One of the most promising models for strategic decision-making in supply chain management is known as the SCOR model. 70 leading members of the manufacturing, distribution, and solutions supplier industries (in collaboration with the Supply Chain Council) developed the management tool, which is short for “Supply Chain Operations Reference Model.” The program has been designed in a way that it can applicable to any size operation. The SCOR model is a process meant to assess waste, establish standards, and continuously improve. It is a repetitive framework of constant engagement and discovery, developed to describe all the business activities associated with the phases of satisfying a customer.
SCOR MODEL: Management Process
The SCOR model is based on three major principles: process modeling/re-engineering, measuring performance, and best practices. There are 5 distinct process-modeling building blocks to the SCOR model:
- Plan: These are processes that relate to demand and supply planning. Standards must be established to improve and measure supply chain efficiency. These rules can span compliance, inventory, transportation, and assets, among other things.
- Source: This step in the SCOR model involves any processes that procure goods or services in order to meet a demand (real or planned). Material acquisitions and sourcing infrastructure are examined to determine how to manage the supplier network, inventory, supplier performance, and agreements. This stage should help you plan on when to receive, verify, and transfer a product in the supply chain.
- Make: In order to meet planned or actual demand, this is the process in which a product is transformed to its final state. This step is particularly important in the manufacturing and distribution industries, and helps to answer the questions of: make-to-order, make-to-stock, or engineer-to-order? The “make” part of the process includes production activities, packaging, staging, and releasing the product. It also involves production networks and managing equipment and facilities.
- Deliver: Any process that involves getting the product out, from order management and warehousing, to distribution and transportation. This step also involves customer service and overall management of product lifecycles, finished inventories, assets, and importing/exporting requirements.
- Return: This final step focuses on all products that are returned or received, for any reason. Organizations must be prepared to handle the return of defective products, containers, and packaging. The return process involves the application of business rules, return inventory, assets, and regulatory requirements. This final step directly extends to post-delivery customer support and follow-up.
SCOR MODEL: Scope
The SCOR model does not attempt to explain every business process or activity. As in all business models, there is a specific scope that the SCOR model addresses, including the following segments:
- Customer Interactions: The entire process of the customer relationship, from order entry through paid invoice.
- Product Transactions: All product, from the supplier’s supplier to the customer’s customer, including equipment, supplies, bulk products, etc.
- Market Interactions: From the understanding of demand, to the fulfillment of every order.
The focus of SCOR can also be defined and measured on 3 levels of process detail.
- Level 1: Defining Scope – geographies, segments, and context
- Level 2: Configuration of the supply chain
- Level 3: Process element details – identifies key business activities within the chain.
A major supplier of light bulbs around the world, Philips Lighting has been using the SCOR model since 1999. They recently reported to the Supply Chain Council that over the years, incorporating the SCOR model into their business framework has directly resulted in improved customer service and reduced inventories. The SCOR model is a tried and true process for manufacturing and distribution industries that has seen decades of success. When applied correctly, it can streamline processes and refine your organization’s supply chain.