Article written by: PhD. George Ogrinja, Supply Chain Director, Associate Professor Faculty of Economic Cybernetics, Statistics and Informatics, ASE Bucharest
Go back to Part I: Supply Chain Management Practices
In the previous article we talked about processes, but what are the processes of a SCM?
Supply chain management is the management of relations between business partners within supply chain. The SC is managed partner with partner and all these connections between partners of SC are formed and operated through the key processes.
As noted in the discussion on the relationship between Logistics and SCM, SCM is internationally a concept without problems. These problems referring to the lack of a universally accepted definition of SCM were conducted to the existence of several different and competing frameworks for SCM.
In our presentation we have included five models of representation-specific SCM standards which have a level of detailed, meaningful description in the literature:
- SCORE (the Supply Chain Operations Reference) of the Organization of the Supply Chain Council
- the Global Supply Chain Forum (GSCF) model
- Supply Chain Management Process Standards of the Council of Supply Chain Management Professionals
- Frazelle Model of Supply Chain Logistics developed by Ed. Frazelle
- Collaborative Planning Forecasting and Replenishment (CPFR®) of the Organization of the Voluntary Interindustry Commerce Solutions (VICS) and Integrated Business Planning (IBP) that brings together models of CFPR si S&OP (Sales and operations planning)
Space is limited and our intention to create an overview of the existing standards in the field of SCM makes us restrict the number of models and standard of presentation. That’s why in the next section we will make a summary of the first four models, the CFPR and IBP is handled in a separate article with examples of Best Practice.
1. Supply Chain Operations Reference (SCOR)
The Supply Chain Operations Reference (SCOR) model, was developed by Supply Chain Council, a non-profit association that serves all types of organizations interested in improving the processes of SC. SCORE offers a standard set of processes and methods for modeling the business activities of a SC, performance measurement indicators and best practices to solve problems identified during the stages of modeling and measurement processes.
SCORE also facilitates the process of integration of the SC partners through:
- provision of common processes
- the implementation of the standard indicators of performance measurement processes
- providing best business practice applicable to industrial large scale for accelerated improvement of the performance of business processes
For more details see also www.supply-chain.org
SCORE model in version 11 is composed of 6 processes involved in the management of the SC, as follows:
- Plan, processes that balance aggregate demand and supply to develop a course of action which best meets sourcing, production, and delivery requirements.
- Source, processes that procure goods and services to meet planned or actual demand, locations and products.
- Make, processes that transform product to a finished state, to meet planned or actual demand, production sites and methods.
- Deliver,processes that provide finished goods and services to meet planned or actual demand, typically including order management, transportation management, and distribution management; channels, inventory deployment and products.
- Return, processes associated with returning or receiving returned products for any reason. These processes extend into post-delivery customer support; locations and methods.
- Enable, support processes for executing operations from a SC.
Fig. 7 SCORE model Processes
SCORE offers detailed description of standards processes (levels 1 through 3 of the detail) across a range of organizations from diverse industries. Starting with level 4 of the description of a process SCORE no longer uses standards allowing the model to be very flexible in relation to specific operations related to each company.
Fig. 8 shows a simplified levels of detail for MAKE process:
Fig. 8 The SCORE MODEL – Levels of Process Detail
2. Council of Supply Chain Management Professionals framework
CSCMP’s Supply Chain Management Process Standards containing general guidelines to help companies self-assess supply chain processes by identifying process strengths and weaknesses…and to focus attention on areas where improvement efforts will drive the most benefit.
CSCMP (Council of Supply Chain Management Professionals) and APQC (American Productivity & Quality Center) collaborated on the Second Edition of CSCMP’s popular Supply Chain Management Process Standards. The Second Edition of the Standards was rewritten by Supply Chain Visions on behalf of CSCMP.
It covers 10 of the 12 main categories in the APQC Process Classification Framework (PCF)* that are supply chain related or have processes that impact the supply chain, and are organized as follows:
1.0 Develop Vision and Strategy
2.0 Develop and Manage Products and Services
3.0 Market and Sell Products and Services
4.0 Deliver Products and Services
5.0 Manage Customer Service
6.0 Develop and Manage Human Capital
7.0 Manage Information Technology
8.0 Manage Financial Resources (limited to accounts payable and accounts receivable)
9.0 Manage Environmental Health and Safety (EHS)
10.0 Manage Knowledge, Improvements, and Change
The graph of Figure 9 illustrates how a main category of processes is organized, as well as the list of processes/activities of the minimum standard recommended to be part of the structure of process 1.1.1. Assess the External Environment.
- Each section in the main category (CATEGORY) is further organized into groups of processes (PROCESS GROUP). Process groups taken from the PCP (the American Association APQC) that does not refer to the SC were not included in the methodology of CSCMP Council.
- Process Groups contain the next level of detail, related activities/processes (PROCESS OR ACTIVITY). For each process/activity the methodology describes both minimum and best practices standards (see Description of Suggested Minimum Standard for the Process or Activity that describes the component process 1.1.1. Assess the External Environment in order to meet the minimum standard.)
Fig. 9 The process structure on detail level
The Standards provide essential qualitative process data to perform assessment, analysis, and improvement efforts on core processes. However it is also important to review quantitative performance metrics for key processes as part of a comprehensive performance improvement effort.
How will do these?
Becouse CSCMP’s Supply Chain Management Process Standards are mapping on PCF developed by APQC you can use as quantitative performance metrics APQC’s Open Standards Benchmarking (OSB)** to measure your process improvement initiative.
*The PCF developed by non-profit APQC ((American Productivity & Quality Center) provides a comprehensive, cross-industry, open standard framework of industry processes and activities. The PCF organizes operating and management processes into 12 enterprise level categories (level 1) , including process groups (level 2) and over 1,000 processes (level 3) and associated activities (level 4).
**The Open Standards Benchmarking database contains the measures of the processes, based on benchmarking surveys conducted by APQC.
3. The Global Supply Chain Forum (GSCF)
The fundamental structure of SCM in the vision of GSCF is composed of 8 key processes, shown in Figure 10.
Fig. 10 GSCF Model from Douglas M. Lambert, Martha C. Cooper and Janus D. Pagh
The eight key business processes are: Customer Relationship Management, Customer Service Management, Demand Management, Order Fulfillment, Manufacturing Flow Management, Supplier Relationship Management, Product Development and Commercialization and Return Management. Each process is managed by a cross-functional team, including representatives from logistics, production, purchasing, finance, marketing and research and development. Furthermore broken down into a series of strategic sub-processes, thus providing the blueprint for implementation of the framework.
Of the eight processes, customer relationship management and supplier relationship management provide a crucial link to external companies within the chain, other GSCF processes, equally important for the visibility of end-to-end of the SC, are specific to each company’s internal processes and the number varies from case to case.
The value of having standard business processes in place is that SC managers from different organizations in the supply chain can implement advanced collaborative and coordination technologies, because their companies are using common concepts and methods and have appropriate organizational culture.
For more details see also http://www.scm-institute.org/Our-Relationship-Based-Business-Model.htm
4. The Frazelle Framework of Supply Chain Logistics
Frazelle Model is presented in figure 11. To implement best practice in Supply Chain@logistics, the author, Ed. Frazelle recommends the implementation of RightChain model. In figure 12 is made a presentation of RightChain versus WrongChain. The author’s suggestion is to get off the WrongChain from your vision.
Fig. 11 Frazelle’s Framework-detailed structure
Fig.12 Frazelle Model of Supply Chain: WrongChain vs RightChain
RightChain integrates all components of the SC and the performance indicators are global and not local where performances are focused to maximize the level of each element of the logistic chain. Because the WrongChain is not a model to be followed in the case studies that we present to you we will back on the structure of the set of indicators for measuring the performance of a supply chain, so as to educate human resources towards a systemic vision, focused on processes and integration.
All 4 models described previously, SCOR, GSCF, CSCMP and Frazelle are well-defined and potentially could be implemented by a wide range of companies, as follows:
- The GSCF it has an extended area of applicability, ensure the implementation of changes to the organizational structure and is especially recommended to companies migrating from a hierarchical structure to a process-oriented structure.
- SCORE Model and the one offered by CSCMP are easier to implement in the modeling business functions that refers to sources, production and logistics management activities. Also, these models are coupled with the standard methodology for conducting Benchmarking operations.
- Frazelle Model is very close to logistic activities and can be used for the implementation of effective and efficient management of logistic activities.
In conclusion, When we talk about performance in Supply Chain we mean integration. Integration of strategies, processes, organizations, information systems in order to maximize the value provided by Supply Chain.
Today the market request:
- Personalization/customization: the power transferred to the final consumer in SC led to the adjustment of the pattern of production and related services – from mass production (PUSH model) to customized production (PUSH-PULL model) nearest personalized customer requirements
- Collaboration between partners for joint actions coordination of SC
- Real Time: reduction of downtime cross-corporate operations
- Flexibility (Agile), faster adaptation to permanent changing conditions in the market to earn or maintain competitive advantages
- Efficienct processes in SC by applying the concepts of Lean Management (reducing or eliminating non-value added activities)
- Visibility end-to-end inside and outside the company, upstream and downstream processes of SC
- Traceability – ability to identify and track a product or a component back to its point of origin during all stages of SC (see in this context, the current scandal concerning meat animal origin)
- Integrating information and sharing their partner organizations in SC
And they all require models, methodologies that bring together standards and “best practices” that have already proved effective.
See our next articles…