Supply Chain Dashboards and Sensors - the SCOR Model

“The ability to simplify means to eliminate the unnecessary so that the necessary may speak.” – Hans Hofmann, 20th-century expressionist painter

What SCOR Is

The Supply Chain Operations Reference (SCOR®) is a model that provides a unique framework for defining and linking processes, performance metrics, and best practices into a unified structure across supply chain. This entry will provide a very high level overview of SCOR.  For more details please visit https://supply-chain.org .

SCOR is structured around five core supply chain processes: 

• Plan 

• Source 

• Make 

• Deliver 

• Return

A sixth process, Enable, was added to the Version 11 edition of the SCOR model in December 2012. 

Additionally, SCOR provides a set of supply chain performance attributes that correlate to a set of “Level 1” metrics. 

Performance Attribute	Definition	Level 1 Metric
Supply Chain Reliability	The performance of the supply chain in delivering the correct product, to the correct place, at the correct time, in the correct condition and packaging, in the correct quantity, with the correct documentation, to the correct customer.	Perfect Order Fulfillment
Supply Chain Responsiveness	The speed at which a supply chain provides products to the customer.	Order Fulfillment Cycle Time
Supply Chain Agility	The agility of a supply chain in responding to marketplace changes to gain or maintain competitive advantage.	Upside Supply Chain Flexibility
		Upside Supply Chain Adaptability
		Downside Supply Chain Adaptability
		Overall Value at Risk (VAR)
Supply Chain Costs	The costs associated with operating the supply chain.	Supply Chain Management Cost
		Cost of Goods Sold
Supply Chain Asset Management	The effectiveness of an organization in managing assets to support demand satisfaction. This includes all assets—fixed and working capital.	Cash-to-Cash Cycle Time
		Return on Supply Chain Fixed Assets
		Return on Working Capital

Each performance attribute contains three levels of metrics detail in a parent-child, cascading type of relationship structure.  SCOR accounts for different types of production environments including Make-to-Stock, Make-to-Order, and Engineer-to-Order.  The model goes into further detail defining how work is done.  It covers different types of flow through a company including material and information flows.

One of the powerful aspects of the SCOR model is the ability to link the interdependencies between various important metrics across a supply chain into an integrated system. 

What SCOR Is Not

SCOR does not provide active descriptions or measure for Research and Development, Sales and Marketing, Quality, or IT.

Additionally, SCOR metrics are diagnostic metrics.  This means the system alone does not tell you which changes to make or how to make changes.  Think of the vehicle you drive.  With a SCOR set of metrics embedded in your organization, you have sensors in your engine that provide you data.  The sensors alone are not all that valuable.  Those sensors needs to be connected to dials at your dashboard for you to look at as you are driving.  That is a step in the right direction but still not enough.  The limitation with SCOR metrics is they don’t tell you what to do.  Having a speedometer will tell you how fast you are going but it does not tell you how fast you should be going.  That is posted for you as a target.  You need all three: the sensor, the dashboard, and the right target.

Simplifying: Where SCOR Can Help

While SCOR can become a complicating end in itself for some organizations, there is an approach using SCOR that can simplify the understanding of real drivers for financial KPIs.  Executives need the right number of sensors connected to the right readouts on the dashboard.  The SCOR metrics will become important as we look at financial KPIs in future entries.  Many executives have dashboards but don’t have the connection to the sensor to point them toward proper corrections.  As an example, most organizations can calculate financial performance ratios from a cost accounting perspective. 

• Example: Gross Margin = Gross Profit/Revenue (dashboard)

Many organizations have yet to effectively tie together SCOR metrics to financial performance ratios to understand impacts to customers and to the business.  The measurement alone is not enough.  Some organizations measure way too much.  Measuring the right things and knowing what sensors are feeding data to the dashboards to get the desired results is the important, required link. 

• Example: Order Fulfillment Cycle Time impact to Gross Margin (sensor)

Again, the SCOR metrics are diagnostic metrics or sensors that are very good at indicating the reasons why things are the way they are. 

We will explore the link between the sensors and the dashboard.  

The Third Component - Supply Chain Analytics

"Taking action without thinking is the cause of every failure." - Peter Drucker

Supply chain analytics is the third component to blend in to enable good decision making for executives, alongside supply chain metrics and financial performance KPI’s.  Here is the model including these three components in a traditional Venn diagram.

Gartner defines supply chain analytics as "a set of techniques and technologies that incorporate advanced modeling with data management to uncover existing relationships among variables to determine the probability of a future outcome that can drive a business decision."

We’ll explore analytics in more detail in coming entries.  Ultimately the goal is to translate data into usable information that can drive better decisions.  Executives need this information to make real-time decisions based on what is seen through the windshield (foresight) rather than what is seen in the rear-view mirror (hindsight). 

Data is not hard to find.  In fact, there may be too much.  According to a Gartner 2012 study of 188 executives from supply chain companies, 66 percent of CEOs say that information overload has reached crisis proportions.  How does one sift out the usable data from the massive amount of data available?     

The answers for improved financial performance and customer service are found in the intersection of financial models, supply chain metrics, and analytics.  The first step is to drive the right link between supply chain metrics and financial performance—no small task in and of itself.  With that link defined a connection between supply chain metrics and advanced analytics— predictive and prescriptive—enable executives to take control of the steering wheel of the organization like never before and drive it in the desired direction.   It will enable executives the take action with intentional thinking. 

The Four Languages of Supply Chain

A former Secretary of Commerce liked to tell of how a high-ranking official once responded to a subordinate's request for a raise by saying, "Because of the fluctuational predisposition of your position's productive capacity as juxtaposed to governmental statistics, it would be momentarily injudicious to advocate an incremental increase."

The staff person said, "I don't get it."

The official replied, "That's right."

Say what?

Many of us have experienced funny situations when it comes to language.  This is particularly true when it comes to speaking and understanding foreign languages.  In consulting with many organizations over the last number of years, there are people talking about similar topics at the same table in conference rooms but they are speaking in different business languages.  While funny in social contexts, not understanding and speaking a common language in a business environment can create confusion and disengagement.  Often there are much more significant consequences in the form of customer, financial, and operational inefficiencies and loses. 

If supply chain is the most strategic asset available to the C-suite to achieve corporate objectives, then the team needs to be able to effectively communicate—that is talk, listen, and understand the same content with the same meaning. 

To begin getting to a common language, let’s first understand The Four Languages of Supply Chain. 

1. Dollars 
2. Metrics 
3. Process 
4. Projects

These are spoken in cascading order through the organization by four people groups.  

1. C-suite 
2. Vice presidents 
3. Managers 
4. Frontline personnel

We can look at this model in a picture format.

These languages are not contained in defined boxes.  There is some understanding across these groups but there is a primary vernacular for different segments of the business.  

So what

Different supply chain language dialects impact timely and effective business decisions.  Revenue, customer service, and profitability are all opportunities or risks.  Sales and Operations Planning (S&OP) meetings are the common place where this can be measured most easily.  Just listen to the language being spoken.  The meetings are often filled with the next 12 weeks worth of firefighting topics primarily in the languages of process and projects.  Questions are often asked about the lack of C-level sponsorship.  There is little to no content shared in the language of finance and thus little involvement.  Unfortunately, decisions are made in other limited exposure sessions that leave the balance of the supply chain team confused and frustrated. 

Gartner's executive survey identified growth as the CEO's top priority, yet this research found only 14 percent of supply chain leaders feel they are recognized as revenue growth generators.¹ While the CEO and CFO mandate growth, achieving a more strategic relationship with the rest of the business remains an elusive goal for many supply chain executives. 

Gartner research recommends strengthening and communicating the case to drive business growth to internal business partners to show how the supply chain strategy aligns with the business strategy to promote growth.² To do this, the communication will need to be in the language of finance rather than operational or process metrics such as pallets, units, boxes, or widgets. 

Speaking a common language will require an understanding of the links between operational metrics and financial performance metrics.  We will look at a few of these primary models in the coming weeks to begin building a bridge in establishing a common supply chain financial language.

  

(1)   “CEO and Senior Executive Survey 2013: Supply Chain Implications to Support Global Growth Goals” March 2013

(2)   “Survey Analysis: Chief Supply Chain Officers Conquer Organizational and Capability Challenges to Grow” November 2013