How does SCOR measure up?A users pe rspect ive on SCOR metr
ics
by Peter Bolstorff
What is SCOR?The Supply Chain OperationsR e f e r e n c e model,
developed by theSupply-Chain Council, provides astandard
methodology for managingsupply chain projects centered on
Plan,Source, Make, Deliver and Return.
To keep on schedule, I told adesign team at the kickoff of a
SCOR project,weve got four weeks to identify and definethe number
of S C O R c a r d s and appropriatesupply chain metrics, collect
data, identifysources and collect appropriate benchmark data,define
competitive requirements forperformance, calculate performance
gaps, anddetermine financial opportunity. For those ofyou who have
not been down the projectroadmap, this h i t - t h e - g r o u n d
- r u n n i n g w o r keffort represents the key tasks to produce
aSCORcard gap analysis in four weeks.
As anxiety set in, the team members turnedto the SCOR model
documentation, whichcontains more than 200 alphabetically
arrangeddefinitions in the v. 5.0 metrics glossary.Which ones do we
use? one team memberasked. They remembered from previouseducation
that SCOR suggests 13 metrics torepresent Level 1 supply chain
performance. Amore serious question came from thecompanys
controller, who asked, What do wedo with the rest?
The SCOR model does a good job definingLevel 1 metrics and there
are good, easyaccess benchmark sources for most of these but the
model does not address many shareholdermetrics, and the breakdown
of Level 1 metrics totheir Level 2 and 3 components is
notstandardized. So my objective in this article is todiscuss a
more comprehensive SCORcardtemplate based on my experiences working
withmany project teams.
The SCORcard templateThe SCORcard template (see table, oppositep
a g e) summarizes the important dimensions ofthe supply chain
performance metrics needed tobuild a SCORcard. The Level 1 metrics
areorganized by three broad categories and sevenperformance
attributes: n C u s t o m e r - f a c i n g metrics measure
supply
chain delivery reliability, responsiveness andflexibility with
respect to customers andsuppliers.
n I n t e r n a l - f a c i n g metrics measure supplychain cost
and asset management efficiency.
n S h a r e h o l d e r - f a c i n g metrics
measureprofitability, effectiveness of return and shareperformance.
For each Level 1 performance metric, the
template includes a working definition,benchmark sources, main
Level 2 components,main Level 3 components, and a simple data
keeping SCORUpdating the Supply-Chain Councils implementation
model
2 2 MAR 2002 w w w. t o t a l s u p p l y c h a i n . c o m S U
P P L Y C H A I N T E C H N O L O G Y N E W S
query used to calculate the actual performance.Not Hardwired Yet
indicates that in over 30projects, no standard consistent metric
hassurfaced to support multiple companies andindustries. It does
not mean that there arentuseful Level 3 metrics; Ive tried to point
togood sources of potential Level 3 metrics.
It is important to note that while theSCORcard gap analysis only
focuses on theLevel 1 metrics results, Level 2 metrics arerequired
for many of the calculations. Theremaining sections will provide
lessons learnedon the decomposition logic for Level 2(material
flow) and Level 3 (work andinformation flow).
C u s t o m e r-facing metri c sDelivery performance is an
example of aSCOR Level 1 metric that does not decomposeto Level 2
by simple calculation. Rather itdecomposes to the relative on time
andcomplete delivery measures for suppliers,factories, warehouses
and transportationproviders. Level 3 decomposition is varied bythe
locations of Level 2 roles and the servicegoals of the departments
in the location. F i l lr a t e is another customer facing metric
with arelative Level 2 decomposition; f o r e c a s ta c c u r a c
y is defined as the fill rate cascade.
The logic for many design teams is that for astock item to be on
the shelf at the time of orderreceipt, good planning needs to have
takenplace. Good planning is measured by forecastaccuracy attained
through a solid sales andoperations planning process and/or
leadingpractices like collaborative planning,forecasting and
replenishment (CPFR).
In some projects, steering teams haveelevated forecast accuracy
to Level 1 status. Inother projects, the design team defined it as
aLevel 2 decomposition subordinate to inventorydays of supply.
Level 3 decomposition is variedby the departments role in the
forecast processand the goals for improvement.
Perfect order decomposes to Level 2identical to delivery
performance with theadded component of payable match. From
thecustomers perspective, a perfect order isdelivered on time and
complete with a perfectitem number, quantity and price match of
theirreceipt and purchase order with your invoice.This works in a
similar manner when gradingsuppliers on their ability to fulfill
perfect orders.
Level 3 decomposition is varied by thedepartments role in the
match process and the
jmojonniercopyright 2002, Penton Media, Inc.
PerformanceAttribute or Category
Supply ChainDelivery ReliabilityThe performance of thesupply
chain indelivering: the correctproduct, to the correctplace, at the
correcttime, in the correctcondition and packaging, in thecorrect
quantity, withthe correctdocumentation.
Supply Chain ResponsivenessThe velocity at which asupply chain
providesproducts to the customer.
Supply ChainFlexibilityThe agility of a supplychain in
responding tomarketplace changesto gain or maintain competitive
advantage.
Supply Chain CostThe costs associatedwith operating thesupply
chain.
Supply Chain Asset ManagementEfficiencyThe effectiveness of an
organization inmanaging assets to supportdemand satisfaction.
Thisincludes themanagement of allassets: fixed andworking
capital.
ProfitabilityIncome after cost.
Effectiveness ofReturn
Share
Typical Query Customer
Customer Orders Delivered OnTime and In Full/Total Numberof
Customer Orders; use thePMG survey as a guide.
Customer Lines Delivered OnTime and In Full Quantities.
Customer Orders Delivered OnTime and In Full with 100%match of
price, item, andquantity on the invoice, packingslip, and customer
PO/TotalNumber of Customer Orders.
Absolute Value [Actual DeliveryDate - Order Entry Date] foreach
line item and/or eachCustomer Order; use the PMGsurvey as a
guide.
Source Leadtime for ContraintItem + Manufacturing CycleTime for
Make-to-Order + OrderFulfillment Leadtime for Stock Items.
Anecdotal Query basedUtilization, Staffing Model, andSupplier
Contracts; use thePMG survey as a guide.
Cost Centers for Material + CostCenters for DirectManufacturing
Labor + Cost Centers for IndirectManufacturing Labor.
Map the cost centers thatsupport the supply chainactivities
listed at Level 3, then add them up; use the PMGsurvey as a
guide.
[Revenue $ - Direct MaterialCost $] / Total Number ofEmployee in
FTEs.
Map the cost centers thatsupport the supply chainactivities
listed at Level 2, then add them up.
[$ Inventory / (COGS / 365)] + [$ Receivables / (Revenue /365)]
- [$ Payables / (MaterialCost / 365)] Use PMG Surveyas a guide
$ Inventory by classification/(COGS by classification/365)
Revenue $/Total Net Asset $
* SCOR Level 1 Metric; Definition of SCOR Level 1 Metrics found
in the Glossary ofthe model document.
(Revenue $ - Cost of Goods $) /Revenue $
(Revenue $ - Cost of Goods $ -SG&A Costs) / Revenue $
(Revenue $ - Cost of Goods $ -SG&A Costs - Tax $) / Revenue
$
(Revenue $ - Cost of Goods $ -SG&A Costs - Tax $ -
[WorkingCapital $ * Cost of Money]) /Revenue $
Net Operating Income $ / TotalNet Asset $
Net Operating Income $ / TotalRevenue $
Use company formula.
Use company formula.
Use company formula.
Level 1 PerformanceMetrics
Delivery Performance
(see SCOR Glossary fordefinitions of all metrics)
Fill Rates
Perfect OrderFulfillment
Order FulfillmentLead Time
Supply ChainResponse Time
Production Flexibility
Cost of Goods
Total Supply ChainManagement Cost
Value AddedProductivity
Warranty/ReturnsProcessing Cost
Cash-to-Cash CycleTime
Inventory Days ofSupply
Asset Turns
Gross Margin
Operating Income
Net OperatingIncome
Economic Profit
Return on Assets
Return on Sales
Return onInvestment
Earnings Per Share
EPS Percent ChangeTTM
Stock Price PercentChange TTM
Working Definition
Delivery Performance measures the percentageof orders delivered
on time and in full tocustomer request date and/or to
customercommit date.
Fill Rates measures the percentage of ship fromstock orders
shipped within 24 hours of orderreceipt.
Many companies use Line Item Fill Rate as analternative metric
measured by the percentage oflines filled within committed to hours
of orderreceipt.
Perfect Order Fulfillment measures thepercentage of orders
delivered on time and infull to customers request date AND
flawlessmatch of purchase order, invoice, and receipt.
Order Fulfillment Lead Time measures thenumber of days from
order receipt in customerservice to the delivery receipt of at
thecustomers dock.
Supply Chain Response Time measures thenumber of days it takes a
supply chain torespond to (plan, source, make, and deliverorders)
an unplanned significant increase ordecrease in demand without cost
penalty.
Production Flexibility measures the number ofdays to achieve an
unplanned 20% increase ordecrease in orders without cost
penalty.
Cost of Goods measures the direct cost ofmaterial and labor to
produce a product orservice.
Total Supply Chain Management Cost measuresthe direct and
indirect costs to plan, source anddeliver products and services.
Make costs areoften captured in COGS while Return costs
arecalculated in Warranty/Returns ProcessingCosts.
Value Added Productivity is calculated bysubtracting direct
material cost from the revenueand dividing the result by the number
ofemployees. This is similar to sales per employee.
Warranty/Returns Processing Cost measures the direct and
indirect costsassociated with returns including defective,planned
maintenance, and excess inventory. Thisincludes the entire reverse
logistics process.
Cash-to-Cash Cycle TimeCash-to-Cash Cycle Time measures the
number ofdays that cash is tied up as working capital.
Inventory Days of Supply measures the numberof days that cash is
tied up as inventory.
Asset Turns is calculated by dividing revenue bytotal assets
including both working capital andfixed assets.
Gross Margin is calculated by subtracting Cost of Goods from
Revenue and is most often expressed as a % of the remaining dollars
to sales.
Operating Income (or Margin) is calculated bysubtracting Cost of
Goods AND Sales, Generaland Administration (SG&A) from Revenue
and ismost often expressed as a % of the remainingdollars to
sales.
Net Operating Income (or Margin) is calculatedby subtracting
Cost of Goods AND Sales, Generaland Administration (SG&A) AND
Taxes fromRevenue and is most often expressed as a % ofthe
remaining dollars to sales.
Operating Income (or Margin) is calculated bysubtracting Cost of
Goods AND Sales, Generaland Administration (SG&A) AND Taxes AND
Costof Capital from Revenue and is most oftenexpressed as a % of
the remaining dollars tosales.
Return on Assets is calculated by dividing NetOperating Income
by Total Net Assets
Return on Sales is calculated by dividing NetOperating Income by
Total Revenue.
Return on Investment (or invested capital) iscalculated by
dividing Net Operating Income byTotal Invested Capital.
Earning Per Share is the adjusted incomeavailable to Common
divided by the dilutedweighted average shares outstanding.
This is the percent change in the trailing twelvemonth (TTM) EPS
as compared to the same TTMperiod one year ago.
This is the percent change in the trailing twelvemonth (TTM)
Stock Price as compared to thesame TTM period one year ago.
Benchmark Sources
PMGOn time and in full delivery to customer requestand customer
commit.
No Source IdentifiedMost companies have their own internal gauge
asto their competitive rank for line item fill rate.
No Source IdentifiedThis metric is important but difficult to
get goodstatistical benchmark comparisons.
PMGOrder Receipt to Order Entry, Order Entry toOrder Shipment,
Order Shipment to OrderReceipt, and overall Order Fulfillment Lead
Time.
No Source IdentifiedThis metric is important but difficult to
get goodstatistical benchmark comparisons.
PMGUpside Production Flexibility.
PMG and www.marketguide.comSee COGS under Income Statement and
calculatemedian (middle), superior (average of top 20%),and
advantage (midpoint of median and superior) based on the industry
or otherdesignated competitors.
PMGOrder Management Cost, Material AcquisitionCost, SC Related
IT Cost, Inventory CarryingCost, Finance and Planning Related
Cost.
No Source IdentifiedThis metric provides an overall comparison
but isdifficult to manage supply chain performance.
No Source IdentifiedThis metric is important but difficult to
get goodstatistical benchmark comparisons.
PMG andwww.marketguide.comDays Payables Outstanding, Days of
Inventory, and Days Sales (Receivables) Outstanding.
PMG and www.marketguide.comDays RMInventory, Days WIP Inventory,
and Days FG Inventory; for marketguide, calculate median(middle),
superior (average of top 20%), and advantage (midpoint of median
and superior)based on the industry or other
designatedcompetitors.
PMG and www.marketguide.comRevenue, Total Net Assets; for
marketguide,calculate median (middle), superior (average of top
20%), and advantage (midpoint of medianand superior) based on the
industry or otherdesignated competitors.
www.marketguide.comRevenue, Cost of Goods; for
marketguide,calculate median (middle), superior (average oftop
20%), and advantage (midpoint of medianand superior) based on the
industry or otherdesignated competitors.
PMG and www.marketguide.comRevenue, Cost of Goods, and SG&A;
formarketguide, calculate median (middle), superior(average of top
20%), and advantage (midpoint ofmedian and superior) based on the
industry orother designated competitors.
www.marketguide.comRevenue, Cost of Goods, SG&A, Taxes,
ANDInterest Expense; for marketguide, calculatemedian (middle),
superior (average of top 20%), and advantage (midpoint of median
and superior)based on the industry or other
designatedcompetitors.
www.marketguide.comRevenue, Cost of Goods, SG&A, and Taxes;
for marketguide, calculate median (middle), superior(average of top
20%), and advantage (midpoint of median and superior) based on
theindustry or other designated competitors.
www.marketguide.comNet Operating Income, Total Net Assets.
www.marketguide.comNet Operating Income, Total Revenue.
www.marketguide.comNet Operating Income, Total Invested
Capital.
www.marketguide.comAdjusted income, Diluted weighted
averageshares outstanding.
www.marketguide.com
www.marketguide.com
Main Level 2 Components
Supplier on time and in full delivery, Manufacturing schedule
attainment,Warehouse on time and in full shipment,
andTransportation provider on time delivery.
Forecast Accuracy has been assigned level 2relationship to fill
rate or Inventory Days ofSupply.
In addition to Delivery Performance components, Supplier Match %
and Customer Match %.
For Stock Items Order Receipt to Order Entry,Order Entry to
Order Shipment, OrderShipment to Order Receipt.For To Order Items
Order Receipt to OrderEntry, Order Entry to Complete
Manufacturingto Order Shipment, Order Shipment to
OrderReceipt.Backorder Duration Another frequently usedlevel 2
decomposition is that of Back OrderDuration.
Source Leadtime (often contractual), OrderFulfillment Lead Time
for To Order items.
Days to Increase or Decrease Production Labor, Material, and/or
Capacity.
Material Cost, Direct Cost of production, and Indirect Cost of
Production.
Order Management Cost, Material AcquisitionCost, Finance and
Planning Related Costs, MISCosts, and Inventory Carrying Costs.
Revenue, Direct Material Cost, Number of Employees in FTEs.
Returns Warehouse Cost, ReturnsAuthorization Processing Cost,
ReturnMaintenance Cost, Returns Transportation Cost(inbound from
customer, intercompany, andoutbound to supplier).
Days Payables Outstanding, Days of Inventory,and Days Sales
(Receivables) Outstanding.
Days RM Inventory, Days WIP Inventory, and Days FG
Inventory.
Revenue, Working Capital, and Fixed Assets.
Revenue, Cost of Goods.
Revenue, Cost of Goods, SG&A.
Revenue, Cost of Goods, SG&A, and CorporateTaxes.
Revenue, Cost of Goods, SG&A, CorporateTaxes, and Interest
Expense.
Revenue, Cost of Goods, SG&A, CorporateTaxes, Interest
Expense, and Total Net Assets.
Revenue, Cost of Goods, SG&A, CorporateTaxes, Interest
Expense, and Total Revenue.
Revenue, Cost of Goods, SG&A, CorporateTaxes, Interest
Expense, and Total InvestedCapital.
Not Hardwired YetNone Identified.
Not Hardwired YetNone Identified.
Not Hardwired YetNone Identified.
Main Level 3 Components
Not Hardwired Yet These are departmental and/ordiagnostic
measures supportingdelivery performance goals.
Not Hardwired YetThese are departmental and/or diagnostic
measures supporting the forecast and planning process performance
goals.
Not Hardwired YetThese are departmental and/or diagnostic
measures supporting perfect order fulfillmentperformance goals.
Not Hardwired YetThese are departmental and/or diagnostic
measures supporting cycle time within the order fulfillment
processes.
Not Hardwired YetThese are departmental and/or diagnostic
measures supporting cycle time or leadtime improvementin
Purchasing, Manufacturing, andOrder Management.
Not Hardwired YetNone identified.
Not Hardwired YetThese are departmental and/or diagnostic
measures supporting unit cost goals.
Customer Service Cost, Outbound Transportation Cost, FG
WarehouseCost, Purchasing Cost, InboundTransportation Cost,
RMWarehouse Cost, DemandPlanning, and Supply Planning.Transactional
Productivity is an alternative level 3 measure; i.e., divide
Material Acquisition Costs (people hours) divided by
PurchaseOrders.
Not Hardwired YetUse Level 2 metrics as source for Level 3
components.
Not Hardwired YetThese are departmental and/or diagnostic
measures supporting warranty and return cost goals.
$ Payables, Cost of Materials, Accounts Payables Terms,
Inventory $, Cost of Goods, $ Receivables, Revenue, Accounts
Receivables Terms.
Within each level 2 inventory type, inventory classifications
differ by organization but often are based on volume and/or turns;
classification language often is noted by A items, B items, C
items, and D items as well as non-working inventory.
Use Level 2 metrics as source forLevel 3 components.
Use Level 2 metrics as source forLevel 3 components.
Use Level 2 metrics as source forLevel 3 components.
Use Level 2 metrics as source forLevel 3 components.
Interest Expense is partically calculated by cost of money and
working capital.
Use Level 2 metrics as source for Level 3 components.
Use Level 2 metrics as source for Level 3 components.
Use Level 2 metrics as source for Level 3 components.
Not Hardwired YetNone Identified.
Not Hardwired YetNone Identified.
Not Hardwired YetNone Identified.
w w w. t o t a l s u p p l y c h a i n . c o m 2 3MAR 2002S U P
P L Y C H A I N T E C H N O L O G Y N E W S
T H E S C O R C A R D T E M P L A T E
w w w. t o t a l s u p p l y c h a i n . c o m 2 5MAR 2002S U P
P L Y C H A I N T E C H N O L O G Y N E W S
Y e t; many design teams use thecalculations for Level 2 metrics
as thesource for Level 3 components.
Warranty/returns processing costdecomposes to returns warehouse
cost,returns authorization processing cost,returns maintenance
cost, r e t u r n stransportation cost (inbound fromcustomer,
intercompany, and outboundto supplier). Level 3 is Not HardwiredY e
t.
C a s h - t o - c a s h decomposes to Level 2components of days
payableso u t s t a n d i n g, days of inventory a n ddays sales
(receivables) outstanding.Level 3 elements include the dataelements
of $ payables, cost ofm a t e r i a l s, accounts payables
terms,inventory $, cost of goods, $r e c e i v a b l e s, r e v e n
u e, and a c c o u n t sreceivables terms. Inventory days ofs u p p
l y decomposes to Level 2 metricsof days RM inventory, days of
work-in-process (WIP) inventory, and d a y sof FG inventory. Level
3 inventoryclassifications differ by organization butoften are
based on volume and/or turns;classification language often is noted
byA items, B items, C items and D itemsas well as non-working
inventory.
Asset turns decomposes to Level 2elements of r e v e n u e,
working capitaland fixed assets. The Level 3components for working
capital f o l l o wthe same decomposition path as cash-to-c a s h
.
S h a re h o l d e r-facing metri c sGross margin decomposes to
Level 2components of r e v e n u e and cost ofg o o d s. Use cost
of goods as the sourcefor Level 3 components.
Operating income or margindecomposes to r e v e n u e, cost of
goods,sales, general & administrative(SG&A) expense. Use
cost of goodsand S G & A expense categories asmetrics for Level
3 components.
Net operating income or margindecomposes to r e v e n u e, cost
of goods,S G & A and corporate taxes. Use c o s tof goods, S G
& A and corporate taxrate expense categories as a metrics
forLevel 3 components.
Economic profit decomposes tor e v e n u e, cost of goods, S G
& A,corporate taxes and interest expense.In addition to the
expense categories innet operating income, Level 3decomposition
also includes i n t e r e s te x p e n s e calculated, in part, by
cost ofmoney and working capital.
Return on assets decomposes to n e toperating income and total
net assets;in some cases companies prefer to useoperating income
instead. Level 3decomposition is based on the n e toperating income
and total net assetsdecompositions discussed previously.
Return on sales decomposes tor e v e n u e and net operating
income.Level 3 decomposition is based on thenet operating income d
e c o m p o s i t i o n sdiscussed previously.
Return on investment d e c o m p o s e sto net operating income
and t o t a linvested capital. Level 3 decompositionis based on the
net operating incomedecompositions discussed previously.Share data
is calculated and defined atLevel 1; there has been no need
todecompose any further in a SCORp r o j e c t .
How many SCORcard s ?A critical task of the business is
todetermine how many SCORcards needto be assembled. Ideally, there
is aSCORcard for each supply chainidentified in the project scope a
n d a nenterprise consolidated SCORcard (seeScale the Heights in
the Dec. 2001S C T N for supply chain definitiontechniques).
The level of difficulty of completingthis task is mostly
dependent onaccounting practices for the internal-facing and
shareholder-facing metrics.The most complicated case occurs
incompanies that define supply chains bycustomer channel yet
consolidatefinancial reporting by product group orlocation.
In this case, the design team mightdecide to combine onto one
SCORcardthe customer-facing data for each supplychain and with the
consolidated internal-facing and shareholder-facing data; it iswise
to match the costs with the revenueand inventory. Almost
always,companies change their reportingcapability to be able to
SCORcard eachsupply chain independently.
This template is n o t perfect. It is n o tintended to become a
standard; rather, itis intended to share lessons learned sinceit
has been used.
The more user discussions we initiateon the trials and
tribulations of using theSCOR metrics, the closer we will get
toestablishing standard ways of measuringperformance. In addition,
the morebenchmark sources we can establish atLevel 1 and Level 2,
the moreeffectively we can compare and contrastcompanies and
industries.
By the way, the design teammentioned earlier completed its
gapanalysis on time and on budget. Itprovided the basic framework
for supplychain key performance indicators(KPIs) and cascading
organizationalperformance goals.
keeping SCORUpdating the Supply-Chain Councils implementation
model
acronyms solved
C O G S cost of goods soldC P F R collaborative planning,
forecasting and replenishment
F G finished goodsF T E full-time equivalentK P I key
performance indicatorM I S management information systemR M raw
material
S G & A sales, general & administrative
Peter Bolstorff is executive director, supply chain for
Minneapolis-basedPRAGMATEK Consulting Group Ltd. , a business
systems consulting firmoffering supply chain performance services.
He is the former chair of the SCORIntegration Committee and the
Supply-Chain Councils Technical Committee,and designed the
Supply-Chain Councils executive education series to aid inthe
successful implementation of SCOR. He is serving a two-year term on
theSCORboard, the board of directors for the Supply-Chain
Council.
To reach Peter Bolstorff: p e t e r . b o l s t o r f f @ p r a
g m a t e k . c o mFor more about PRAGMATEK: w w w . P R A G M A T
E K . c o mTo comment on this article: s c t n e d i t o r @ p e n
t o n . c o m
About SCORThe Supply Chain Operations Reference (SCOR) model has
been developed by theSupply-Chain Council and is S C T N s
recommended implementation model for SCMinitiatives. While the
author of this article is affiliated with the Supply-Chain
Council,this article was prepared under the direction of S C T N
and was not subject to priorreview or approval by the Supply-Chain
Council or any of its members/affiliates.
To learn more about the Supply-Chain Council, including a white
paper guide to Level 1 metrics: w w w . s u p p l y - c h a i n . o
r g
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