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In today’s competing market environment, manufacturing and distribution companies are going through increasing requirements for better customer service, new products and quicker delivery of products to customer. Everyone in supply chain needs to help reduce cost, streamline production, and speed delivery in order to help their company compete and remain profitable. To achieve this goals, companies are turning to supply chain visibility solutions with performance metrics capabilities.

SAP BusinessObjects Supply Chain Performance Management (SCPM) application helps companies improve supply chain effectiveness, by focusing actionable, operational process metrics that impacts supply chain performance. The capabilities of the SCPM application is build around industry recognized Supply Chain Operations Reference model (SCOR) metrics which works on Assess, Diagnose and Correct mechanism (assess if your supply chain is healthy, then find out where the problem lies, and finally correct the problem).

SCOR Introduction
SCOR is a process reference model developed by the management consulting firm PRTM and AMR Research. SCOR is endorsed by the Supply Chain Council as the cross-industry de facto standard diagnostic tool for supply chain management. SCOR enables users to address, improve, and communicate supply chain practices within and between all interested parties in an extended enterprise. SCOR provides standard business process definitions, terminology, and metrics. It enables companies to benchmark themselves against others and influence future application development to improve business processes in five distinct functional areas: plan, source, make, delivery, and return. SCOR is a management tool, spanning from customer to supplier. The model has been developed to describe the business activities associated with all phases of satisfying a customer demand. The SCOR model is based on three major pillars namely; Process modeling, Performance measurement and Best practices.

SCOR Performance measurement Pillar
SCOR contains metrics to measure supply chain business operations. These metrics are associated with the performance attributes. The performance attributes are characteristics of a supply chain that permit it to be analyzed and evaluated against other supply chains with competing strategies. The metrics in the model are hierarchical, just as the process elements are hierarchical. Level 1 metrics are created from lower-level calculations. Level 1 metrics are primary, high-level measures that may cross multiple SCOR processes. They do not necessarily relate to a SCOR level 1 process (plan, source, make, deliver, return). Lower-level calculations (level 2 metrics) are generally associated with a narrower subset of processes.

Key Supply Chain Metrics towards SCPM
It is important to recognize that supply chain performance is not just a measurement process. Cross-functional, balanced metrics are necessary, but not sufficient. Instead, SCPM is a cycle consisting of identifying the problems, understanding the root causes, responding to problems with corrective actions, and continuously validating the data, processes, and actions that are at stake.

Below are seven key SCOR scorecard metrics which helps in translating company strategic goals into measurable targets, measure effectiveness across end-to-end business processes and proactively identify bottlenecks and pin-point root causes:

(1) Perfect Order Fulfillment
A ‘perfect order’ is defined as an order that meets all of the following five standards:
– An order is considered complete if the products ordered are the products provided and the quantities ordered match the quantities provided (% order delivered in full)
– An order is considered on-time if the location, specified customer entity and delivery time are met upon receipt (Delivery performance to customer by commit date)
– An order is considered perfect condition if the products delivered has no manufacturing or packaging errors and is accepted by the customer (Perfect condition)
– An order is considered to have shipment transaction accuracy if all the shipment documentation related to the order is accurate, complete (with the correct price and quantity) and on time (Shipment transaction accuracy)
– An order is considered to have EDI transaction accuracy if the customer facing EDIs mentioned in the list run error free ( EDI 859, 855, 810) (EDI transaction accuracy)

(2) Order Management Cycle Time
Order fulfillment cycle time is defined as the time taken from customer authorization of a sales order to customer receipt of the product. The major segments of time includes order entry, manufacturing, distribution and transportation.

(3) Demand Management Accuracy
Demand Management accuracy is a measure (in%) of how accurately sales figures are forecasted. MAPE (Mean Absolute Percentage Error) is the industry wide accepted tool to measure supply chain forecast accuracy.

(4) Upside Supply Chain Flexibility
Upside supply chain flexibility measures the amount of time it takes the supply chain to respond to unplanned x% increase in demand from forecast without incurring service or cost penalty. It measures the total time taken (in days) from generating the manufacturing order to its shipment.

(5) Inventory Turns
Inventory turns measures how many times the company inventory is sold or replaced during a financial year. Since inventory (both finished goods and components) has low liquidity, a high inventory turnover ratio would measure that the company is using its inventory assets well. It is the ratio of cost of goods sold to average inventory.

(6) Total Supply Chain Management Cost
Total supply chain management cost measure controllable and uncontrollable costs associated with the plan, source, make, deliver and return supply chain processes.

(7) Return on Working Capital
A measurement comparing the depletion of working capital (cash-in-hand) to the generation of sales over a given period. This provides some useful information as to how effectively a company is using its working capital to generate sales.

SAP BusinessObjects SCPM solution
SAP SCPM helps you manage, monitor and measure the performance of your company’s supply chain. SAP SCPM provides supply chain executives with a holistic view of their entire supply chain including planning, sourcing, manufacturing, operations, and logistics. The application allows organizations not only to measure and monitor various supply chain metrics, but more importantly, allows them to understand the correlation between these metrics and how changing one metric impacts the others in a positive or negative way. SAP SCPM loads relevant data from heterogeneous data sources via flat file extracts and aggregates it in a SAP NetWeaver BI-based data model. The data can then be analyzed via a rich internet application style Web client.
Companies that implement SAP SCPM should benefit from gaining overall visibility and enhanced collaboration across their supply chain, increased supply chain flexibility and responsiveness, and overall improved process efficiency. SCPM provides below capabilities:
• Strategy Management – to develop and define supply chain strategy and manage, monitor and measure its progress.
• Impact Analysis – to understand the relationship between metrics and their impact on each other.
• What-if-Analysis – to simulate different business scenario’s and to find possible effects of the scenario by performing a what-if-analysis.
• Operational Analysis – to provide end to end visibility into all supply chain functions perform root-cause analysis.

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1 Comment

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  1. Alex Cotoara

    Very good overview article, thanks for sharing !

    Please let me know to which SCOR measurement level do the key supply chain metrics belong.

    And also, in Business Objects are this metrics built in or you have to create them.

    Many thanks

    Alex

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