The SCOR model: defin­i­tion and tasks explained

SCOR stands for “supply chain op­er­a­tions reference.” The Supply Chain Council – an in­de­pend­ent or­gan­isa­tion – defines it as a reference model for analysing, eval­u­at­ing, and op­tim­ising specific processes along the value chain. A supply chain requires permanent overview, ad­just­ment, and im­prove­ment in order to keep up the flow of goods from the man­u­fac­turer to the customer, and to make struc­tur­al im­prove­ments. The SCOR model was developed for this purpose.

The reference model consists of three levels in hier­arch­ic­al order. Due to the hier­arch­ic­al structure of the processes, the supply chain op­er­a­tions reference model can be applied to various sectors and in­dus­tries. The first and top level of the model (level 1) is made up of five core processes and is con­sidered a strategic level. This is where the or­gan­isa­tion­al core processes take place.

1. Plan: Resources are iden­ti­fied, com­mu­nic­a­tion, and delivery chains are es­tab­lished, business ob­ject­ives are aligned with supply and demand, and best practices of the five core processes (plan, source, man­u­fac­ture, deliver, and return) are examined, taking into account inventory, trans­port­a­tion, reg­u­lat­ory re­quire­ments, and resources to improve ef­fi­ciency.
2. Procure (source): The pro­cure­ment of goods and services taking into account the demand for and avail­ab­il­ity of goods, purchase, receipt, testing, and provision of raw materials.
3. Man­u­fac­ture: Pro­duc­tion planning and man­u­fac­tur­ing, quality control, packaging, and demand planning of market-ready products.
4. Deliver: Order, transport, warehouse and dis­tri­bu­tion man­age­ment, and all processes related to the delivery of completed goods and services.
5. Return: Customer service and supplier processes as­so­ci­ated with any kind of return and disposal of goods.

The SCOR model’s basic structure was expanded in 2012, adding a further category to its 11th version:

6. Support (enable): Processes related to supply chain man­age­ment, e.g. business rules, databases, risk man­age­ment, legal re­quire­ments, con­trac­tu­al and business reg­u­la­tions.

The second, tactical level (level 2) divides the model into three process types. This sim­pli­fied structure is intended to promote the per­form­ance of the supply chain in­de­pend­ent of its company and industry af­fil­i­ation. Stand­ard­ised hier­arch­ies allow per­form­ance values to be applied to companies of different sizes and a catalogue of best practices to be designed in­de­pend­ently of company spe­cial­isa­tion.

The three su­per­or­din­ate process types of the con­fig­ur­a­tion level are:

1. Plan: Providing raw materials and setting up planning periods to meet planned and expected demand.
2. Execute: Processes that emerge from the planning process and influence product status (e.g., dis­tri­bu­tion, control, trans­form­a­tion, re­dir­ec­tion) depending on real or ag­greg­ated demand.
3. Enable: All processes that organise and prepare in­form­a­tion and services between supply chain partners through analysis and eval­u­ation of planning, and per­form­ance data.

The third, op­er­a­tion­al level (level 3) is called the design level. Here, the processes of the con­fig­ur­a­tion level are broken down once again in greater detail with sub-processes, based on input-output relations.

A per­form­ance meas­ure­ment system evaluates and analyses the process elements (e.g. costs, business planning, capacity checks) and measures the financial success of a company. At the design level, the actual defin­i­tion of process elements and the first step towards in­creas­ing ef­fi­ciency and supply chain op­tim­isa­tion through the SCOR model takes place.

In addition to the supply chain levels mentioned above, process flows between companies and internal or external partners are also struc­tured into four main pillars. These four pillars define the SCOR model as a reference framework and make it ap­plic­able to all sectors. Stand­ard­ised processes and key figures enable the model to be used for cost/per­form­ance op­tim­isa­tion in simple or complex supply chain man­age­ment op­er­a­tions.

The first pillar of the SCOR model comprises the five process cat­egor­ies already described (plan, procure, man­u­fac­ture, deliver, return) and the process types: plan, execute, and enable. The SCOR design, that is, modelling a value chain, in­tro­duces standards that enable per­form­ance to be described. By cat­egor­ising and char­ac­ter­ising process flows, companies can focus on improving the quality and cost ef­fi­ciency of man­u­fac­tur­ing and delivery.

The reference model of hier­arch­ic­ally ordered process flows enables companies to com­mu­nic­ate with their con­tract­ors along the supply chain about services, design processes, and per­form­ance.

The second pillar in the SCOR model uses a unified system of more than 150 key per­form­ance in­dic­at­ors, which are hier­arch­ic­ally struc­tured. KPIs are used for the internal eval­u­ation of per­form­ance and the external analysis of the supply chain, and are assigned to each detailed process in the SCOR model. Supply chain man­age­ment can be split between the en­ter­prise view (internal-facing) and customer view (customer-facing).

From the en­ter­prise view (internal), specific key figures evaluate per­form­ance at­trib­utes like costs and capital. From the cus­tom­er­'s point of view (external), it is necessary to evaluate delivery re­li­ab­il­ity, re­spons­ive­ness, and ad­apt­ab­il­ity. In­dic­at­ors can be used to measure and describe the per­form­ance of in­di­vidu­al con­tract­ors within the supply chain and the per­form­ance and ef­fi­ciency of the entire supply chain.

The eval­u­ation considers factors like per­form­ance, costs, and planning/execution time, and allows processes to be compared with best practices and competing supply chain strategies. The hier­arch­ic­al and multi-di­men­sion­al structure of key per­form­ance in­dic­at­ors allows processes such as pro­cessing time to be linked to per­form­ance in­dic­at­ors or service level to punc­tu­al­ity and delivery quantity, with the aim of improving per­form­ance.

The aim of applying the SCOR model is to execute orders in the most efficient way possible. This means achieving a perfect balance between delivery, quantity, punc­tu­al­ity (from the cus­tom­er­'s point of view), re­li­ab­il­ity, and cost ef­fi­ciency. In order to assess per­form­ance at each stage of the supply chain, best practice values are needed as a guide and a benchmark. These best practice values can consist of customer-related, internal, share­hold­er-related, and cross-company per­form­ance values. By comparing them, con­clu­sions on per­form­ance can be drawn in the long-, medium-, and short-term.

Following the analysis of per­form­ance meas­ure­ments based on real, targeted, and ideal key per­form­ance in­dic­at­ors and per­form­ance data, it’s necessary to determine positive effects (e.g. profit, per­form­ance increase, and cost reduction), and to stand­ard­ise processes that led to an increase in per­form­ance and include them in value tables. On the other hand, the key figure metrics should enforce cost reduction along the supply chain (material and personnel costs, costs for warehouse and transport logistics, and return costs).

Im­ple­ment­ing a supply chain op­er­a­tions reference model and a KPI system can optimise the following aspects in a value chain:

• Structure and or­gan­isa­tion of lo­gist­ic­al processes through pre-modelled business processes
• Ap­plic­a­tion of the KPI system at different process levels to align coupled processes and their per­form­ance
• Key per­form­ance indicator metrics for the creation of best-practice guidelines, which can be used to further increase ef­fi­ciency
• Iden­ti­fic­a­tion, im­ple­ment­a­tion, and stand­ard­isa­tion of IT solutions and software tools for cross-company com­mu­nic­a­tion and process con­fig­ur­a­tion

The digital boom of the 1990s linked up national and in­ter­na­tion­al in­dus­tries, and ac­cel­er­ated com­mu­nic­a­tion and co­oper­a­tion along the supply chain through uniform internet protocols such as HTML, HTTPS, and TCP/IP. The di­git­al­isa­tion of business processes and e-commerce re­ima­gined supply chain man­age­ment from the ground up.

Business is no longer conducted only in local branches. Digital supply chains and online retail platforms are de­cent­ral­ised across the world and no longer rely on physical presence or face-to-face com­mu­nic­a­tion. In e-commerce, it’s possible to never meet one's own suppliers, customers, and contract partners in person, as long as supply chain man­age­ment is well-organised and the SCOR model elim­in­ates weak­nesses and closes gaps in the supply chain. Since a large part of the processes are carried out via digital channels anyway and everything is, therefore, already well-doc­u­mented, data can be easily analysed in e-commerce – and processes can be better optimised.

To set up your own e-business, you need to follow the same planning and im­ple­ment­a­tion steps as when you open a company. Company goals need to be aligned with delivery/transport logistics, dis­tri­bu­tion channels, capital, supply and demand, and compared with per­form­ance meas­ure­ments.

In e-commerce, applying the SCOR model comes with sig­ni­fic­ant chal­lenges, because online customers have high ex­pect­a­tions, including fast delivery, low costs, easy pay methods, available and efficient customer support. If you’re looking for ways to optimise your e-business or your online store, it’s worth applying the SCOR model to your digital supply chain man­age­ment strategy.