How to Organize the Systems Selection Process Using the SCOR Framework Pittiglio Rabin Todd &...
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Transcript of How to Organize the Systems Selection Process Using the SCOR Framework Pittiglio Rabin Todd &...
How to Organize the How to Organize the Systems Selection Process Systems Selection Process Using the SCOR Framework Using the SCOR Framework
Pittiglio Rabin Todd & McGrathPittiglio Rabin Todd & McGrath
April 12, 2000April 12, 2000David Kennedy, PrincipalDavid Kennedy, Principal
© Copyright 2000 Pittiglio Rabin Todd & McGrath25814
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Today’s Objectives
Provide an overview of a proven process for system selection
Describe how the SCOR-model can be used to help organize the process
© Copyright 2000 Pittiglio Rabin Todd & McGrath25814
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Each stage represents a step-level change in people, processes, and technology
Companies Progress Through Distinct Stages As They Improve Their Supply Chain Performance
Average Performance Best-in-Class Performance
Stage 1Functional
Stage 2Internal Process
Integration
Plan
Source
Make Deliver
Stage 3The Extended
Enterprise
• Functional orientationsub-optimizes performance
• Poor SC performance
• Alignment across sub-processes and levelsof management
• Above-average SCmetric performance
• Internal and external process integration
• Each link in the chain focuses on its customers, competencies and creating value
© Copyright 2000 Pittiglio Rabin Todd & McGrath25814
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Systems and Tools Are Critical to Improving Supply-Chain Performance
• Value Proposition• Core Competencies• Make/Buy Decisions• Capacity Rationalization
Operations Strategy
Organization and Decision-MakingPolicies and Procedures
xxx xxxxxxxx xxxxx xxxxxInformation
Systems and Tools
Senior Management
PlanSource Make Deliver
Supply-Chain Management Processes
Performance Metrics and Benchmarks
AssetsDeliveryPerformance/
Quality
CostFlexibility &Responsiveness
© Copyright 2000 Pittiglio Rabin Todd & McGrath25814
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Companies Can Follow a Proven and Simple Companies Can Follow a Proven and Simple Process to Help Select Systems SolutionsProcess to Help Select Systems Solutions
Fact-BasedSystemsSelection
AssessCurrent
Supply ChainPerformance
Define the Future
OperatingModel
• ISC Benchmarking• SCOR Levels 1 & 2 Mapping• SCOR Qualitative Assessment
- Practices- Process Constraints- Systems and Enablers- Measurements- Organization and Decision Making
• Develop Value Potential
• SCOR Level 3 & 4 Practices• Organizational and Decision Making• Requirements using SCOR Framework
- Business Requirements- Systems Requirements
• Develop Initial Business Case
• Vendor Responses to SCOR Requirements Document• Vendor Demonstrations• RFP Evaluations• Finalize Business Case• Select Software Solution
© Copyright 2000 Pittiglio Rabin Todd & McGrath25814
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Benchmarking Provides a Level 1 SCORcard and Helps Quantify the Potential Value in the Supply Chain
Benchmarking Provides a Level 1 SCORcard and Helps Quantify the Potential Value in the Supply Chain
Benchmarking performance is the foundation for the qualitative assessment
Supply-Chain Performance Versus Custom Population
0% – 20% 20% – 40% 40% – 60% 60% – 80% 80% – 100%
Key Perspectives Level 1 MetricsMajor
Opportunity DisadvantageAverage
or Median AdvantageBest-
in-Class
Delivery Performance to Request 90% 99%
Order Fulfillment Lead Time (MTS) 5 days 2 days
Perfect Order Fulfillment 86% 98%
Supply-Chain Response Time 88 days 46 days
Upside Production Flexibility 10% 30 days 4 days
Supply-Chain Management Cost 10.3% 7 %
Value Added per Employee $210K $466K
Total Inventory Days of Supply 47 days 23 days
Cash-to-Cash Cycle Time 59 days 25 days
Net Asset Turns 2.1 turns 5.1 turns
Flexibility &Responsiveness
DeliveryPerformance/
Quality
Cost
Cu
sto
mer
-fac
ing
Inte
rnal
-fac
ing
Company ABC performance
AssetManagement
© Copyright 2000 Pittiglio Rabin Todd & McGrath25814
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The SCOR Model is the Basis of the Qualitative Assessment
Level Schematic Comments
1
2
3
4
Configuration Level
(Process Categories)
Process Element Level
(Decompose Processes)
Plan
DeliverMakeSource
A company’s supply chain can be “configured” at Level 2 from 17 core “process categories”
F/CNet
DemandsCheck
CapacityCheck
MaterialCheck
InventoryRelease
MPS
Level 3 defines a company’s ability to competesuccessfully in its chosen markets, and consists of:
• Process element definitions
• Process element information inputs, and outputs
• Benchmarks, where applicable
• Best practices, where applicable
• System capabilities required to support best practices
• Systems/tools by vendor
Implementation Level
(Decompose Process
Elements)
Companies implement specific supply-chain management practices at this level. Level 4 defines practices to achieve competitive advantage and to adapt to changing business conditions.
SC
OR
Pro
cess
Re
fere
nc
e M
od
el Top Level
(Process Types)
The basis of competition and supply-chain performance targets are set
Not in
Model
Description
© Copyright 2000 Pittiglio Rabin Todd & McGrath25814
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Each Level 3 Process Element Identifies Metrics, Best Practices, and Software Features
Each Level 3 Process Element Identifies Metrics, Best Practices, and Software Features
Process Element: Schedule Manufacturing Activities Process Element Number: M1.1
Process Element DefinitionGiven plans for the manufacture of specific parts, products, or formulations in specified quantities and plannedavailability of required materials, the scheduling of the operations to be performed in accordance with these plans.Scheduling includes sequencing, and, depending on the factory layout, any standards for setup and run. Ingeneral, intermediate manufacturing activities are coordinated prior to the scheduling of the operations to beperformed in producing a finished product.
Performance Attributes MetricCycle Time Schedule cycle time
Schedule interval
Cost WIP inventory days of supply
Material losses
Scheduled resource cost
Service/Quality Schedule achievement
Assets Capacity utilization
Best Practices Software Features RequiredCross training/Certification HR/Certification support
Maintain data and system integrity byensuring production data, inventory levels,and schedule requirements are 99+%accurate
Detailed production model that synchronizes PLAN andMAKE activities
Schedule optimizes use of shared resources,such as production equipment and tooling
Detailed production scheduling model and simulationcapabilities
Schedule includes preventive maintenanceprogram
Interface between maintenance management system andscheduling system
Schedule minimizes changeover costs Detailed production scheduling model and simulationcapabilities
Real-time feedback from Manufacturing andTest (1.3) activities
Re-synchronization of MAKE activities
© Copyright 2000 Pittiglio Rabin Todd & McGrath25814
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Current State Assessments Workshops Can Be Conducted Using SCOR
41
We will use this template to capture our Level 4 discussionsfor each Execution process element
• ( Suppl ier ) ET OPr oposal
• Sou rci ng P lans•ET O Spec or Desi gn
• Pr ocur ement Si gnal( Suppl ier )
• ET O Reque st forPr oposal( Suppl ier )
• Sou rce Execut ion D ata• Sou rci ng P lans• Re pleni shmen t S ignal s
• Pr ocur ementSi gnal ( Suppl ier )
• M ater i al on O r der
• I nvento ry
• M ater i al Pull S ignal s• M ater i al Invent or y
Locat ion• WI P I nvent or y Locat io n• Fi nished G oods I nvent or y
Locat ion
• ( Suppl ier )Pur chasedM ater i als
• Re ceipt V eri fi cati on
Identi fy Sources of
SupplyTransfer Material
Rec eive and Veri fy
Material
Schedule Material
Del iv eries
Selec t Final Suppl ier(s)
and Negotiate
11Inputs: Outputs:
Est. Time
1
2
Who performs:
Systems used:
1
2
1 1
1
2
1
2
1
2
1
2
1
2
1
2
Step: Identify sources of supplySite: Material:
© Copyright 2000 Pittiglio Rabin Todd & McGrath25814
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Current Practices Can Be Compared toSCOR-based Best Practices
Sample Element of Maturity Framework: Source Execution
Stage 1Functional
Stage 2Integrated Supply-Chain
Stage 3Extended Enterprise
Material planner uses MR andjudgement to generate PO’s andschedule materials
Materials are procured on a basis ofneed using individual PO’s
Significant level of expediting andshortage meetings
Full documentation check, parts countcheck, and visual inspection for allmaterials received; withformulate/engineer to order materialschecked against specifications as well
Material is stocked and released permanufacturing work orders
Material is purchased for the entirecontract or lot
Material inventory managed byMPS/MRP system
Inventory holding policies and cyclecounting used
Inventory aging and stock levelsconsidered only when target maximumlevels are exceeded
Formal excess and obsolescenceprocesses in place, but not proactive
PO routing and approval is electronic Blanket PO’s, monthly invoicing, and pay
upon receipt reduce number and cost oftransactions
ABC material classification based onspend profile, lead time, and usage
Material scheduling techniques differ bycommodity type and ABC classification
“A” class items are inspected only forquantity, with vendor certificationallowing sample testing of most items
High usage material is delivered directlyto point of use
Some high value items have time-phased delivery based on total cost andactual cost of ownership
Some advanced auto-replenishmenttechniques in place (minmax / kanban/breadman)
High value item purchasing based onvisibility of schedule
Differentiated inventory holding policiesby ABC parts/materials classification
Key suppliers carry strategic safety stockat the company site as consignmentstock (pay for use)
Strategic process for quick disposition ofobsolete and excess inventory
Paperless purchasing – orders moveelectronically from requisition topurchase order to payment
No receiving/inspection as vendorcertification allows verification ofquantity and quality
Deliveries made directly to point ofuse for all A and B materials, so onlyoccasional transfers needed
Advanced replenishment techniquesare common
End customers and suppliers arelinked by EDI and have highlyintegrated flow of materials andinformation
Inventory managed by suppliers withreplenishment driven by signals fromcustomers and delivered to point ofuse
Total end-to-end investment isoptimized from customer to keysuppliers
Advance knowledge of obsolescenceprevents any significant build-up ofobsolete inventory
© Copyright 2000 Pittiglio Rabin Todd & McGrath25814
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Fully Developing a Future Operating Model Identifies Critical Business Requirements
OEMSupply-Chain
S2
M4 M4
M4 M4
M4 M4
M4 M4
M4 D2
D2 D2
D2 D2
D2 D2
D2 D2
M4 M4
M4 M4
M4 M4
M4 M4
M4
Many OEM Suppliers80% of product
supply ($$)
D2 D2
D2 D2
D2 D2
D2 D2
D2 D1
Deliver Stocked Product
60% of productvolume
S1
S1
S1
S1
High VolumeRetailers50% product volume
Retailers: All others15% product volume
OEM5% product volume
Captive Retail30% product volume
P2 P4
ManufacturingSupply-Chain
S1
S1
D2 D2 D1
MTS ComponentsSeveral Hundred
Suppliers
D2 D2 D1
20% of productsupply ($$)
M3
M3
MTS Factories
D1
D1
Collocated Distribution
DeliverStockedProduct
D1
40% of productvolume
P2
P2
P3
P3
P4
P4
P4
Company
Factory
Single, Collocated Manufacturing, and Distribution
Suppliers Customers
S2 D2
D2 D2 D1 S1
80% ManufacturedProduct Supply
20% ManufacturedProduct Supply
MTO Components
MTS Components
MTO Components
MTS Components
D2 M4
S2
S2
S2
High Volume Retailers80% product volume
Trend
Retailers: All others15% product volume
Trend
OEM5% product volume
Trend
95% of productvolume
ManufacturingSupply-ChainPlanning
P3VMI
P1
D2 D2 D2 S2 D1
OEM OEM
Cross-docking
5% of productvolume
OEM Supply-ChainPlanning
P2
OEM
P4
P1
Supply-ChainExecution
Future State Configuration
Current State Configuration
P2 P4
© Copyright 2000 Pittiglio Rabin Todd & McGrath25814
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Future Business and Systems Requirements Can Be Organized Using SCOR
Tracking #SCOR
Identifier Segment Name RequirementImportance
(H = Must Have Does Vendor
have this
In Basic ERP In Partner (Which one ?)
93 S3.1Identify Sources of
SupplyAbility to multi-source all items under one product code
and perform tracking and billing functions H 100
94 S3.1Identify Sources of
Supply
Ability to source and allocate demand for goods and services from multiple suppliers, automate demand
allocation among suppliers (e.g., split 30/50/20) H 80
95 S3.1Identify Sources of
Supply
EDI capabilities for all relevant supplier communications (850, 856, 855, 810, 820, 846, 852, & EDIFACT
equivalents). Accommodate country-specific European EDI requirements. H 80 List provided at demo
96 S3.1Identify Sources of
Supply
Provide latest demand requirements or customer specifications, e.g. Johnson's Blue Book, to all vendors
by various means (EDI, e-mail, fax, etc.) H 90
97 S3.1Identify Sources of
Supply
Maintain vendor profiles in approved vendor DB (price, delivery perf.,lead time, quality perf., etc.) With
parent/child heirarchical capability. H 100
98 S3.1Identify Sources of
Supply
Automatic updating of vendor scorecard in approved vendor database (e.g., quality, on-time delivery
performance, etc.) H 90 Scorecard provided at demo
99 S3.1Identify Sources of
SupplyOne vendor database worldwide for finished goods, raw
materials, or contract services. H 90 By server
100 S3.1Identify Sources of
Supply
Ability to search approved vendor database by commodity code, services offered, location, minority-
owned businesses, etc. H 90
101 S3.1Identify Sources of
Supply European 80 character string vendor identifier H 100
102 S3.1Identify Sources of
SupplyReporting capabilities for vendor purchases by
commodity, vendor, minority-owned businesses, etc. H 100
© Copyright 2000 Pittiglio Rabin Todd & McGrath25814
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Software Demonstrations, Evaluations, and Selections Can Be Conducted Using SCOR
SoftwareDemonstrations
SoftwareEvaluations
SoftwareSelection
Negotiations andBusiness Case
Justification
Plan
Source Make Deliver
© Copyright 2000 Pittiglio Rabin Todd & McGrath25814
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Conclusions
The SCOR framework can be easily applied to the systems selection process
Current state assessments of processes, practices, and metrics
Future operating models can be based on the SCOR process elements
Business and systems requirements to enable the future models can be developed referencing SCOR
Software demonstrations can given using the plan, source, make and deliver structure