1.6 Supply Chain Operations Reference (SCOR) Model
As we have seen in the previous sections, supply chain management involves coordinating a diverse set of functions within an organization, as well as managing relationships with a variety of external entities. This can quickly become complex, and managing this complexity effectively requires a system of standards, metrics, and procedures. Recognizing this need, the Supply Chain Council developed the Supply Chain Operations Reference (SCOR) model.
The SCOR model is a process reference model that provides a framework for evaluating and comparing supply chain activities. It encompasses all customer interactions, from order entry through paid invoice, as well as all product transactions, from supplier’s supplier to customer’s customer. It includes the six primary management processes:
Plan: This involves developing a strategy for managing all resources that meet customer and company demands. It includes processes like demand planning, production planning, and inventory planning.
Source: This involves procuring goods and services to meet planned or actual demand. It includes processes like supplier selection, order management, and supplier performance monitoring.
Make: This involves transforming product to a finished state to meet planned or actual demand. It includes processes like production execution, quality assurance, and production scheduling.
Deliver: This involves providing finished goods and services to meet planned or actual demand, typically including order management, transportation management, and distribution management.
Return: This involves managing product returns for any reason. It includes processes like return order management, return inventory management, and return disposal.
Enable: This involves managing and developing the business rules, performance metrics, data models, and practices that govern the operation of the supply chain. It includes processes like business rules management, data management, performance management, and risk management.
The SCOR model is useful for several reasons. It provides a standard description of supply chain processes, which facilitates communication and collaboration between different entities in the supply chain. It also provides a set of standard metrics for measuring supply chain performance, which allows organizations to benchmark their performance against industry standards and identify areas for improvement.
The SCOR model integrates both the entity view and the functional view of supply chains. From the entity view perspective, the SCOR model recognizes the importance of managing relationships with suppliers and customers, and it includes processes for sourcing materials from suppliers and delivering products to customers. From the functional view perspective, the SCOR model encompasses a range of internal functions, including planning, sourcing, making, delivering, and returning. By integrating these two views, the SCOR model provides a comprehensive framework for managing supply chains.
The SCOR model not only integrates the entity and functional views of supply chains, but it also emphasizes the importance of both internal and external alignment. Internal alignment refers to the coordination and collaboration among different functions within an organization, all working towards a common organizational goal. For instance, the marketing department must align with the operations department to ensure that the products being promoted are available in the right quantities at the right time. Similarly, the finance or accounting department must align with the purchasing department to ensure that procurement activities are within budget and that the necessary funds are available to pay suppliers on time. Conversely, the purchasing department must ensure that their purchases are within the budget set by the finance department. This alignment of functions towards a shared objective is crucial for the overall success of the organization.
External alignment, on the other hand, refers to the coordination and collaboration among different entities in the supply chain, such as suppliers, manufacturers, distributors, and retailers. Achieving external alignment can be challenging, as it often requires convincing external partners to align their strategies with the needs of the supply chain. For example, a clothing retailer may need to work closely with its suppliers to ensure they adopt sustainable practices, aligning with the retailer’s commitment to sustainability. If a supplier is unwilling or unable to adopt such practices, the retailer may need to seek out other suppliers who are better aligned with its supply chain needs.
The SCOR model provides a framework for achieving both internal and external alignment by standardizing processes, defining clear roles and responsibilities, and establishing performance metrics. This alignment is crucial for the smooth functioning of the supply chain and for achieving the ultimate goal of supply chain management: to deliver the right product, at the right time, at the right place, and at the right cost.
The structure of this textbook is designed around the SCOR model. The initial chapters will focus on strategy, quality, and sustainability, which are integral parts of the ‘Plan’ process in the SCOR model. We will then move on to chapters dedicated to ‘Source’, where we will discuss various aspects of sourcing, including supplier selection, order management, and supplier performance monitoring.
Following this, we will delve into the ‘Make’ process, discussing the transformation of products or services to meet demand. This will include topics such as production execution, quality assurance, and production scheduling. The subsequent chapters will focus on ‘Deliver’ and ‘Return’, covering topics such as order management, transportation management, distribution management, and the management of product returns. Throughout all these chapters, we will integrate the concept of ‘Enable’ by discussing relevant metrics and performance measures. This will provide you with a comprehensive understanding of how to manage and develop the business rules, performance metrics, data models, and practices that govern the operation of the supply chain.
As we embark on this journey together, I want to emphasize the importance and excitement of studying supply chain management. Regardless of your major or your future career path, understanding supply chains is crucial. Whether you’re a marketing major needing to ensure the right products are available for customers, a finance student wanting to control costs and book revenues, or a management student aiming to ensure the long-term success of a firm, supply chain knowledge is indispensable. So, let’s dive in and explore the fascinating world of supply chain management!
