SCOR

Using SCOR for analysis and performance

SCOR consists of a set of standardised metrics businesses can use to measure organisational performance in five key process areas. These metrics are used for two purposes: to identify how an organisation is performing in each area and to identify potential areas of improvement. The model can also be used as a benchmarking tool, helping organisations assess their performance against industry sectors. By including best practices for each process area, organisations can implement appropriate strategies to address areas of concern.

Five areas of SCOR

The five key process areas are as follows.

1. Plan. As part of effective supply chain management, you need to balance supply chain resources with supply chain efficiency. This involves managing factors such as ensuring sufficient inventory is available when required without overcommitting to resources that won’t be used. Effective planning entails communicating policies to manage considerations such as inventory levels, asset management, transportation and regulatory compliance to ensure supply chain processes align with the business’s financial plan.
2. Source. An effective sourcing process will require you to assess both the goods and services you purchase and the infrastructure of the supply chain. You need to examine whether the goods and services you buy are fit for purpose, align with the Five Rights of Procurement, and whether the supply chain infrastructure is sufficiently designed to support optimal performance. This element includes considerations such as inventory management, supplier networks, supplier performance and negotiating effective supply agreements.
3. Make. The manufacturing and production processes for the business’s products or services should include several considerations, such as whether they will be made to order, made to stock, or engineered to order. The ‘make’ element of SCOR should assess each activity within the production process, manage the production network, review all necessary equipment and facilities, and examine any transportation processes required before distribution.
4. Delivery. This aspect encompasses processes such as order capture, warehousing, distribution, logistics, transportation, and relevant paperwork (delivery notes, invoicing, etc.). You should consider factors such as inventory handling and storage, inspection and quality control, import and export considerations (customs, tariffs, etc.,) and life cycle management.
5. Return. This final stage of SCOR examines return management, considering factors like reverse logistics (in the event of damaged or defective goods), and the return of reusable packaging materials, such as pallets or containers. It analyses processes for return management, such as logistics methods, receipting processes, returning products to inventory, and any necessary remanufacturing processes.

As part of a SCOR analysis, you may assess the costs associated with each stage to help analyse efficiencies and identify areas of improvement. A SCOR exercise can also help you understand the links between different supply chain activities and aid the creation of a value chain map aligned to business strategies.

The SCOR model was developed by the Supply Chain Council (SCC) in 1996 but is now maintained by APICS (formally the American Production and Inventory Control Society). It is designed to address efficiency across five supply chain performance attributes: reliability, responsiveness, flexibility, costs and asset management. Each of these performance attributes has various metrics that you can choose to suit the context of your organisation’s supply chain. The model consists of 250 metrics in total, with three levels of analysis.

• Level 1- Organisation and hierarchical structure.
• Level 2 – Process level.
• Level 3 – Diagnostic level.

The metrics are designed to support each level and act as diagnostic measures. For example, level 2 metrics will serve as a diagnostic measure to determine the key performance elements required to achieve level 1 metrics. By analysing level 2 performance metrics, you should be able to explain performance gaps or identify improvement areas for level 1.

The five attributes of SCOR are as follows.

1. Reliability -The ability of the business to perform activities as expected. This attribute focuses on the predictability of process outcomes. This metric primarily monitors the quality of a product or service.
2. Responsiveness – This attribute is concerned with speed, for example, the speed at which specific tasks or processes are performed, or the speed at which the supply chain can provide goods or services to a customer.
3. Agility (or flexibility)- This refers to a business’s ability to respond to external influences, such as risks, threats, opportunities, etc. Organisations should measure their ability to adapt or flex to changing environments.
4. Costs – This attribute is concerned with the cost of operating the supply chain and considers aspects such as labour, material, logistics and management costs.
5. Asset management efficiency – This refers to an organisation’s ability to use assets efficiently, considering factors like inventory reduction and outsourcing versus insourcing decisions.

Referring back to the three levels, a level 1 metric for reliability might be the perfect fulfilment of orders. Level 2 metrics to support this may include the percentage of orders delivered on time, in full, with no defects. Level 3 metrics might include the number of complaints for missing documentation or the rate of error-free returns shipped.

Benefits of SCOR

Benefits

• It can help organisations identify weak areas, develop improvements and define common supply chain management processes.
• It enables organisations to benchmark themselves against industry best practices and develop matching strategies.
• It can be used globally across any industry and sector.
• It helps drive standardised processes across the supply chain, aiding more effective supply chain integration, collaboration and communication.
• It can aid risk management by identifying areas of concern.
• It can also be used as a supply chain mapping tool, providing better overall visibility, insights and information on the supply chain.
• It can aid decision-making by providing access to data-driven insights that can help you to make informed decisions.

SCOR best practices

In order to fully leverage the benefits of SCOR, it is important to consider the following.

• Implementing an effective SCOR model may require significant resources like finances, time, and specialist expertise. Employees may need training to implement and use the model, slowing the initial start-up process.
• It is important to ensure a comprehensive understanding of the SCOR framework to fully appraise the business. You will need to make sure all activities within the five key process areas are captured and measured against the five performance attributes for the model to work effectively. For example, if a key process in the delivery area is missed, it may not be measured for factors like cost. This means you will not have a true view of organisational performance.
• Although comprehensive and relevant across global industries and sectors, it is not customised to individual businesses, meaning it may miss the unique needs of some organisations. The framework may need to be adapted, or these needs considered elsewhere. In addition, the SCOR model doesn’t provide options to evaluate other vital business areas, such as sales and marketing, some aspects of service and support, human resources or technology development. When using the model to benchmark against industry standards or other competitors, these areas may need to be evaluated in other ways.
• It requires regular updates and audits to ensure the model remains relevant and effective.
• You will also need to monitor changes in the organisations internal and external environment and assess whether changes need to be made to the SCOR model to accommodate. For example, new emerging risks or changes in processes may open up opportunities for new activities to be measured, or your performance expectations may need to be realigned, for example, adjusting delivery expectations due to a natural disaster.
• The SCOR model relies heavily on data availability and quality, meaning sufficient due diligence and data-checking processes are necessary to ensure accuracy. You may also need to use supply chain management technology such as ERPS, MRP or blockchain, reporting software or automation tools to streamline processes, improve accuracy and reduce human error.
• Any key performance indicators developed to measure the process areas and performance attributes will need to be SMART and fit for purpose.
• An effective SCOR analysis may involve input and collaboration with other functions. Effective cross-functional working and clear communication is essential.

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