Supply Chain SCOR Model for SME’s

This is our first ERP Guest Blog – something new for us, so please let us know if you like it( or not)

Supply chain management concept was born during the intense competition in textile industry in the 80’s. First supply chain analysis was conduct in USA and the result revealed that total lead-time was 66 weeks from raw material to consumer (40 weeks were spent in the warehouse or in transit). Since then, every company realizes that it’s not the competition between one company and other companies anymore. It’s the competition between one supply chain and other supply chains. Large business enterprises only seek the strongest members to join their supply chain and small and medium business enterprises (SMEs) are usually left out.

Many SMEs try to improve their capabilities by implementing supply chain management concepts but they find it quite a challenging task due to the lack of solid implementation method.

The SCOR Model or Supply Chain Operation Reference Model was created by Supply Chain Council, a US-based non-profit organization. The primary purpose was to establish common framework that every member in the supply chain can understand. The Supply chain process is defined as PLAN, SOURCE, MAKE, DELIVER and RETURN. Implementation plan consists of 4 stages as below,

Analyze Basis of Competition
The starting point of supply chain implementation is to understand the overall business environment. There are 3 sources of information, namely your current performance, customer’s requirements and performance of your competitors/peers. The output of is stage is “SCORCARD”, the dashboard displaying your current level of key performance indicators (KPIs) and desired level of KPIs.

Configure Supply Chain
One of the most prominent areas for improvement is to look at the current structure of your distribution network or how materials flow from suppliers to customers. A geographic map with locations of customers/suppliers/warehouse is constructed. Then, the different scenarios of your distribution network will be established to achieve the right balance between distribution costs and service/market coverage.

Align Performance, Levels, Practices and Systems
Business process improvement is the key of this stage. The SCOR Model provides ready-to-use business processes that are applicable to both Multi-National Companies (MNCs) and SMEs alike. What you have to do is to check how each process is performed and find the way to improve each process. The general idea of process improvement is to add additional processes, combine many processes into one, eliminate unnecessary processes and rearrange the sequence of processes.

Implement Supply Chain Processes and Systems
At the end of the day, you should be able to make a summary of what you want to do to improve the distribution network and business process. That is not the end, the SCOR Model also provides “Best Practice” or “Tried and True Improvement Idea”. This ranges from something like demand planning, supplier relationship management, manufacturing process improvement, implementation of enterprise resource planning (ERP) and so on. The list of best practices in a SCOR Model is very extensive. Then you should try to prioritize improvement plans that work for you.

Final thoughts, the SCOR Model is not the silver bullet but it’s the gateway to supply chain improvement. What you can do is to implement the SCOR Model and carry out improvement plans that don’t require a big investment. The more productive way to implement SCOR Model is to do analysis by yourself, summarize the findings and let consulting companies propose improvement ideas or help you with implementation of more complex best practices.

Guest post by Ben Benjabutr, more details can be found on his SCM Operations blog.

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