Supply Chain Excellence: A Handbook for Dramatic Improvement Using the SCOR Model
By Peter Bolstorff and Robert Rosenbaum
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About this ebook
The Supply Chain Operation Reference (SCOR) framework is a proven solution to the ever-present business struggle of strengthening and improving company-wide processes.
This leading cross-industry model for maximizing efficiency provides you with a lasting competitive advantage, revealing the key to achieving flawless production in a compressed timeline. By incorporating the proven Supply Chain Council DCOR and CCOR models to expand the process scope, Supply Chain Excellence offers a comprehensive look at the entire value chain process and provides you with a step-by-step guide for implementing an improvement strategy that will help your organization succeed.
With examples and insights from nearly one hundred supply chain improvement projects to draw from, you will learn how to:
- identify the causes of misalignment in their company;
- utilize a scorecard to analyze and evaluate their current processes;
- strategize, prioritize, and implement a new method;
- incorporate management techniques such as Six Sigma and Lean;
- and quantify the financial value of supply chain improvement.
Supply Chain Excellence also adapts the use of the SCOR model for an SAP environment, global enterprises, and small businesses to help any organization keep its sales, manufacturing, distribution, and inventory moving in perfect synchronization.
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Book preview
Supply Chain Excellence - Peter Bolstorff
Supply Chain Excellence
Third Edition
Supply Chain Excellence
A Handbook for Dramatic Improvement Using the SCOR Model
Third Edition
Peter Bolstorff
and Robert Rosenbaum
Bulk discounts available. For details visit: www.amacombooks.org/go/specialsales or contact special sales: Phone: 800-250-5308 • Email: [email protected]
View all the AMACOM titles at: www.amacombooks.org
This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought.
Various names used by companies to distinguish their software and other products can be claimed as trademarks. AMACOM uses such names throughout this book for editorial purposes only, with no intention of trademark violation. Individual companies should be contacted for complete information regarding trademarks and registration.
SAP, AcceleratedSAP, and R/3 are the trademark(s) or registered trademark(s) of SAP AG in Germany and in several other countries; SCOR is a registered trademark in the United States and Europe; DCOR and CCOR are trademarks of the Supply Chain Council; ProcessWizard is a trademark of Xelocity Limited; Microsoft, Excel, Access, Office Communicator, and Lync are registered trademarks of the Microsoft group of companies; Minitab is a registered trademark of Minitab, Inc.; GoToMeeting is a registered trademark of Citrix Online, LLC; and Cisco is a registered trademark of Cisco Systems, Inc.
Library of Congress Cataloging-in-Publication Data
Bolstorff, Peter.
Supply chain excellence : a handbook for dramatic improvement using the SCOR model / Peter Bolstorff and Robert Rosenbaum.—3rd ed.
p. cm.
Includes bibliographical references and index.
ISBN-13: 978-0-8144-1771-3 (hbk. : alk. paper)
ISBN-10: 0-8144-1771-X (hbk. : alk. paper) 1. Business logistics—
Management. I. Rosenbaum, Robert (Robert G.) II. Title.
HD38.5.B64 2012
658.7—dc23
2011026467
© 2012 Peter Bolstorff and Robert Rosenbaum
All rights reserved.
Printed in the United States of America.
This publication may not be reproduced, stored in a retrieval system, or transmitted in whole or in part, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of AMACOM, a division of American Management Association, 1601 Broadway, New York, NY 10019.
About AMA
American Management Association (www.amanet.org) is a world leader in talent development, advancing the skills of individuals to drive business success. Our mission is to support the goals of individuals and organizations through a complete range of products and services, including classroom and virtual seminars, webcasts, webinars, podcasts, conferences, corporate and government solutions, business books, and research. AMA’s approach to improving performance combines experiential learning—learning through doing—with opportunities for ongoing professional growth at every step of one’s career journey.
Printing number
10 9 8 7 6 5 4 3 2 1
Dedications
Peter:
To my wife, Cary, with whom
I have spent 25 amazing years!
Bob:
To my wife, Barb, a source of partnership,
support, and so much more.
Contents
Preface
Acknowledgments
Introduction
Chapter 1
The Supply Chain Operations Reference Model
The Cross-Industry Standard for Supply Chain
The Supply Chain Council
The SCOR Framework
Value Chain Processes
Using SCOR to Drive Supply Chain Improvement
Build Organizational Support
Define Project Scope
Analyze Performance
Develop Project Portfolio
Implement Projects
Extend to the Greater Value Chain
The Value of a SCOR Initiative
Chapter 2
Phase 0: Build Organizational Support for Supply Chain Improvement
Finding the Tipping Point for Change
The Evangelist
The Evangelist’s Resume
Experience
The Active Executive Sponsor
Educate-for-Support Behaviors of the Active Executive Sponsor
Planning and Organizing Behaviors of the Active Executive Sponsor
Measures and Strategy Behaviors of the Active Executive Sponsor
Design Solutions Behaviors of the Active Executive Sponsor
Establishing Core Team Buy-In
Collective Experience
Attitude
Effective Communication Skills
Ability to Cope Well in Chaos
Picking the Project Design Team
Problem-Solving Experience
Personality Factors
Dedication: Discipline to Tasks
Access to Data
Chapter 3
Phase 1: Define Project Scope
Planning and Organizing a Supply Chain Excellence Initiative
The Business Context Summary
Strategic Background
Financial Performance
Internal Profile
External Profile
The Supply Chain Definition Matrix
The Project Charter
Chapter 4
Phase 2: Analyze Performance
April 18 and 25: Project Kickoff and SCOR Metrics
The Project Kickoff
Picking a Balanced Set of Supply Chain Metrics
Data Collection and Benchmarks
Chapter 5
Phase 2: Data, Benchmarks, and Competitive Requirements
May 2 and 9: Putting Performance in Perspective
Initial Data Review
The SCORmark Survey
Competitive Requirements Analysis
Rules for Prioritization
Metric Defect Analysis
Sponsor Update Considerations
Chapter 6
Phase 2: Scorecards and Gap Analysis
May 16 and 23: Estimating the Size of the Opportunity
The Scorecard Review
The Scorecard Gap Analysis
Chapter 7
Phase 2: Defect Analysis
May 30 and June 6: Answering the Questions of Who, What, Where, When, and How Much and Then Telling the Steering Team
Defect Analysis
Perfect Order Fulfillment
Order Fulfillment Cycle Time
Upside Supply Chain Flexibility
Supply Chain Management Cost
Inventory Days of Supply
Planning for the First Team On-Site
The Steering Team Review
Change Management: Dealing with Denial
Change Management: Placing Blame
Change Management: Book the Numbers
Chapter 8
Phase 3: Develop the Project Portfolio
June 16 and July 11–15: Building Shared Vision and the Project List
Planning the Brainstorm Event
Invitees
Effective Communication
Organized Brainstorm Categories
The Appropriate Venue
Predefined Leadership Roles
Documentation Approach
Conducting the Brainstorm Session
Chapter 9
Phase 3: Refine the Project Portfolio
July 11–15: Validating the Project Benefits and SCOR Processes
Consolidating Problems to Projects Using SCOR
Validating the Problem Weight
Chapter 10
Phase 3: Opportunity Analysis
July 11–15: Due Diligence for the Project List
Summarizing the Opportunity
The Project Opportunity Worksheet
Identify Further Validation Resources
Conducting Steering Team Review Number Three
Chapter 11
Phase 4: Lay Groundwork to Implement Projects
Mapping Out the Details and Portfolio Implementation Plans
Implementation Project Charters
Chapter 12
Phase 4: From Portfolio Development to Implementation
Organizing Supply Chain Improvement as Part of Daily Life: Faster, Better, and Cheaper
Initiating Implementation
Chapter 13
Phase 4: Initiate Implementation
Getting Organized, Getting People, Getting Data
Identify and Approve Project Resource Plan
Establish the Project Schedule and Kickoff Date
Review Project Background and Develop the Performance Baseline
Chapter 14
Phases 2–4: The Staple Yourself Interview and SCOR Level 3 Process Diagram
June 13–17: How the Work Really Gets Done; a Tool for All Phases
Preparing for the Staple Yourself Interview
Understanding the Staple Yourself Interview Worksheet
Fowlers Analysis of P3 Plan Make
Assembling the AS IS Process and RACI Diagrams
Chapter 15
Phase 4: Solution Design
Defining How the Process Should Work at SCOR Level 3
The SCOR Level 3 Blueprint
Configuring the Level 3 Blueprint for Project 7
Chapter 16
Phase 4: Level 4 Process Development and the Storyboard
How Business Process Improvement Is Like a Good Cartoon
Constructing a SCOR Level 4 Process
Plan Supply Chain (P1) Level 4 Samples
Fowlers P3 Level 4 Processes and Storyboard
Chapter 17
Phase 4: Configure, Solution Test, Pilot, Refine, and Roll Out
Moving the Needle on Performance
Configuration (or Build)
Solution Test
Pilot One, Refine, and Pilot Two
Rollout
Chapter 18
Phase 4: Supply Chain Strategy
Supply Chain Excellence as a Way of Life
What Is Supply Chain Strategy?
Trading Partner
Trading Partner Dimensional Challenges
Organization
Organization Dimensional Challenges
Processes
Process Dimensional Challenges
Technology
Technology Dimensional Challenges
Performers
Performer Dimensional Challenges
Chapter 19
Extend to the Greater Value Chain
Analyzing Barriers to Profitable Growth
Value Chain Excellence
Build Organizational Support
Identify Value Chain Improvement Roles, Evangelists, Active Executive Sponsor(s), Core Steering Team, and Design Team
Assemble and Deliver Appropriate Educational Content and Gain Consensus for a Pilot Project
Define Value Chain Project Scope
Calculate the Number of Value Chains
Assemble High-Level Industry Comparison
Decide on the Project Scope
Analyze Value Chain Performance and Project Portfolio Development
Identify Appropriate Value Chain Performance Metrics and Assemble Appropriate Benchmark Comparisons (Deliverables 1 and 2)
Assess and Prioritize Competitive Requirements
Perform Metric Defect Analysis
Develop a Project Portfolio
Implementation Considerations
Product-to-Market Map
Level 2 Process Diagrams
Staple Yourself Interviews
TO BE Level 4 Process Diagrams with Information System Storyboards
Conclusion
Appendix
Fowlers Inc. Supply Chain Excellence Project Charter
I. Introduction
Purpose of the Project Charter
Project Charter Contents
Maintenance of the Project Charter
II. Project Overview
Scope
Business Objectives
Project Objectives
III. Project Approach
Methodology
Project Schedule
Steering Team Meetings
Risks and Dependencies
Project Organization
Roles and Responsibilities
Benefits and Measures of Success
Benchmark Sources
Benefit Analysis
Project Communication
Index
This publication contains references to the products of SAP AG. SAP, R/3, xApps, xApp, SAP NetWeaver, Duet, PartnerEdge, By-Design, SAP Business ByDesign, and other SAP products and services mentioned herein are trademarks or registered trademarks of SAP AG in Germany and in several other countries all over the world.
Business Objects and the Business Objects logo, BusinessObjects, Crystal Reports, Crystal Decisions, Web Intelligence, Xcelsius and other Business Objects products and services mentioned herein are trademarks or registered trademarks of Business Objects in the United States and/or other countries.
SAP AG is neither the author nor the publisher of this publication and is not responsible for its content, and SAP Group shall not be liable for errors or omissions with respect to the materials.
Preface
Using experience gained from 35 supply chain improvement projects, the first edition of Supply Chain Excellence (AMACOM, 2003) was an instruction manual for anybody who sought a rigorous and proven methodology for systematic improvement in supply chain performance, using a cross-industry reference called the Supply Chain Operations Reference (SCOR®) model.
The second edition (AMACOM, 2007) updated the method and approach based on an additional 30 engagements with companies that completed multiple projects and integrated deliverables and analytical concepts in continuous improvement methods using Six Sigma and Lean. The second edition also expanded the process scope to encompass the entire value chain—including product design and customer sales processes. This was done with addition of two new frameworks: the Design Chain Operations Reference (DCOR) and Customer Chain Operations Reference (CCOR) models.
The third edition (AMACOM, 2012) updates the tips and techniques based on experience with 30 more projects—a majority of which were completed by companies that have not only used the approach multiple times but also extended its application in three areas: global alignment, small business schedule, and utilization of SAP® software. As with previous editions, updated and expanded key concepts, steps, tasks, outcomes and behaviors are illustrated in the context of a composite case: Fowlers Inc. Specific additions for this third edition include:
A refined, more efficient project timeline conducive to global and small business use
Simplified deliverables that better utilize resources and sharpen focus on performance
Integration of SAP functionality and system implementation processes into the Fowlers examples
A section on effective global supply chain strategy
SCOR Level 4 examples of sales and operations planning and master scheduling
Updating to SCOR 10.0
Acknowledgments
We would like to acknowledge those companies and individuals who have directly (and indirectly) contributed to this book. First and foremost, we would recognize Ralph Maltese. Ralph has been a colleague on past projects, a subject matter expert for SAP functionality and implementation methodology and business practices in general, and a great friend. Without his insight, contributions, and energy, this edition would have been nearly impossible. Second, we would recognize our supply chain colleagues at Amway, the United States Air Force, the Diverse Manufacturing Supply Chain Alliance (DMSCA), Kohler Co., McCormick and Co., and Nortech Systems, who again committed themselves to the approach—bringing ideas and suggestions that challenged us to make Supply Chain Excellence easier, more effective, and more relevant. This third edition is another tribute to them. Specific thanks are in order to George Calvert and his team, as well as to Gerry Phillips, Jane McCarthy, Jeff Akers, David Burton, Jim Radin, Denise Layfield, Mike Degen, Pete Kucera, Davor Grgic, Joe Hnilicka, Gerrard Gallenberger, Oliver Kaestner, and the Supply Chain Operating System (SCOS) team.
Third, we would like to recognize Xelocity, eKNOWtion, and SCE Africa, who as partners have adopted the approach, added their expertise and regional perspectives, and successfully delivered project after project—including the application of the ProcessWizard tool—to all but one continent on the planet. Specific thanks go to Ikhlag Kashkari, Michael Diver, Douglas Kent, and Jolanda Pretorius.
Fourth, we would thank the Supply Chain Council. Its dedication to improving SCOR (introducing 10.0) and to introducing new tools, like DCOR 2.0, CCOR 1.0, the SCORmark survey, and a SCOR People section, has provided the platform from which all of us experiment. Thanks are in order for the Council’s permission to use the process models in this project and for its commitment to education through the SCOR Implementation Workshop. We would particularly like to recognize Joe Francis and Caspar Hunsche.
Fifth, we would acknowledge those who have translated Supply Chain Excellence into Korean (collaborated work by Northeast Asia Logistics Innovation Cluster, Bumhan Publishing, 2007); German (Dr. Rolf Poluha, Springer Verlag Berlin Heidelberg, 2007); and Japanese (Japan Business Create Co., Ltd., Japan Institute of Plant Maintenance).
Supply Chain Excellence
Third Edition
Introduction
During dinner at a recent supply chain conference, a senior executive asked me about the latest thinking on how to improve global supply chain performance. Without hesitation I whispered, Have you tried the sardine strategy yet?
Anticipating the puzzled look, I continued: For schooling fish, staying together is a way of life. Fish in a school move together as one.
Photo by Ihoko Saito/Toshiyuki Tajima/Dex Image/Getty Images.
For schooling fish, the move as one
trait is innate. Separation means likely death. For global supply chains, misalignment—failure to move as one—means poor service, high inventory, unexpected costs, constrained growth and profits, and loss of market share.
The purpose of this book is not to convince anyone of the importance of supply chain management (SCM). That case has been well made many times in many industries since the first edition of Supply Chain Excellence was published in 2003. Even then, only the first two paragraphs of the book’s introduction argued the why
of SCM. The rest was about the how.
While using the methodology of this book on roughly 100 supply chain projects around the world, how
has been further refined into a series of processes to achieve the highest levels of supply chain alignment: moving as one.
Here are the 15 most common contributors to supply chain misalignment. Which ones are relevant to you?
Fifteen Common Causes of Misalignment
1. Lack of a Technology Investment Plan
A chief information officer deflected pressure to install the latest and greatest advanced planning system—making the case that simply having state-of-the-art tools was not a good enough reason to put her entire company into the kind of upheaval that such implementations create. As she watched the rapid evolution of web-based applications, event management tools, and demand-driven advanced planning systems, she found herself without a clear technology investment plan that supported the company’s business strategy.
2. Little or No Return on Investment (ROI)
A company bought its Enterprise Resource Planning (ERP) package during the vendor’s end-of-quarter push to meet sales goals. The deal included all the latest add-ons—things like customer relationship management, transactional processing, advanced supply chain planning, event management, and web portals providing self-service for customers and suppliers. Now the executive team is looking for an answer to a deceptively difficult question: When will a return on investment start to show up in the earnings statement?
3. Isolated Supply Chain Strategies
Three executive vice presidents—for sales, marketing, and operations—assembled their own well-articulated strategies for developing supply chain competence within their departments. Then they invested in application technology, manufacturing processes, and product development—all with measurable success. Now what’s missing is a comprehensive blueprint that combines their individual efforts to drive profit and performance across the entire company.
4. Competing Supply Chain Improvements
A company’s