SCOR model for supply chain evaluation

Effective supply chain management is crucial for the economic performance of companies worldwide. Applying the SCOR model to supply chains enables businesses to assess their status and perfect their operations.

What is the SCOR model?

Short for Supply Chain Operations Reference, the SCOR model is a tool used in logistics to represent, analyze, and configure various aspects of the supply chain. Created by the Supply Chain Council (SCC) in 1996, it evaluates the efficiency of S&OP (sales and operations planning) and defines best business practices based on specific categories. Applicable across industries, the SCOR model helps businesses assess the maturity of their processes and determine whether they align with strategic objectives.

The four levels of the SCOR model

The SCOR model is structured around four levels that serve as a reference framework to optimize costs and improve supply chain performance.

1. Process modeling. This involves developing a supply chain strategy by defining overall goals and identifying key performance indicators (KPIs) to measure success. The objective is to understand market needs and design efficient processes.
2. Performance measurements. At the tactical level, a detailed plan is established for production, procurement, and distribution to ensure the supply chain can adapt to demand fluctuations. SCOR model KPIs are divided into customer-facing indicators and internal-facing metrics focused on business priorities.
3. Best practices. The third stage involves managing daily supply chain activities to ensure efficient order fulfillment. Key aspects include inventory optimization, timeliness, reliability, and cost-effectiveness.
4. Implementation. Once improvements prove beneficial, successful processes are standardized and broken down into actionable steps for implementation. The goal is to foster continuous improvement.

How the SCOR model works

Five main processes determine how the SCOR model is applied in logistics:

1. Plan includes demand strategies, production planning, business rules, data collection, transportation, and potential regulatory requirements.
2. Source involves selecting suppliers, negotiating contracts, building inventory, scheduling deliveries and receiving, authorizing payments, and managing goods.
3. Make refers to activities linked to production, such as quality control of finished products, packaging, and preparation for shipment.
4. Deliver handles the storage, transportation, and distribution of items from customer order management to the final destination.
5. Return relates to reverse logistics, including consumer returns.

How long does it take to implement the SCOR model? The time needed varies depending on the size and complexity of a company’s supply chain, but it can range from several months to a full year.

Pros and cons of the SCOR model

Using the SCOR model to visualize supply chain activities and optimize operations offers several benefits:

• Analytics. The model’s high level of detail allows for better analysis of internal processes.
• Problem detection. By creating road maps to achieve objectives, the SCOR model helps with troubleshooting.
• Increased efficiency. The SCOR model helps reduce supply chain costs and improve productivity.
• Greater collaboration. Coordinated work among supply chain members results in more optimized operations.
• Visibility. Using standardized metrics makes it possible to identify improvement areas and monitor progress.

So, what are the challenges and disadvantages of implementing the SCOR model? On the one hand is the considerable resource investment required to adopt it. On the other hand, the model omits some key business aspects, such as finance, sales, and human resources departments. This is often seen as a significant limitation.

SCOR model example applied to business

A toy company provides a practical example of how the SCOR model operates.

• First, the business analyzes past sales data to forecast demand, considering key events like Christmas and Black Friday. It then adjusts inventory to prepare for sales peaks.
• Next, it selects suppliers and schedules monthly orders, maintaining accurate inventory control with a warehouse management system (WMS).
• The toys are manufactured, inspected, and prepared for sale.
• During the sales season, online orders are processed, with some designated for in-store pickup and others shipped via courier services.
• Finally, the company handles returns and customer claims.

Other models and methods

Beyond the SCOR model, several other systems and techniques help streamline the work of logistics and supply chain professionals:

• Jidoka method. A key principle of lean manufacturing, this approach involves immediately stopping production lines when an error is detected.
• SWOT analysis. This strategic planning tool evaluates a company’s strengths, weaknesses, opportunities, and threats.
• Fishbone diagram. Also known as the Ishikawa diagram, this visually maps out potential causes of a problem, with the fish head representing the issue to be analyzed and the bones showing contributing factors.
• Spaghetti chart. This mapping technique depicts manufacturing or distribution processes. Lines illustrate the movement of people, products, or goods.
• EOQ formula or Wilson model. This inventory management method determines the optimal quantity of products to order. The aim is to minimize purchasing, storage, and replenishment costs.

Solutions for your supply chain

Thinking about digitalizing or automating your logistics facility to improve productivity? At Interlake Mecalux, we can lend a hand. Our Easy WMS warehouse management system enhances the performance of the manual and automated facilities we manufacture, with hundreds of clients relying on it daily for their operations. Contact us, and we’ll analyze your needs to offer you the solution that best suits your company.