Siemens SCOR a success1

Siemens AG, with over 450,000 people, sales of around 70 billion and
operating in more than 190 countries it is one of the worlds top five electrical
engineering and electronics companies, producing products from mobile phones to power plants. For
over a decade Siemens has used the Supply-Chain Operations Reference (SCOR) model to improve
its supply chain efficiency and process performance. (The SCOR model is explained later in this
chapter.) The implementation of the model was initially intended to support the companys move to a
considerably stronger focus on e-Business. Teams of more than 250 internal change agents were
formed starting to review strategies, opportunities and challenges.
Siemens initially developed what they called their Generic Business Process version of the SCOR
model so that it could be applied in all their markets. However Siemens soon realized that different
kinds of business required different supply chain solutions. For example, Siemens used SCOR to
streamline the Make-to-Order processes of its Siemens Medical Solutions Business whose
Computed Tomography (CT) devices are made in Germany and China. This was a particularly difficult
business involving make-to-order functions such as the global management of customer orders,
comprehensive and complex material management, customisation and production, technical support,
worldwide dispatch and logistics, and installation at the customers site. Yet while Siemens were the
clear innovation leader, before the SCOR initiative its inflexible and bureaucratic processes had
resulted in long waits for customers, high levels if inventory and high costs. The CT supply chain was
not connected, with little common understanding of how processes should work or what its supply
objectives should be. Internal operations managers in the supply chain answered to Headquarters
rather than to end customers and conflicting performance objectives led to fluctuating demands
throughout the chain. It was the SCOR process that helped Siemens the tackle these problems
directly. Order management and planning and control processes moved from individual and
fragmented order handling to the management of all worldwide customer orders, sourcing was
simplified and integrated using 22 A suppliers rather than the 250 used previously, production of
small quantities was organised according to customer specifications, strategic partnerships were
developed with service providers, quick installation of systems directly delivered to customer sites
using qualified CT factory personal was implemented, and reverse logistics employed to refurbish
used systems.

The improvements in supply chain performance were spectacular. Order to delivery time reduced
from 22 weeks to 2 weeks, the simplified and transparent order on the factories allowed two
production lines to do the work of the four used previously, factory throughput time was reduced from
13 days to 6 days, flexibility was increased tremendously to a level of 50% orders per month,
inventory levels were reduced significantly enabling CT to divest a warehouse, direct shipments
nonstop from the factory to the customer enabled delivery to customer sites within 5 working days and
also allowed customers to track shipments.
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Excerpt from: Slack et al (2010) Operations Management, 6 Edition, Financial Times Prentice Hall