9 min read
16 Jun
16Jun

According to the definition of the US Supply Chain Council, the supply chain encompasses all activities involved in the production and delivery of final products and services, from suppliers’ suppliers to customers’ customers. Supply chain management includes managing supply and demand, purchasing, manufacturing, sub-assembly and delivery of raw materials and spare parts, item storage and inventory query, customer order entry, and management, channel distribution to final delivery users.

The supply chain is a very complex network chain model (see Figure 1), covering the entire process from raw material supply chain, parts supply chain, product manufacturers, distributors, retailers to the final customer.In the actual supply chain operation, there is an enterprise in the core position, which plays the role of dispatching and coordinating the information flow, capital flow, and logistics in the supply chain. As can be seen in Figure 1, driven by the core enterprise demand information, other node companies realize the entire supply through the division of labor and cooperation of the supply chain (production, distribution, retail, etc.) through capital flow, logistics, and service flow. The continuous value-added of the chain.

Figure 1 Network Chain Structure Model of Supply Chain

At present, under the "Internet +" of the world economy, manufacturing enterprises are facing tremendous challenges. In addition to the traditional "bullwhip effect" for manufacturing enterprises, the Internet and e-commerce waves have also brought huge demand fluctuations in the supply chain.

1. The traditional "bullwhip effect"

The "Bullwhip Effect" is also called the "demand amplification effect." This is because the information flow goes up the supply chain (from customer to supplier) and is distorted step by step, leading to increasing fluctuations in-demand information. The "bullwhip effect" is a common phenomenon under the supply chain operation mechanism. The uncertainty in the demand of manufacturing companies is first brought about by the "bullwhip effect".

2. The additive effect of dual channels

The existence of the Internet and e-commerce has provided an effective platform for millions of online transactions and communications every day and has completely changed the traditional marketing model. A single traditional marketing channel has become a dual-channel online and offline. The superposition of dual-channel demand has increased the complexity of the supply network of manufacturing companies and has increased the difficulty of demand forecasting.

3. The new "hockey stick" effect

The Hockey-stick effect (Hockey-stick Effect), also known as the hockey stick phenomenon, refers to a certain fixed cycle (month, season, or year), the early sales are very low, there will be a sudden increase in sales at the end of the expiration, and In successive cycles, this phenomenon will repeat itself, and the shape of its demand curve resembles a hockey stick. In the Internet environment, this traditional "hockey stick" effect has undergone new changes. For example, in Figure 2, under the background of "Black Friday Hot Sale" and "Christmas Day Hot Sale", prominent peak demand appears.

Figure 2 Fluctuations in Internet Sales

Figure 2 Fluctuations in Internet Sales

4. Uncertainty brought by the benefit-sharing of supply chain members

Compared with individual enterprise management, the biggest difference between supply chain management is that the focus of interest considers the maximization of the entire supply chain's interests, not the maximization of individual enterprise's interests. With the increasing degree of cooperation among supply chain members and the continuous integration of enterprises, the "problem of distribution of benefits" among enterprises has arisen.In the face of many supply chain management challenges, manufacturing companies should build a flexible supply chain operation strategy based on the market and their own strategic changes, and build a suitable supply chain operation mechanism based on the supply chain operation strategy. SCOR model is one of the most popular effective methods for supply chain modeling.The Supply Chain Operations Reference model (SCOR) is developed and supported by the International Supply Chain Council (SCC), which is suitable for supply chain operation reference models in different industrial fields. This is currently recognized by the academic circles as a relatively mature method system for corporate supply chain process combing.

Figure 3 The Supply Chain Operation Reference SCOR Model 

The SCOR model can be divided into three levels according to the details of the process definition (see Figure 4), and each level can be used to analyze the operation of the enterprise supply chain. Below the third level, there can also be fourth, fifth, sixth, and other more detailed process description levels that belong to each enterprise. Process definitions in these levels are not included in the SCOR model.

Figure 4 The Difference Levels of SCOR Model

Figure 4 The Difference Levels of SCOR Model

The Characteristics of SCOR's Three-tier Structure in Supply Chain Management

The first level: Provides a broad definition of the types of planning, procurement, production, distribution, and return processes, which is the starting point for an enterprise to establish supply chain goals.

The second level: 26 core process catalogs are defined, all of which may be part of the supply chain. Companies can choose from these core processes to suit their needs and construct a practical or ideal supply chain.

The third level: to provide companies with the information needed to plan and set goals to improve supply chain performance. The planning part includes process element definition, problem diagnosis, industry target selection, system software capabilities, etc.

SCOR model (Supply-Chain Operations Reference-Model) is a set of supply chain operation reference models suitable for different fields developed by the International Supply Chain Association. In addition to the operation of more than 2,000 international corporate members in the association, its practical data sources also include third-party data and various surveys in the market. It can be regarded as the essence of knowledge and experience in supply chain management, which brings together many companies and management The crystallization of the wisdom of the author. The International Supply Chain Association hopes that this model can help companies improve their operations.

 Figure 5 The Data Analysis Function of SCOR Model 1

 Figure 5 The Data Analysis Function of SCOR Model 1

However, with such a perfect enterprise supply chain management model, there are very limited successful application cases heard in some countries, so why is it difficult for many companies to implement SCOR?

When studying SCOR or other procurement, operation, and logistics content of the International Supply Chain Association, you will find that whether it is seminars, certification exams, or industry sharing, most of the participants are middle-level or grass-roots supply chain people, and those with high positions are For positions such as VP or director, it can be said that the mainstream is the tactical and executive level. SCOR is mainly a strategic level tool. Before applying SCOR, the first thing to consider is whether the company's supply chain architecture matches the company's market strategy. SCOR is the top-level design that serves the company's supply chain architecture.

Figure 6 The Data Analysis Function of SCOR Model 2

Figure 6 The Data Analysis Function of SCOR Model 2

In the eyes of these senior managers, the supply chain is sometimes reduced to logistics. It is the support department within the enterprise rather than the core competitiveness of the enterprise. In today's rapidly changing market, whether it is product innovation from 0 to 1 (such as Steve Jobs and Apple's engineers), or efficient operation from 1 to N (such as Cook and Apple's foundry management) is the core competitiveness. If the senior executives of the enterprise do not understand and participate in the design of SCOR, how can the implementation of SCOR at the tactical and executive levels have good results?

Figure 7 The Apple's Strong Supply Chain Integration Capabilities

Figure 7 The Apple's Strong Supply Chain Integration Capabilities

The strategic level is determined first and then is to consider how SCOR can guide the company to gradually improve its supply chain to support its strategy to the maximum. Some supply chain masters once said that SCOR is a best practice model and static, while the improvement of a company's supply chain is to solve problems and change dynamically. Personally think that this explanation is not accurate, and the expectations of SCOR are inconsistent with its due role.

Figure 8 The Difference Roles from SCOR Model

In the link of Source / Make / Deliver, the SCOR model is used to analyze the five indicators that can reflect market competitiveness in each link, define the core indicators of each link according to the corporate strategy, and compare the benchmarks of the company and the industry on the core indicators. The gap between best practices. Clear positioning, understanding yourself and finding gaps are the correct way to open the SCOR model.

The Value of SCOR

So, there is a question that how could we improve after finding the gap?

The answer must be to dynamically solve the current problems in the enterprise supply chain through the grasp of the actual situation of the enterprise and the understanding of the SCOR model.The execution part of SCOR provides only direction and high probability. Based on the actual operation practice of the International Supply Chain Association on more than 2,000 international companies and companies surveyed by the market, what can tell you is the process that most companies that are excellent on this indicator have implemented. If your own company has done the same process, you should probably get the same excellent results.

 Figure 9 The Insulating Glass Production Enterprises

 Figure 9 The Insulating Glass Production Enterprises

Take the glass deep-processing industry as an example, especially the insulating glass production enterprises. The world's outstanding glass deep-processing enterprises are worth learning, imitating, and learning from new entrants or companies that have failed to integrate efficient supply chain configurations.

Figure 10 The Glass Deep-processing Manufactory

Figure 10 The Glass Deep-processing Manufactory

The SCOR Model Hierarchy

The SCOR model is based on standardized modular thinking, to solve the problem of overall unity. It can even be said that it is not doing addition but doing subtraction. Let employees of different functions communicate in the same language under the same regulations. Relatively speaking, this model is more suitable for large companies with group headquarters, which can regulate and improve the supply chain operations of subsidiaries and factories. This is why high-level strategy makers are more suitable for learning and applying SCOR.


Disclaimer: The above views do not represent the position of Jinan LIJIANG Glass, and the copyright belongs to the original author and source. The content of News is the author's personal opinion, and it does not mean that Jinan LIJIANG Glass agrees with his opinion and is responsible for its authenticity. Jinan LIJIANG Glass only provides references and does not constitute investment and application advice.  

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