supply chain project
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- 1 -Spring 2010 | WICHITA STATE UNIVERSITY
A Systems Perspective of Balanced Scorecard and SCOR Assessment of Supply Chains
By
Sumanth Pandith Surendra
- 2 -Spring 2010 | WICHITA STATE UNIVERSITY
Project Objectives
Modeling complexity in the supply chain system. Mapping and analyzing interdependencies among the sub-system’s
in a supply chain using Supply Chain Operations Reference-Model (SCOR) model.
Applying ISM (Interpretive Structural Modeling) technique for analyzing the complex structure.
Supply chain performance management using Balanced Scorecard (BSC) and SCOR models.
Integration of BSC and SCOR models for optimizing the performance management.
- 3 -Spring 2010 | WICHITA STATE UNIVERSITY
Introduction to Systems Engineering
A system is defined as a set of interacting or interdependent entities which forms an integrated whole.
A system is complex when it contains complex interdependencies among its entities or sub-systems.
Systems engineering is a field which deals to manage these complex interdependencies in a system.
The need for systems engineering arose when there is increase in complexity of the system.
- 4 -Spring 2010 | WICHITA STATE UNIVERSITY
Introduction to Supply Chain
A supply chain is defined as the network of manufacturers, suppliers, distributers, retailers.
A supply chain typically involves materials and information flow.
Source: Wikipedia
- 5 -Spring 2010 | WICHITA STATE UNIVERSITY
Supply chain from system’s perspective
A supply chain is seen as a system with its sub-systems (entities) and their interactions.
The interactions is known as interdependencies. Supply chain is said to be complex if the interdependencies among
the sub-systems are complex. The sub-systems in a supply chain could be planning, production
and distribution departments. The information flow and the material flow among the sub-systems
are the interactions or the interdependencies.
- 6 -Spring 2010 | WICHITA STATE UNIVERSITY
A typical supply chain system with interdependencies
SalesSales
ProductionPlanning
General LedgerGeneral Ledger
PurchasingPurchasing
CustomersCustomers
VendorsVendors
InventoryInventory Shop Floor execution
A/RA/R A/PA/P
- 7 -Spring 2010 | WICHITA STATE UNIVERSITY
Need for a model
A system is modeled for analyzing complex interdependencies. Some of process models used in systems engineering for modeling
are: Control flow graphs. Functional flow block diagram. Binary decision diagram. IDEF diagrams N2 charts.
- 8 -Spring 2010 | WICHITA STATE UNIVERSITY
SCOR Model
SCOR (Supply Chain Operations Reference-Model) is a process reference model used for modeling supply chain system.
SCOR was first developed by Supply Chain Council (SCC). SCOR is a management tool used for process modeling and
performance management. SCOR has 5 distinct processes for supply chain modeling. Plan, Source, Make, Deliver and Return are the 5 sub-systems in a
supply chain.
- 9 -Spring 2010 | WICHITA STATE UNIVERSITY
SCOR model for a supply chain showing the sub-systems
The First level hierarchy of the Supply Chain System with sub systems.
- 10 -Spring 2010 | WICHITA STATE UNIVERSITY
MESTT (Meta Data Enabled Systems Thinking Tool)
Reports
Database
yEd
Query
ISM
GraphmlInterpreter
Input
- 11 -Spring 2010 | WICHITA STATE UNIVERSITY
Perform Systems Thinking (Source MESTT Project)
Data Mangement System
MES
SE Generated Information
Resolved Issue
Realization Plan
Operational Architecture
Issue Query
Physical ArchitectureOriginating Requirements
Issue QueryIdentified Issue
Graphics Formatted Report
Graphic Report
Derived Requirements
Systems Engineer
Data Report
Data Formatted Report
yEd Graphics Interface
1.1.1
Manage Data
1.1.2
Provide GraphicInterface
1.1.3
AnalyzeRelationships
Date:Friday, November 02, 2007
Author:University User
Number:1.1
Name:(University) Perform Systems Thinking
- 12 -Spring 2010 | WICHITA STATE UNIVERSITY
Decomposing subsystems into elements
Sub systems and its elements as activities as 2nd level hierarchy
- 13 -Spring 2010 | WICHITA STATE UNIVERSITY
Modeling the sub systems and system elements.
- 14 -Spring 2010 | WICHITA STATE UNIVERSITY
Interpretive Structural Modeling
Malone, 1975:
ISM “is used here to refer to the systematic application of some elementary notions of graph theory in such a way that theoretical, conceptual, and computational leverage is exploited to efficiently construct a directed graph, or network representation, of the complex pattern of a contextual relationship among a set of elements.”
- 15 -Spring 2010 | WICHITA STATE UNIVERSITY
Interpretive Structural Modeling
Management and interpretation of input from individuals or groups. Computer-assisted learning process. Network analysis / graph theory Better understanding of direct and indirect relationships among a
system’s components
- 16 -Spring 2010 | WICHITA STATE UNIVERSITY
Interpretive Structural Modeling (ISM) analysis
Circular layout with the most dependent entity in the whole system
- 17 -Spring 2010 | WICHITA STATE UNIVERSITY
Hierarchical layout in left to right position
- 18 -Spring 2010 | WICHITA STATE UNIVERSITY
Circular layout in single cycle form
- 19 -Spring 2010 | WICHITA STATE UNIVERSITY
Circular layout with the centrality measures calculation
- 20 -Spring 2010 | WICHITA STATE UNIVERSITY
1st order Reachability nodes (elements) in the system
- 21 -Spring 2010 | WICHITA STATE UNIVERSITY
Implications from the ISM study for the complex system
It is evident that by analyzing the interdependencies in the system we can reduce the complexity of the system.
MRP is the most dependent entity among the sub systems of Planning, Sourcing, Making & Delivery.
Increases the visibility in the supply chain system. Improves communication and co-ordination among the sub systems. Increases responsiveness in the system and feedback loops are
managed efficiently.
- 22 -Spring 2010 | WICHITA STATE UNIVERSITY
Balanced Scorecard (BSC)
BSC is a management tool used for performance management in an organization.
BSC develops performance metrics based on four categories in an organization and they are:
Customer Perspective. Financial Perspective. Internal business perspective. Innovation and learning perspective
- 23 -Spring 2010 | WICHITA STATE UNIVERSITY
Drawbacks of conventional performance management approach
Lack of Balanced approach Lack of understanding Lack of distinction of metrics at various organizational levels Lack of formal structure for metrics
- 24 -Spring 2010 | WICHITA STATE UNIVERSITY
Performance management for supply chain
Gunasekaran et al. (2001) developed metrics three different organizational levels such as strategic tactical and operational levels.
Further, categorized into financial and non-financial metrics.
Level Performance metrics Financial Non financial
Strategic Total cash flow time X
Rate on return on investment X
Flexibility to meet particular
customer needs X
Delivery lead time X
Total cycle time X
Buyer/supplier relationship level X
Customer query time X
TacticalExtent of cooperation to improve
quality X
Total transportation cost X
Forecasting methods X
Product development time X
Operational Manufacturing cost X
Capacity utilization X
Information carrying cost X
Inventory carrying cost X
- 25 -Spring 2010 | WICHITA STATE UNIVERSITY
BSC for supply chain performance management
Financial Metrics
Net Profit vs. Productivity ratio
Rate of ROI
Budget variations
Supplier relationship level
Delivery performance
Supplier cost saving initiatives
Delivery reliability
operational expenses
Supplier rejection rate
Customer satisfaction metrics
Customer query time
customer perception
Products range and services
Order lead time
Flexibility
Delivery lead time
Delivery performance
Invoicing efficiency
Delivery reliability
Responsiveness
Delivery quality
Defect free deliveries
(Source: Gunasekaran et al., 2001)
- 26 -Spring 2010 | WICHITA STATE UNIVERSITY
Internal Business Process Metrics
Total supply chain cycle time
Total cash flow time
Supplier lead time
Product development cycle time
Purchase order cycle time
Planned process cycle time
MPS Effectiveness
Capacity Utilization
Total Inventory costs
Incoming stock level
Work in Progress
Scrap value
Finished goods inventory
Innovation & Learning Metrics
Supplier involvement for problem solving
Supplier cost saving initiatives
Employee Morale
Order Entry Methods
Accuracy of forecasting techniques
Range of products and services
Flexibility of service systems in meeting customer needs
(Source: Gunasekaran et al., 2001)
- 27 -Spring 2010 | WICHITA STATE UNIVERSITY
SCOR application for Supply Chain performance measurement
SCOR is also applied for the performance measurement of the supply chain activities and processes.
SCOR model helps to describe the supply chain in five different dimensions such as reliability, responsiveness, flexibility, and cost and asset management efficiency.
Using SCOR we can have the structured hierarchy for the performance metrics across the whole supply chain.
Decompose the metrics from top which may be called as level 1 metrics to the next level which may be called as level 2 metrics.
- 28 -Spring 2010 | WICHITA STATE UNIVERSITY
Performance Attributes and Level 1 Metrics (Scott Stephens Dec 2001)
Performance attribute Performance attribute definition Level 1 metric
Supply chain delivery reliability
Performance of supply chain in delivering right product to the right place at the right time in the right condition in the right quantity with the right documentation to the right customer
a) Delivery performance b) Fill rates c) Perfect order fulfillment
Supply chain responsiveness Velocity at which a supply chain provides products to the customer
Order fulfillment lead times
Supply chain flexibilityAgility of a supply chain in responding to
marketplace changes to gain or maintain competitive advantage
a) Supply chain response time b) Production flexibility c) Cost of goods sold d) Total supply chain management costs e) Value added productivity f) Warranty/returns processing costs
Supply chain costsCosts associated with operating the supply
chain cash to cash cycle time
Supply chain asset management efficiency
Effectiveness of an organization in managing assets to support demand satisfaction, this includes the management of all assets like fixed and working capital
Inventory days of supply asset turns
- 29 -Spring 2010 | WICHITA STATE UNIVERSITY
Level 1 and Level 2 Metrics
Level 1 Metrics Level 2 Metrics
Delivery Performance Scheduled Orders to Customer Request
Delivery Performance Delivery Performance to Request Date
Delivery Performance Delivery Performance to Commit Date
Delivery Performance Perfect Order Fulfillment to Delivery
Delivery Performance Fill Rate by Order or Product Line
Order Fulfillment Lead Time Customer Signature/Authorization to Order Receipt
Order Fulfillment Lead Time Order Receipt to Order Entry Complete
Order Fulfillment Lead Time Order Entry Complete to Start Manufacture
Order Fulfillment Lead Time Start Manufacture to Order Complete Manufacture
Order Fulfillment Lead Time Order Complete Manufacture to Customer Receipt of Order
Order Fulfillment Lead Time Customer Receipt of Order to Installation Complete
Order Fulfillment Lead Time Total Order Fulfillment Lead Time
Upside Production Flexibility Metrics Upside Production Flexibility: Principal constraint
Upside Production Flexibility Metrics Key Components or Material Availability
Upside Production Flexibility Metrics Direct Labor Availability
Upside Production Flexibility Metrics Internal Manufacturing Capacity
Supply Chain Response Time Forecast Cycle Time
Supply Chain Response Time Replan Cycle ( Sales & Operations Planning ) Time
Supply Chain Response Time Intra-Manufacturing Replan Cycle Time
Supply Chain Response Time Total Sourcing Lead Time
Supply Chain Response Time Release-to-Ship Time
- 30 -Spring 2010 | WICHITA STATE UNIVERSITY
Level 1 Metrics Level 2 Metrics
Total Supply Chain Management Costs Order Management Cost
Total Supply Chain Management Costs Material Acquisition Cost
Total Supply Chain Management Costs Inventory Carrying Cost
Total Supply Chain Management Costs Supply-Chain-Related Finance and Planning Cost
Total Supply Chain Management Costs Supply-Chain-Related IT Cost
Total Supply Chain Management Costs Total Supply-Chain Management Costs
Cash-to-Cash Cycle Time Days Sales Outstanding
Cash-to-Cash Cycle Time Average Payment Period for Production Materials
Cash-to-Cash Cycle Time Total Inventory Days of Supply
Cash-to-Cash Cycle Time Inventory Days of Supply (Raw, WIP, Finished Goods)
Cash-to-Cash Cycle Time Inventory Turns
Cash-to-Cash Cycle Time Cash-to-Cash Cycle Time
Forecast Accuracy Unit Forecast Accuracy
Forecast Accuracy Dollar Forecast Accuracy
Financial Metrics COGS as a Percentage of Revenue
Financial Metrics Year over Year change in COGS
Financial Metrics Profitability (EBIT) as a Percentage of Revenue
Financial Metrics Expenses (SG&A) as a Percentage of Revenue
Financial Metrics Sales Growth (1 Year)
Financial Metrics Net Asset Turns
Value Added Productivity Value Added Productivity per Employee
Value Added Productivity Value Added Productivity per Payroll
- 31 -Spring 2010 | WICHITA STATE UNIVERSITY
Level 1 and level 2 metrics linking the performance metrics across the whole supply chain
- 32 -Spring 2010 | WICHITA STATE UNIVERSITY
Delivery performance metric and associated metrics
- 33 -Spring 2010 | WICHITA STATE UNIVERSITY
Total order fulfillment lead time metric and associated metrics
- 34 -Spring 2010 | WICHITA STATE UNIVERSITY
Upside Production flexibility metric and associated metrics
- 35 -Spring 2010 | WICHITA STATE UNIVERSITY
Supply chain response time metric and associated metrics
- 36 -Spring 2010 | WICHITA STATE UNIVERSITY
Total supply chain management costs and associated metrics
- 37 -Spring 2010 | WICHITA STATE UNIVERSITY
Financial metric and associated sub level metrics
- 38 -Spring 2010 | WICHITA STATE UNIVERSITY
Cash to cash cycle time metric and associated metrics
- 39 -Spring 2010 | WICHITA STATE UNIVERSITY
SCOR level 1 and level 2 metrics mapped onto BSC
- 40 -Spring 2010 | WICHITA STATE UNIVERSITY
Advantages of linking the SCOR metrics to the BSC
Combining SCOR and BSC the performance metrics can be linked to the individual business processes.
Performance metrics in supply chain can be categorized hierarchically so as to track them easily.
Performance measures could be carried not only at the organizational level but also at the process level.
Track the performance linking with the organizational business processes.
We can track the impact of supply chain metrics on the organizational performance.
- 41 -Spring 2010 | WICHITA STATE UNIVERSITY
Conclusions
Reduce complexity in the supply chain system. Increase visibility in the system. Increase responsiveness in the system. Improve communication and co-ordination. Track the most dependent element in the system. Manage the information flow and material flow effectively. Better performance management by integrating SCOR and BSC. Track performance metrics at both strategic and operations levels.
- 42 -Spring 2010 | WICHITA STATE UNIVERSITY
(Source: Eugene A. Asahara)
- 43 -Spring 2010 | WICHITA STATE UNIVERSITY
References T. R. Browning (2001), Applying the Design Structure Matrix to System Decomposition and
Integration Problems: A Review and New Directions. IEEE Transactions on Engineering Management, 48, 292-306.
R Bhagwat., & M. K. Sharma (2007), Performance measurement of supply chain management: A balanced scorecard approach. Computers & Industrial Engineering, 53, 43-62.
S-J, (Gary) Chen., & E. Huang (2007), A systematic approach for supply chain improvement using design structure matrix. Journal of Intelligent Manufacturing, 18, 285-299.
C. Chandra., S. Kumar (2001), Enterprise Architectural Framework for Supply-chain Integration. Industrial Management & Data Systems, 6, 290-303.
M. Fayez., L. Rabelo., M. Mollaghasemi (2005), Ontologies for supply chain simulation modeling.
Proceedings of the winter simulation conference, 2364-2370. Gordon Stewart (1997), Supply Chain Operations reference model (SCOR): the first cross-industry
framework for integrated supply-chain management. Logistics Information Management, 10, 62-67. M. M. D. Hassan (2005), Engineering Supply Chains as Systems. Systems Engineering, 9, 73-89.
- 44 -Spring 2010 | WICHITA STATE UNIVERSITY
References
R. S Kaplan., & D. P Norton (1996), Using the Balanced Scorecard as a Strategic Management System. Harvard Business Review, Jan-Feb, 1-10.
Z. Li., A. Kumar., & Y. G. Lim (2002), Supply Chain Modeling- a co-ordination approach. Integrated Manufacturing Systems, 13, 551-561.
A. Roder., & B. Tibken (2006), A methodology for modeling inter-company supply chains and for evaluating a method of integrated product and process documentation. European Journal of Operations Research, 169, 1010-1029.
Scott Stephens (2001), Supply Chain Operations Reference Model version 5.0: A New Tool to Improve Supply Chain efficiency and Achieve Best Practice. Information Systems Frontiers, 3:4, 471-476 .
- 45 -Spring 2010 | WICHITA STATE UNIVERSITY
THANK YOU!!!!
- 46 -Spring 2010 | WICHITA STATE UNIVERSITY
Questions?
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