Performance management using SCOR - Supply Chain Council

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Performance management using SCOR - Supply Chain Council

Performance management

using SCOR

Lars Magnusson, Ericsson AB

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 1 | 16 November 2010


© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 2 | 16 November 2010


© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 3 | 16 November 2010


SCOR model @ Ericsson

The Supply-Chain Council (SCC) has developed and

endorsed the Supply Chain Operations Reference model

(SCOR) as the cross-industry standard for supply chain

management.

Ericsson joined SCC in 1997

and has been actively using it’s

frameworks since 2002.

Supply

Chain

Source

Plan

Make

Enable

Deliver

Return

Ericsson use today:

•Base for Supply Process Design

•Base for Supply Performance

management

•Base for external Benchmark

•Future base for interaction with

Sales - CCOR, Design – DCOR

& Product Mgm “xPLOR”

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 4 | 16 November 2010


Performance Management building blocks

Structure

Method

Tools

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 5 | 16 November 2010


Fundamentals-

Ericsson Supply Chain Design

The Ericsson Supply chain Design is…:

• …built on a solid process platform

› Ericsson Business Process for internal integration

› Ericsson Supply Model for flow optimization

› Ericsson Operational Model for legal & tax compliance

SCOR (Supply Chain Operations Reference model) for best practice

and performance management

• …supported by an integrated Enterprise Resource Planning tool

(SAP)

• …controlled by a global performance & visibility platform

• …enabled by a dedicated global process and business development

team

in order to fulfill commercial agreements with our customers

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 6 | 16 November 2010


Not all Supply Chains are alike…

Plan Supply Chain

Plan

Plan

Plan

Plan

Plan

Deliver

Return

Source

Return

Make

Deliver

Return

Source

Make

Deliver

Source

Return

Deliver

Return

Source

Return

Return

Return

Ericsson

Partner

Tier 3

Tier 2

Tier 1

Customer

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 7 | 16 November 2010


Volume index

Behavior of supply chains vary….

Sample of typical volume variations

Product A

Product B

200

150

100

50

0

1 2 3 4 5 6 7 8 9 10 11 12

Months

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 8 | 16 November 2010


Events in Supply Chain

basis for Performance Management

A reduction in

warehouse stock

due to a withdrawal

of stock or the

delivery of goods to

a customer.

The delivery of goods from a

vendor to a company. It is used to

update inventory quantities and

values.

The date on which goods are to arrive at the

customer's premises.

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 9 | 16 November 2010


Events in Supply Chain – basis for Performance

Management in physical flow

Inventory

Received (GR) but

not departed (GI)

t1

t2

t3

Accuracy

Actual Event

Planned /Confirmed

t4

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 10 | 16 November

2010


Data capturing is not always easy, due to external

factors….

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 11 | 16 November

2010


…and we do not always make it easier inside our

own companys administrative flow

Actual

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 12 | 16 November

2010


What do we mean by end-to-end control

When wanting endto-end

performance

mgm – decide from

which perspective

you view the supply

chain

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 13 | 16 November

2010


Summary - Structure

• Express your Supply Chains in

understandable flows

– all supply chains are different !

• Review your events and secure data

capturing

• Secure common interpretation of data

and data quality definitions

• Decide what you mean by end-to-end

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 14 | 16 November

2010


Visibility is an enabler for Supply Chain Control

Ericsson internal flows

are tracked in the

Ericsson Order

systems (One / EM)

Inventory is

controlled across

the entire supply

chain (One)

Efficient work methods and

routines for Deviation

Management is deployed

Regional/Global 1st &

2nd tier DSP systems

is used for detailed

transport tracking and

deviation management

Tactical control is

performed in the Event

Manager tool

Data Analysis and

Measurements is

performed across the

entire Supply Chain

(EBW)

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 15 | 16 November

2010

Granularity of data:

Minute

Hour

Day


Customer

Internal

Select your performance criteria based on available

SCOR metrics

SCOR metrics: Standard Level 1 Metrics

Performance Attribute Metric (level 1)

Reliability

Perfect Order Fulfillment

Responsiveness Order Fulfillment Cycle Time

Flexibility

Supply Chain Flexibility

Supply Chain Adaptability †

Cost

Supply Chain Management Cost

Cost of Goods Sold

Assets

Cash-to-Cash Cycle Time

Return on Supply Chain Fixed Assets

† upside and downside adaptability metrics

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 16 | 16 November

2010


Set up a good presentation of your selected

metrics…

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 17 | 16 November

2010


..and decide what is good for each of your supply chains

Performance attributes Benchmark Ericsson

Median/Best

20%

Wanted

pos

Current pos

Q1

1 Delivery Precision

2 Lead time

3 Supply chain management

cost

4 Inventory days of supply

Med: 88%

BIC: 97%

Med: 29 d

BIC: 8d

Med: 10%

BIC: 6,6%

Med 104 d

BIC: 43d

xx.0%

RBS ~ nn days* + distr

yy.c%

nn days

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 18 | 16 November

2010


Monitoring of events in Event Manager

Actual Planned

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 19 | 16 November

2010


Ericsson Supply Process deployment of SCOR – Measurement

System in SAP BW

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 20 | 16 November

2010


Elements that we have to manage

EVA - $

Outbound

Supply

Operations

Cost

Outbound WIP cost

(“things” moving)

Outbound Capital cost

(“things” standing still)

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 21 | 16 November

2010


Summary - Tools

• Do not get caught up in the KPI

swamp – let SCOR assist in making

your definitions

• Benchmark - internally or externally

• There are a lot of good tools in place.

Make sure you know what you need

them for

• Use the right tool for the right thing –

data granularity, statistical analysis etc

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 22 | 16 November

2010


Integrated Improvement

SCOR, Six Sigma and Lean

SCOR, Six Sigma and Lean aim to improve the

business by optimizing system performance,

reducing variation, and eliminating wasteful

activities.

SCOR

Six Sigma

Lean

Y= f (X1 , ... , XN )

m

s

• Optimization of Process,

Policy, Organization, and

Systems

• Variation reduction

• Problem solving methodology

• Stability and accuracy

• Speed in the value chain

• Waste elimination

• Value system redesign

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 23 | 16 November

2010


RNAM

The Methods for Supply Chain design

is developed, maintained and governed by:

-A strong global Supply Process team

-A common Subject Matter Expert network

-A Regional Supply Management team

RMEA

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 24 | 16 November

2010


Deployment sample…..

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 25 | 16 November

2010


How can SCOR help me with the issue at hand

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 26 | 16 November

2010


Customs problems – what to do

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 27 | 16 November

2010


Start in the Enable Deliver area

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 28 | 16 November

2010


Locate the process step…

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 29 | 16 November

2010


Look at the identified issues…

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 30 | 16 November

2010


Review what I can do to improve the competence to

avoid duplication of errors…

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 31 | 16 November

2010


SCOR will assist you in different ways…

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 32 | 16 November

2010


Summary: Method

• Use the right combination of tools

• Manage your data quality

• Secure competence in your team –

performance management is an

important business skill

• Get into improvement mode and focus

on the right cost elements

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 33 | 16 November

2010


Performance Management building blocks

Scope

Key areas

Approach

Structure Tools Method

Creation of a common

measurement architecture

• Common Data

interpretation

SCOR framework

• Information Mgm

Definitions

Supply Process Definitions

• Process Events

Broad based use of high quality

data for focused continuous

improvement activities

• Professional Statistical Approach

• Deployment of standard

definitions

SCOR metric definitions

• SAP BW SCOR based

“Standard Business content”

• Global process documents

Creation of systematic &

pragmatic work forms for

continuous improvements

• Feedback loops

• Root Cause Analysis

• Continuous improvements

• Fulfillment of business

objectives

• 6 Sigma methodology

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 34 | 16 November

2010


So how do you make the power of the supply chain

visible to your superiors and peers…

EVA - $

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 35 | 16 November

2010


Elements that we have to manage

EVA - $

Outbound

Supply

Operations

Cost

Outbound WIP cost

(“things” moving)

Outbound Capital cost

(“things” standing still)

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 36 | 16 November

2010


Phases in our Deliver chain

Each area will have an impact on our financials

EVA - $

Precontract

activities

Execution

activities

Closing

activities

Cost of

Sales

Net

Sales

Capital

MARGIN

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 37 | 16 November

2010


Economic Value-Add Creation

EVA - $

Operative

Margin

Increased

Revenue

Add measures

Revenue lift

-Increased responsiveness

-Increased visibility

- …

Economic

Value Add

Return in

invested

Capital

Reduce

Cost

Add measures

Reduction of Supply Chain cost

-Margin improvement

-Freight cost

- Increased resource efficiency

-….

Capital

Efficiency

Reduce

Working

capital

Manage Working Capital

-Inventory reduction in chain

-Improved cash-to-cash cycle

-Trade compliance effect

(duty & VAT deferment)

- …

Cost of

Capital

Fixed

Capital

reduction

Fixed Capital reduction

-Distribution Center utilization

-…

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 38 | 16 November

2010


Linkages between metrics and financial factors

EVA - $

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 39 | 16 November

2010


SCOR Index

EVA - $

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | Performance Management using SCOR| Slide 40 | 16 November

2010


Lars Magnusson

Supply Development

Ericsson AB, Customer Logistics

Lars.m.magnusson@ericsson.com

Questions

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 41 | 16 November 2010

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