Supply Chain Management

Shashank Kapoor
Contents
DMSCA 2010 - Supply Chain Measurement
PART-1
WHAT IS SCM
DMSCA 2010 - Supply Chain Measurement
SCM: Defination
SCM: Different ie!points in "ifferent
#ompanies
Supply Chain Driers: Innoation
DMSCA 2010 - Supply Chain Measurement
Supply Chain Driers: $%ten"e" Pro"u#ts
DMSCA 2010 - Supply Chain Measurement
Supply Chain Driers: &lo'ali(ation
DMSCA 2010 - Supply Chain Measurement
Supply Chain Driers: )le%i'ility
DMSCA 2010 - Supply Chain Measurement
Supply Chain Driers: Pro#ess Centere"
Management
DMSCA 2010 - Supply Chain Measurement
Supply Chain Driers: Colla'oration
DMSCA 2010 - Supply Chain Measurement
Supply Chain Driers: Summary
Superior Supply Chain Management *SCM+ has
,ong -een a Sour#e of Competitie A"antage
Total Supply Chain Management Costs (% of Revenue)
9.2%
12.3%
10.%
10.0%
10.%
9.1%
!.!%
."%
".#%
$.$%
$.3%
".2%
3.$%
3.!%
$."%
3."%
0.0%
2.0%
".0%
!.0%
#.0%
10.0%
12.0%
1".0%
Automotive Industrial Chemical &
Advanced Materials
Computer Consumer Goods Pharmaceutical Semiconductor Telecommunications
Equipment
%est&in&Class
Me'ian
Source: PRTM/The Performance Measurement Group
%

o
f

R
e
v
e
n
u
e
%est&in&(lass Companies) *utpe+fo+m Thei+ Me'ian Competito+s ,ith a
$0% Cost -'vantage
DMSCA 2010 - Supply Chain Measurement
The SC.R )rame!or/
Supply Chain Council Resources
DMSCA 2010 - Supply Chain Measurement
The $nterprise: Role of Supply Chain
DMSCA 2010 - Supply Chain Measurement
S
u
p
p
l
i
e
r

p
r
o
c
e
s
s
e
s
.+o'u(t /esign
/C*R0
C
u
s
t
o
m
e
r

p
r
o
c
e
s
s
e
s
Supply Chain SC*R0
Sales 1 Suppo+t
CC*R0
.+o'u(t Management
What is SC.R
0
1
16
C
u
s
t
o
m
e
r

p
r
o
c
e
s
s
e
s
C
u
s
t
o
m
e
r

p
r
o
c
e
s
s
e
s
S
u
p
p
l
i
e
r

p
r
o
c
e
s
s
e
s
S
u
p
p
l
i
e
r

p
r
o
c
e
s
s
e
s
Supply Chain
Supply Chain
C
u
s
t
o
m
e
r

p
r
o
c
e
s
s
e
s
S
u
p
p
l
i
e
r

p
r
o
c
e
s
s
e
s
Supply Chain
Process, arrow indicates material flow direction
Process, no material flow Information flow
Deliver
Deliver
Make
Make
Source
Source
Return
Return
Return
Return
Plan
Plan
SCOR is a supply chain
process reference moel
containin! o"er 200
pro#ess elements# $$0
metri#s# an $00 'est
pra#ti#es incluin! risk
an en"ironmental
mana!ement
Or!ani%e aroun the fie
primary management
pro#esses of &lan# Source#
Make# Deli"er an Return
De"elope 'y the inustry
for use as an in"ustry
open stan"ar" - Any
intereste or!ani%ation can
participate in its continual
e"elopment
DMSCA 2010 - Supply Chain Measurement
The SC.R
0
mo"el 2 a #ross-in"ustry open
stan"ar"

(he fi"e inte!rate processes pro"ie a 'ounary-free "ie) of the

true en-to-en *+tene Supply Chain

Supports intra- an cross-enterprise optimi%ation of ar'itrary

scale
DMSCA 2010 - Supply Chain Measurement
Supplie+
.lan
Custome+
Custome+)s
Custome+
Supplie+s)
Supplie+
Ma2e
/elive+ Sou+(e Ma2e
/elive+ Ma2e Sou+(e /elive+ Sou+(e /elive+
3nte+nal o+ 45te+nal 3nte+nal o+ 45te+nal
6ou+ Company
Sou+(e
Retu+n Retu+n Retu+n
Retu+n Retu+n
Retu+n
Retu+n Retu+n
SC.R Pro#esses 2 )ie ,eels of
De#omposition
Level Level ! Level " Level # Level $
Scope Confi%uration &ctivity 'orkflow (ransactions
Differentiates
)usiness
Differentiates
Comple*ity
+ames (asks Se,uences Steps Links
(ransactions
Defines Scope Differentiates
Capa-ilities
Links, Metrics,
(asks and
Practices
.o- Details Details of
&utomation
Sets Strate%y /irst (ier
Dia%nostics
Second (ier
Dia%nostics
Industry or
Company Specific
(echnolo%y
Specific
DMSCA 2010 - Supply Chain Measurement
S
Source
Stocked Product
S
Source
Stocked Product
Supply0Chain
Source
Supply0Chain
Source
S1!
Receive Product
S1!
Receive Product
Standard SC2R definitions Company3Industry definitions
4DI 4DI
5ML 5ML
Supply Chain -alan#e" SC.R#ar"
Stanar Strate!ic ,-e"el 1. Metrics
Attri'ute Metri# *Strategi#+
Relia'ility &erfect Orer /ulfillment
Responsi"eness Orer /ulfillment Cycle (ime
A!ility Supply Chain /le+i'ility
Supply Chain Aapta'ility
0
Cost Supply Chain Mana!ement Cost
Cost of 1oos Sol
Assets Cash-to-Cash Cycle (ime
Return on Supply Chain /i+e Assets
Return on 2orkin! Capital
DMSCA 2010 - Supply Chain Measurement
upside and downside adaptability metrics
C
u
s
t
o
m
e
r
I
n
t
e
r
n
a
l
SC.R 13 - S/ills

3aseline Capa'ilities
4 *ssential skills re5uire for 6o' 4 7non-starter8 !aps

Critical Capa'ilities
4
Difference 'et)een ae5uate an superior performance

&erformance
4 Key incenti"es for process e+ecution

Creentialin!
4
(rainin! an "aliation of capa'ilities
DMSCA 2010 - Supply Chain Measurement
SC.R -enefits Companies
SCOR can be used to describe supply chains that are very simple or very
complex using a common set of definitions and enabling a common
understanding
)orm an integrate" measure" strategy )hich translates o"erall 'usiness
o'6ecti"es clearly an comprehensi"ely to all operational 'usiness entities
Create a #ommon 'alan#e" s#ore#ar" 'y !hi#h customers can measure
their performance an 'y )hich SCC mem'ers can measure suppliers9
performance
Compare the performan#e of supply #hain an relate operations )ithin
their company or a!ainst other companies
Determine !hat pro#esses to improe an 'y ho) much to impro"e them
either eliminatin! )aste# or 'y impro"in! process relia'ility
&ui"e the #onsoli"ation of internal supply chains ,)hich results in
si!nificant cost reuctions from eliminatin! uplicati"e assets.
Create stan"ar" pro#esses an" #ommon information systems across
'usiness units ,)hich !enerates ma6or cost sa"in!s# cycle-time an 5uality
impro"ements.
DMSCA 2010 - Supply Chain Measurement
Supply Chain Measurement
(he SCOR Reference &rocess
DMSCA 2010 - Supply Chain Measurement
Configuring a Supply Chain Ar#hite#ture
.+o(ess 7aye+ 8o(us .lanning 9o+i:on
Scope
Define Markets
Define Products 6 Services
)usiness Chan%es
Confi%uration
Define Strate%y
Define 7overnance
Market Chan%es
&ctivity
Define Processes
Define Practices
Define Skills
Performance Chan%es
DMSCA 2010 - Supply Chain Measurement
Measurement an" -en#hmar/ing

:ualitati"e 3enchmarkin!
4 Comparin! 'est practices amon! or!ani%ations
4 Maturity Assessments

:uantitati"e 3enchmarkin!
4 Comparin! le"els of measure performance
4 Assessment of &erformance 1aps

Competiti"e 3enchmarkin!
4
:uantitati"e 3enchmarkin! 'et)een companies
4
;entifies superior relati"e performance
DMSCA 2010 - Supply Chain Measurement
4 Steps of a -en#hmar/ing Program

Supply Chain Definition

Supply Chain &rioriti%ation

Supply Chain Strate!y

Selectin! Metrics

Sourcin! Data

Creatin! a 3alance SCORcar<

&erformin! 3enchmark
DMSCA 2010 - Supply Chain Measurement
Supply-Chain Definition

Supply Chains are the (otality of processes spannin!

operations from supplier to en-customer# focuse on
material# )ork an information flo)

2e use a tool calle the Supply Chain Definition

Matri+ to efine the supply-chains )ithin an enterprise

(he Supply Chain Definition ,i=o Matri+. Matri+ helps

etermine the num'er an si%e of supply chains

Columns> Customers ,Output.

Ro)s> &roucts ,;nput.

(he intersection of each column an ro) 4 if the

!oos or ser"ices flo) to the customer 4 is a supply
chain
DMSCA 2010 - Supply Chain Measurement

Columns are Retail=Commercial# an su'-se!mente

Ro)s are the Ma6or &rouct -ines

$%ample: Air Con"itioning Company
DMSCA 2010 - Supply Chain Measurement
Supply Chain Prioriti(ation

2e use a tool calle the Supply Chain Prioriti(ation

Matri% to orer the supply-chains accorin! to
rele"ance

*ach supply chain can 'e ranke 'y a num'er of

features

2e su!!est>
4
si%e ,re"enue# "olume# an mar!in.#
4
comple+ity ,? SK@s.
4
strate!ic importance

Aou can also look at them 'y

4 Cash Consumption
4 Risk
4 Bolume "aria'ility
4 *tcC
DMSCA 2010 - Supply Chain Measurement

2e use a tool calle the Supply Chain Strate!y

Matri+ to ;entify priority strate!ic features or
attri'utes of supply-chainsC

*ach supply chain strate!y is inicate 'y a

collection of ranke features>
Relia;ility 2n time8 Complete8 9ndama%ed8
Responsiveness /rom Customer Re,uest to final acceptance
8le5i;ility :ow lon% to scale up8 :ow e*pensive to scale down8
Cost Cost of Processes8 Cost of 7oods Sold8
-ssets 'orkin% Capital8 Return on Investments8
Supply Chain Strategy
DMSCA 2010 - Supply Chain Measurement
Supply Chain Strategy in 5 Minutes
%uil' St+ategy Mo'el 7ife(y(le 7i2ely .+io+ity
)uy
1 &ssets
!1 Cost
Make 4(2
1 Relia-ility
!1 Response
)(2
1 &ssets
!1 Relia-ility
)(S Start
1 /le*i-ility
!1 Response
Middle
1 Cost
!1 Relia-ility
Commodity
1 Cost
!1 &ssets
42L
1 &ssets
!1 Cost
DMSCA 2010 - Supply Chain Measurement
*ach uni5ue
com'ination of ratin!s
efines Aour Supply
Chain Strate!y for the
channel
(hink of the ratin! as a
esire state# DO(
)here you )ant to
impro"e the most
Supply-Chain Strategy Matri%
DMSCA 2010 - Supply Chain Measurement
S
A
A
&
&
The SC.R#ar"

2e use a tool calle the

Supply Chain
SCORcar< to ;entify
performance
characteristics of
supply-chainsC

*ach SCORcar< is
'uilt from a su'set of
hunres of SCOR
metricsC

/or supply-chain
'enchmarkin! )e
!enerally use only -e"el
1# 2 an E metrics

(he SCOR Manual

pro"ies all necessary
efinitions
DMSCA 2010 - Supply Chain Measurement
SCOR metrics> Stanar Strate!ic ,-e"el 1. Metrics
Performan#e Metri#s
DMSCA 2010 - Supply Chain Measurement
upside and downside adaptability metrics
Attri'ute Metri# *Strategi#+
Relia'ility &erfect Orer /ulfillment
Responsi"eness Orer /ulfillment Cycle (ime
A!ility Supply Chain /le+i'ility
Supply Chain Aapta'ility
0
Cost Supply Chain Mana!ement Cost
Cost of 1oos Sol
Assets Cash-to-Cash Cycle (ime
Return on Supply Chain /i+e Assets
Return on 2orkin! Capital
C
u
s
t
o
m
e
r
I
n
t
e
r
n
a
l
&hilosophy

Aou nee to ha"e the most ata )here performance

is most critical

Aou nee to ha"e least ata )here performance is

least critical
8o+ 4ve+y Supe+io+ -'vantage .a+ity
Select Level Metric Level Metric Level Metric
and Level ! Metric Level ! Metric
and Level " Metric
SC.R#ar"s in 5 Minutes
DMSCA 2010 - Supply Chain Measurement
A Metri#s Ar#hite#ture
DMSCA 2010 - Supply Chain Measurement
D1.
!eser"e #n".
$alculate Date
Result: The Wor/flo! Diagram
m
p

%
&
'
$
u
p
e
r
t
i
n
o
(

m
p

)
a
c
t
o
r
y

'
S
h
e
n
*
h
e
n
(
!
e
t
a
i
l
+

i
n
c
.
'
,
m
s
t
e
r
d
a
m
(
D-.-
!ecei"e+ .nter+
/alidate 0rder
D-.
!eser"e #n".
$alculate Date
S1.1
Schedule Prod.
Deli"eries
Customer P121 Delivery Commit
S-.1
Schedule Prod.
Deli"eries
D1.-
!ecei"e+ .nter+
/alidate 0rder
Inter0Company P121
C121 ; Customer 2rder, Inv1 ; Inventory, P121 ; Purchase 2rder, Prod1 ; Product
C121 C121
DMSCA 2010 - Supply Chain Measurement
Planning Data &athering: Sour#es of Data

/inancial Data
4 10-K ata# Company Annual Reports# Cost Center Reports
4 Must 'e Berifie 'y /inancial (eam ,Controller.

Don-/inancial Data
4 Customers
Deli"ery &erformance
(otal Cycle-(ime &erformance
4 ;( Systems
&rocess-to-&rocess (ransactions
&lannin! System &arameters ,-ea (imes.
4 Suppliers
4 E&- &ro"iers
DMSCA 2010 - Supply Chain Measurement

-ook at )ho o)ns the ata

Consier )here the transactions may 'e

Or!ani%e to alert ata o)ners to !ather ata

Collect an assess Data :uality

@se SCOR Metrics Definition as a !uie

Met+i( .+o(ess *,ne+ /ue /ate Status
2n0(ime Delivery D1< Lo%istics !3!3!==> Complete
9ndama%ed D1? "PL Provider !3$3!==> $=% Collected
2rder /ulfillment
Cycle (ime
D1 @ D1? Deliver (eam !3!!3!==> +ot started
4tcA
Data &athering Plan
DMSCA 2010 - Supply Chain Measurement
Interpreting the Data

@se for choosin! tar!et performance

Critical to unerstan &erformance in a particular
Demo!raphic

Can 'e 7internal8 ,competin! a!ainst other supply chains in

same company.

Ali!ns Strate!y# &erformance# an &erformance 1oals

DMSCA 2010 - Supply Chain Measurement
Attri'ute
SA
&
Metric ,le"el 1. Aou &arity A" Superior 1ap
Relia'ility S &erfect Orer /ulfillment FGH F2H F$H FIH 1H
Response A
Orer /ulfillment Cycle
(ime
1J
ays
I ays K ays J ays I Days
/le+i'ility &
@psC Supply Chain
/le+i'ility
K2
ays
I0
ays
K0
ays
J0
ays
0
Cost & Supply Chain M!mt Cost 12C2H 10CIH 10CJH 10C2H 1CJH
Assets A Cash-to-Cash Cycle (ime
E$
ays
J$
ays
EE
ays
20
ays
2 Days
Continuous Top Do!n Supply Chain
Integration
S#ope
Configuration
A#tiities
DMSCA 2010 - Supply Chain Measurement
,sses
1usiness
Gaps
,ssess
1usiness
Performance
#dentify
Process
2eeds
$reate
Strate3y
,ssess
1usiness
Mar4et
,ssess
Process
Performance
Deploy
$han3es
$reate
To51e
Pro3rams
#dentify
Process
Gaps
#dentify
Process
2eeds
Define
,s5#s
State
,naly*e
!oot
$ause
$reate
To51e
Pro6ects
$reate
To51e
#dentify
Solutions
#dentify
Process
Gaps
SCC: An in"epen"ent6 non-profit glo'al
asso#iation
/orme in 1FFK to #reate an" eole a stan"ar" in"ustry pro#ess
referen#e mo"el of the supply chain for the 'enefit of helpin!
companies rapily an ramatically impro"e supply chain operations
SCC has esta'lishe the supply chain )orl9s most )iely accepte
frame)ork 4 the SCORL process reference moel 4 for ealuating an"
#omparing supply #hain a#tiities an" their performan#e
4 ;t can 'e use to escri'e supply chains that are "ery simple or "ery
comple+ usin! a common set of efinitions an ena'lin! a common
unerstanin!
4 ;t lets companies 5uickly etermine an compare the performance of
supply chain an relate operations )ithin their company or a!ainst
other companies
SCC #ontinually a"an#es its tools an" e"u#ates mem'ers a'out
ho) companies are capitali%in! on those tools
4 2ith mem'ership open to all intereste or!ani%ations
DMSCA 2010 - Supply Chain Measurement
In"ustry Mem'ership S#ope
DMSCA 2010 - Supply Chain Measurement
Typi#al Company -enefits
B!==M Cost Improvements Sin%le
Division
9SB!1") Savin%s supported with
Mer%er
B$) 'orkin% Capital
B<<M Revenue3Inventory
C!M Improvements Sin%le Division
DPero*idesE
DMSCA 2010 - Supply Chain Measurement
S7PP,8 CHAI9 C.79CI,6 I9C:
DMSCA 2010 - Supply Chain Measurement
Comparatie Data
1
Improvement Area Range
Deli"ery performance 167 5 -87
#n"entory $ost !eduction -97 5 6:7
!eduction in order fulfillment cycle time :7 5 9:7
#mpro"ement to forecast accuracy -97 5 8:7
#ncrease in o"erall producti"ity 1:7 5 167
;ower supply chain costs -97 5 9:7
#mpro"ement of fill rates -:7 5 :7
#mpro"ed capacity reali*ation 1:7 5 -:7
DMSCA 2010 - Supply Chain Measurement
1
Stephens '-:::( 1997 Comparative Study Pittsbur3+ <S,
Many Than/s
6francisMsupply-chainCor!