process integration between trading partners in at the global scale is feasible.

2. Analyze Your Competition Using SCOR Metrics
2.1 Conduct SWAT analysis: in order to succeed in an implementation project, the thorough understanding about the current situation of the company needs to be investigated. This first milestone will lead us to appropriate supply chain improvement plan. The most convenient method is to use the SWOT analysis. It typically reveals problem from the human perspective. 

2.2 Capture current performance: company should examine how supply chain is performing by capturing the performance data based on SCOR metrics.

2.3 Set performance target: after the performance is captured, a target performance should be set for each metric. The value of performance improvement should be calculated as shown below in simplified SCORCARD.

scor model scorcard
3. Improve Material Flow With Level 2 of SCOR Model
3.1 Understand material flow: following the first stage, the material flow will be captured and redesigned by showing the location of supply chain members on a map, including level 2 process, the result is the "AS IS" Geographic map.
scor model as is geo map

3.2 Alter material flow: redesign material flow and make the "TO BE" Geographic Map. Possible issues to be considered in the material flow redesign include removal of non-value added facilities, relocation of distribution warehouses. In this example, value-added activities (M1) are included in its warehouse operations such as kitting.

scor model to be geo map

3.3 Understand inter-company process: convert "TO BE" Geographic Map into "AS IS" Thread Diagram which focuses on the inter-organization processes. Each level 2 process will be transformed into an arrow. Bold vertical line distinguishes company entity. Dashed vertical lines indicate a different department in the same company.

scor model as is thread diagram

3.4 Improve inter-company process: redesign inter-organizational process by considering the issues such as inconsistency of performance measurement between the trading partners.

scor model analysis as is thread diagram

From the above diagram, a delivery performance of Vendor B who sells make-to-stock product is 80%. In order to meet with the end customer’s requirement, the warehouse may has to hold more inventory to protect a manufacturer against uncertainty. This type of metrics conflict should be resolved along the whole supply chain. To finalize "TO BE" Thread Diagram, the planning processes should be added.

scor model to be thread diagram

4. Streamline Information Flow With Level 3 of SCOR Model
4.1 Map internal processes: it’s time to do a process mapping, level 3 processes should be drawn from the SCOR manual and translated into "AS IS" swim lane diagram. This diagram indicates each process under the function name. The example below illustrates S2 process at Vendor A.

scor model as is swimlane diagram

4.2 Improve the internal process: redesign of the organization’s process should be done via a cross-functional team. Then, it’s recommended to gather the knowledgeable person representing each department. Brainstorming session from a design team indicates that the root cause of sourcing processes is from the lack of coordination and information sharing. Then process redesign will create "TO BE" swim lane diagram.

scor model to be swimlane diagram

- To identify the product requirements appropriately, a production planning team works closely with a marketing team in demand planning phase. Moreover, a procurement team joins together with a marketing team and a production planning team to ensure that the products will be scheduled at the right time and right quantity inside a planning time fence.

The team should also consider the following issues,

- Missing processes such as input and output
- Enable processes should be in place
- The people responsible for a particular process should be assigned and documented
- The company should compare what they are performing in each process with best practices
- Level 2 metrics or the industry specific metrics can be added

5. Implement SCOR Model Best Practices
After the processes are redesigned, companies should consult SCOR manual to create a list of best practices as below,

scor model best practices

Many firms consider an improvement plan that requires no or minimum investment. In case it’s necessary to implement technology related best practices, the value of gap analysis will serve as a guideline for an investment decision.

6. Consider Implementation Issues of SCOR Model
6.1 Fair human resource management system is a prerequisite for an implementation. The reason is that SCOR Model needs a lot of input information from employees in order to analyze the business process properly. Troubled employee with problems about compensation, career opportunity, job satisfaction and stuff like that tends to be non-productive during a brainstorm/process redesign session.

6.2 To get more information from the end users quickly, you may develop a check sheet or a questionnaire based on the process of SCOR Model. This will allow you to obtain data easier.

6.3 Existence of ERP system is not mandatory. However, you will find it difficult to retrieve the customer/supplier profile and cost data, if an acceptable level of accounting standard and record maintenance is not in place.

6.4 If the performance data based on SCOR metrics is not readily available, you many consider using a sampling method. Say randomly select 30 orders from the high profit customers. Then, you can capture the delivery performance, perfect order fulfillment and order fulfillment lead-time. Cost of goods sold, asset turns, cash-to-cash cycle time is available from a financial statement.

6.5 You don’t have to compare your performance against peer if your company is small and medium business enterprise. Comparing a world- class company against a small company doesn't yield anything actionable.

6.6 Value from improvement is quite subjective, even though it’s calculated by a consulting firm. It should be seen as an indication if it’s worth it to pay the effort to improve performance in certain area.

6.7 Most big companies use a simulation software in a project to make the improvement of material flow (configure supply chain). If budget doesn't allow, you can just follow my guideline.

6.8 Metrics related to quality are not included. You may include it (or any other KPI) in a supply chain scorcard.

Related Article: Supply Chain Mapping: the How-to Guide