Intelligent Manufacturing € December € 1996 € Vol. 2 € No. 12

SCOR Launched to Improve Supply Chain

For decades, the "supply chain" has been managed as a series of simple, compartmentalized business functions. More recently, with enterprise-wide supply chain management emerging as a crucial opportunity for competitive advantage, 69 manufacturers have worked together to build a cross-industry framework for improved supply chain performance: the Supply Chain Operations Reference model (SCOR). Defining common supply chain management processes and matching them against "best practices," benchmarking performance data, and optimal software applications, the reference model provides the manufacturing community with a powerful tool in improving supply chain performance to world-class levels.

The Supply Chain Council was formed earlier this year to construct the reference model, which will provide manufacturers, suppliers, distributors and retailers with a framework to evaluate the effectiveness of their supply chains and to target and measure specific process improvements (see Intelligent Manufacturing, October 1996). Organized by Boston, Mass.-based Advanced Manufacturing Research (AMR) and Pittiglio Rabin Todd & McGrath (PRTM), the council includes such companies as Dow Chemical, Texas Instruments, Allied Signal, Merck & Co., and Federal Express.

"Over the past seven months, dozens of manufacturers have pooled their real-world supply chain experiences to build a flexible framework and common language that can have a dramatic impact on the ability of companies to improve the supply chain, both internally and among supply chain partners," said Supply Chain Council advisory board member Richard Beck, director, supply chain reengineering at Compaq Computer Corp. (Houston, Tex.).

The SCOR model was designed to enable companies to communicate, compare and learn from competitors and companies both within and outside of their industry. Key components are:

Standard descriptions of the process elements that make up complex management processes
Benchmark metrics used to compare process performance to objective, external points of reference
Description of best-in-class management practices
Mapping of software products that enable best practices

An operations reference model like SCOR is used to describe, characterize and evaluate a complex management process. "The operations reference model approach is the logical extension of business process reengineering and other process improvement efforts," said PRTM director Bill Helming. "Early reengineering efforts considered little customer focus or competitive input, for example, and the effectiveness of benchmarking was limited by the lack of a common language and observations that didn't transfer well to new industries or even within an enterprise. The operations reference model combines the benefits and lessons of past methods into a configurable, cross-functional framework."

According to Helming, a historical shift in management is underway. "Process-based management is replacing function-based management," he observed. "Integration among management processes is increasing. To enable this shift, management processes need to be well defined and then effectively implemented."

With the release of SCOR, the Supply Chain Council will now focus on making the model available and on encouraging its use in implementation. The council is opening its membership and licensing copies of SCOR at no cost to member industrial companies, logistics and distribution companies, and supply chain software companies. The reference-model can be downloaded with a member's password from the council's home page on the World Wide Web (www.supply-chain.com). It will also be available to members at a nominal fee embedded in a simple software application.

At the launch of SCOR, PRTM previewed the findings of its 1996 Integrated Supply Chain Benchmarking Study, an examination of more than 200 companies that revealed a dramatic performance gap between average and best-in-class (the top performing 20%) companies. Notably, the study showed that best-in-class companies enjoy a cost advantage ranging from 0.3% to 7% of revenue over median companies in their industry.

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