The SCOR Model, also referred to as the Supply Chain Operations Reference model, is a type of tutorial used to improve your knowledge and usage of the Supply Chain Management system. It is more of a management tool. The Supply Chain Management Council has designed the SCOR Model in collaboration with other distributors, manufacturers, suppliers and logistics service providers, and therefore the model is best suited for people in this category of business.
The SCOR Model compares itself with the best practices in the industry and constantly improvises techniques for distributors, manufacturers and logistic service providers.
This allows the companies using the SCOR Model to compare and learn from their competetitor’s. The SCOR Model also has a number of additional abilities. The Supply Chain Reference Model can function as a performance model that has 4 levels, which are in turn shaped like a pyramid. These four levels can literally walk a company through each step of performance, and guides them through the model. This pyramid is the core of the Supple Chain Reference Model.
What Can the Supply Chain Reference Model do to help a Business grow?
It can characterize the best practices and apply it to your business by further improvising it. It is futuristic in its functionalities, as it is already improvising on what is best in the industry. It also quantifies the performance of your competitors and compares them to you. It can establish targets for you based on this comparison.
How does the Supply Chain Reference Model achieve this?
It uses predetermined and standardized metrics to measure the values which are accurate. It works on a framework of established parameters. It aligns itself with software and current technologies.
The main aim of the Supply Chain Reference Model revolves around the business and all the phases it needs to go through to attain customer satisfaction. The four levels in the pyramid are Plan, Source, Make and Deliver. They are all customer-centric, and work towards the goal of attaining customer satisfaction, which is the primary objective of any business.
What is the scope of the Supply Chain Reference Model?
The SCOR Model includes all the transactions at the customer level into its spectrum of functioning, from invoicing to product or service delivery, and market interactions. The SCOR Model does not only address one section like the Sales, Marketing, or product development alone. It ranges across multiple and complex industries. There are three process levels, and none of these levels focus on how the business should go about conducting its operations or changing its functions. In fact, the SCOR Model makes the business expand its functions to the fourth level which extends some organization specific processes, systems and practices.
Many businesses face challenges when it comes to keeping their customers happy in terms of supply. Many manufacturers function traditionally by keeping high inventories which result in high costs. The Supply Chain Reference Model addresses this problem directly by integrating the best processes across the industry, and not only within the specific business window. When you have the experience of good companies , as well as successful companies at hand to compare and contrast, following their example could result in the cutting of inventories to less than 50%. You can easily avoid a surplus and cut costs, increasing the process of cost savings.
The SCOR Model establishes predetermined values for all the levels such as planning, sourcing, making deliveries, and even returns. The raw materials also go through the same process. The SCOR Model establishes the limits for each step in the process, and these limits are based on the industry standards which in turn are derived from the best practices shared across the industry. Even if products have to go through re-engineering, the benchmarks based on the best practices shared will develop standards for the re-engineering of products, processes involved and costs.
The entire model of the supply chain includes the plan, source, make and delivery that is steered by the customers supply and demand. The SCOR Model creates a buffer inventory based on the understanding of this demand and supply chain. The buffer will be created by a well planned and managed system which results in correct inventories and the avoidance of a surplus.
SCOR has attracted a lot of attention from many countries globally. Many businesses across several countries have incorporated the SCOR Model into their business model. They have implemented this model after studying and analyzing it. After the continued of use of the SCOR Model, companies are now gaining the competitive edge over other companies not only locally, but also globally. China has set a precedent for adapting to the SCOR Model, and lot of Chinese companies today vouch for the model and stand behind it.
What does each step of the SCOR Model involve?
Planning through the SCOR Model involves determining demand, planning supply and managing the material. It determines the resources needed to meet the requirements, plans and coordinates the process of the supply chain, and the returns are included as well. Since it is the very first step in the SCOR Model, it also determines the execution of the other steps. It includes all the factors such as business rules, inventory, transportation, data collection, and compliance. The supply chain model works with the financial model in coordination.
Sourcing in the SCOR Model involves scheduling deliveries, checking them, verifying, transferring and also authorizing payments. Apart from these it also determines the quality and assesses the supplier performance, recording data at the same time. It also manages import and export agreements, along with the supplier agreements.
As you can imagine, this process involves a lot of scheduling production activities, and everything involved in production such as the packaging and staging of the product is carried out. It also manages rules, performance data for production, processes, facilities and equipment.
The Deliver step is all about the steps which involve the delivery of a product. Right from warehouse management to pick up, products are based on customer inquiries, packaging, and shipping. Receiving and installing them at the customer’s site is required. It also maintains collective data on the product lifecycle, inventories for production and transportation costs.
The Returns are another important and final step in the process. It includes returning raw materials and products with defects. Inventory control at this level is also created. It assesses the reasons for returns, defects created at what level and the occurrence of defects.
According to the SCOR council, the Supply Chain Operations Reference Model is used by more than 800 companies at various levels. The companies who want to advance and upgrade their supply chain model have had the most desired outcome. Studies and testimonies show that the Supply Chain Operations Reference Model yields results which have met with expectations from the industry critics. Few of the attested results are up to 50% cost reduction in total supply chain costs, improvement in order fulfillment cycles, and reduction in inventory costs. However, these are just a few of the benefits, and there is a whole lot more.
Another factor to consider is that the SCOR Model has a warehouse management and transport infrastructure management included in it. Warehouse management is about benchmarking all the processes like packaging, picking up goods, transportation of goods, and delivery of goods for the entire process involved in a warehouse. The Transportation and Delivery infrastructure management benchmarks procedures connected with transport, freight, shipping costs and quality of products as well.
It further disintegrates the supply chain into 26 components, and each component is looked into individually. Organizations can get an inside picture using this level of what is happening in the supply chain process. The disintegrated supply chain provides information easily, and using this information is the next level in which the SCOR Model can be planned. The next level in the SCOR Model is all about planning and implementing. The SCOR Model will set targets, define benchmarks, and determine capabilities and best practice sharing. The final level is about improvising and implementing the improvised model.
The SCOR Model works along with the Process Reference Model. The process reference model takes into consideration the business process re-engineering and process measurement for benchmarking. The process reference model helps to capture the current state of the business, and gives inputs to develop the business model into a futuristic business. It also describes the standard processes in management, and tries to explore relationships among various processes. The Process Reference Model helps explain complex procedures in a process pertaining to the management of standard procedures. It converts the data and makes it less complex so that the standard metrics can be applied easily. It standardizes the most complex procedures and process into basic ones. Once this standard is achieved, any process can be tuned, tweaked, measured, managed assessed and reassessed.
The SCOR Model can analyze many more levels apart from these. It can go into the core details of any company and try to bring out the best possible results. Though the SCOR Model speaks of 5 steps to analyze and apply, these 5 steps are further categorized and each sub level has a different functionality. When they are all added together, the end result is a well coordinated study which can revamp a company’s supply chain model into a profit making model.